Interestingly enough, former President Donald Trump’s position on tariffs has done a complete 180. Now, he’s expressing relief over possible delays in their implementation, backpedaling from earlier arguments about their harmful macroeconomic effects. This change comes as the USMCA free trade treaty, which he signed in his first term, faces difficulties. Should Mexico or Canada fail to live up to its provisions, they would risk 25% tariffs on their exports. Mexico, China, and Canada are America’s three largest trading partners. Last year, their collective share represented 41% of the total value of goods imported into the U.S., so the impact of these tariffs is very deep.
In a recently-troubled Cabinet meeting, Trump made his view abundantly clear. He is convinced that other countries have been screwing the U.S. for decades.
“We’ve been ripped off by every country in the world.” – Donald Trump
Trump often paints the direst picture when it comes to tariffs. He portrays these moves as key steps to protect American interests.
The Shifting Narrative
This marks a subtle shift from the President’s original, more aggressive, approach to tariffs. Even though in the past, he was adamant for all-inclusive, across-the-board tariffs, his now preferred playbook is the softer approach. This change was evident when he suggested that the implementation of tariffs might not be as severe as initially anticipated.
“We might be even nicer than that.” – Donald Trump
The 20% tariff on Chinese imports remains in effect. On top of this, there’s the 25% tariff on steel and aluminum imported from China that further complicates life for companies that depend on these goods. These tariffs would likely end up raising consumer prices.
In response, Trump has suggested raising tariffs to as much as 60% on every Chinese product coming into the United States. This new concept of a jobs guarantee has caused chest-thumping panic among the business community and free-market economists. During the 2016 campaign, he signaled from the start that he was serious about tariffs.
International Reactions and Domestic Implications
India is apparently planning to reduce its tariff rates before April 2, Reuters quotes an unnamed Indian government official. With the ongoing US-China trade war, this action, if successful, could indicate a major shift in global trade patterns. Trump’s tariff plan boasted plenty of carve-outs, to the delight of investors.
“On January 20th, as one of my many first Executive Orders, I will sign all necessary documents to charge Mexico and Canada a 25% Tariff on ALL products coming into the United States, and its ridiculous Open Borders.” – Donald Trump
Here at home, the former President’s ambitions have run into some heavy fire. Just last week, The Conference Board announced that consumer confidence has sunk to its lowest point since January of 2021. This decline largely mirrors national economic trends, which have been affected greatly by the uncertainty created by tariffs.
Colin Grabow, a Cato trade policy analyst, flagged the only possible justification for Trump’s tariff offensive.
“Framing tariff hikes as a corrective to abusive practices by US trading partners — essentially giving them a taste of their own medicine — seems much easier to justify than sectoral tariffs with only nebulous connections to their proposed justification,” – Colin Grabow
Nevertheless, Grabow also cautioned against underestimating Trump's commitment to tariffs.
“As a self-described ‘tariff man’ who has long seemed enamored with import duties, we should assume that Trump’s desire for higher tariffs is sincere and more than just a negotiating ploy,” – Colin Grabow
The Future of U.S. Trade Policy
… quite the opposite, in fact, Trump is floundering as he sails through the dangerous shoals of international trade. His ever-changing tariff strategy exemplifies the precarious position between defending American interests and upholding foreign relations. Though his approach has clearly softened in other areas, we can see that his belief in reciprocal tariffs is still as strong as ever.
This transformation leads one to wonder what’s next for the direction of U.S. trade policy going forward. With negotiations still underway and global economic conditions shifting daily, these numbers are subject to change. We are only beginning to learn how these changes will influence U.S. industry’s competitive position and U.S.-China relations.