Who isn’t President Donald Trump targeting with a trade war? China is the front line, clearly. But he’s played tough with Mexico, Canada, the European Union and even India. Japan, the world’s third largest economy, has evaded his ire, but Tokyo also hasn’t yet agreed a trade deal with the US.
He’s emboldened by an incredibly resilient US economy he claims as valediction. The newest tariffs he’s imposed on Chinese goods are not a drag on US consumers, but rather in the service of a better bargaining position for a trade deal, which he’ll deliver at some point, he hopes. The trade war with China is “a little squabble.”
Trump’s reality with regard to China, which he explained to reporters at the White House Tuesday, might be more believable if China were the only nation with which Trump was tangling. Far from it.
Nothing happens in a vacuum. While China has already raised tariffs on US exports. Mexico is preparing to retaliate against US tariffs and the EU is said to be weighing its options.
Trump’s trade war is bigger than China; it’s a multi-front world conflagration in which Trump is the aggressor, picking fights with world leaders and the US Congress as he foists his nationalism onto the rest of the world, sending shock waves through the global economy.
Trump’s aggressive moves have US clothing companies “freaked.” Farmers hurt by the trade war are looking for another multi-billion dollar aid payout from taxpayers, automobile manufacturers are anxiously awaiting separate tariffs Trump is considering. Even the price of tomatoes is set to skyrocket thanks to Trump.
On notice: “You will be tariffed”
Trump’s moves emerge from his messaging. The US might be largest and most powerful economy in the world, but it’s been pushed around, according to Trump.
“We are the piggy bank that everybody likes to take advantage of or take from and we can’t let that happen anymore,” he said in a riff on the idea Tuesday.
Never mind that piggy bank analogies in US politics are usually employed to raise the alarm about the $22 trillion national debt, which is exploding as a result of Trump’s cuts and the largest single foreign owner of which (more than $1.3 trillion) is China.
The idea that Trump is fighting for trade justice is central to his world view and the idea that all of his predecessors did it wrong is a main theme, although he’ll often temper that sense of injustice with boasts about how well things are going.
“I think we probably have the greatest economy that we’ve ever had,” he said Tuesday.
Second, Trump would like you to know that despite what you read in the media about tariffs and counter-tariffs, what’s going on with China is not a trade war, but rather “a little squabble,” as he said Tuesday. And the US is “in a very strong position.”
Third, if you don’t treat the US fairly, in Trump’s mind, you “will be tariffed.”
Trump seemed to be trying to start a new catchphrase last September when he defended tariffs (read: taxes) he was slapping on imports.
“They will be ‘Tariffed!” he said of countries he didn’t think were treating the US fairly.
It was like a “You’re fired!” for his brand of dramatic, confrontational nationalist global trade. A week later he hit China with new tariffs on $200 billion worth of goods. What he’s done most recently is raise the rate of the tariffs on those goods from 10% to 25%.
Penalties for top trading partners
The top three US trading partners are Mexico, Canada and China, in that order. Together they represent 43% of US trade with other countries, according to Census data.
Trump has hit all three with tariffs of some kind, yet he’s failed so far to agree new trade deals. He could be running out of things to threaten.
Trump hit China with tariffs last year and threatened more if a deal could not be reached by March. He extended that deadline in February. But now with trade talks stalled, he’s carrying through with increased tariffs on $200 billion in goods from China and considering tariffs on an additional $300 billion in goods – essentially everything else China sells to the US.
That’s not he only deadline coming. May 18 marks the deadline for Trump to respond to a report he requested on possible tariffs on auto imports from Mexico and the European Union, although there is expectation from the auto industry and Europe that he will seek to delay that decision.
“There are signals that it could be extended - because of the negotiations between the US and China,” European Trade Commissioner Cecilia Malmstroem told a German newspaper.
Trump could use the threat of those tariffs in trade negotiations with the EU, although those talks have barely gotten off the ground.
The possibility of auto tariffs would also present problems for Mexico, where US car manufacturers have opened plants. Mexico also exports large amounts of produce to the US.
Not all tariffs are tied to trade deals. The Commerce Department, responding to complaints from Florida growers, according to NPR, re-imposed duties on Mexican tomatoes, which amounts to a tariff since it could drive up the cost of produce in US markets. Mexico produces a large portion of the tomatoes consumed in the US and a 2013 deal had forestalled those duties.
Pushing “non-Tariffed” alternatives
Now that trade talks with China are stalled, markets are spooked, and US farmers and retailers are, in the words of Rick Helfenbein, president of the American Apparel and Footwear Association, “beyond freaked.”
No matter, Trump said Sunday on Twitter.
“We are right where we want to be with China. Remember, they broke the deal with us & tried to renegotiate. We will be taking in Tens of Billions of Dollars in Tariffs from China. Buyers of product can make it themselves in the USA (ideal), or buy it from non-Tariffed countries…”
He specifically mentioned Vietnam, a signatory of the TPP he scuttled for the US, but which other countries carried on. But the larger point is that unilateral trade deals and a tough foreign policy were supposed to bring businesses home to the US, not send them to different countries in Asia.
To be sure, all of this could work out and Trump could emerge from his presidency with separate new trade deals for China, the EU and North America. It would be a triumph of tariffs over trade and create a new reality.
Trump against the world
His presidency has been spent projecting dominance, issuing threats, demanding concessions and slapping tariffs on the United States’ largest trading partners.
What he’s technically got to show for it, so far, is a trade deal with South Korea, which had the backdrop of North Korea and possible nuclear annihilation to move it along.
His promised re-branding and update of NAFTA – Trump wants to call it the US, Mexico, Canada trade agreement or USMCA – is foundering in part because the White House failed to get the deal ratified before Democrats took control of the House in January.
“The problem is that they kicked the can down the road. They were being hostile toward the Canadians and the Mexicans alike. And the deal got signed late,” former US Ambassador to Canada Bruce Heyman told Yahoo! Finance.
The issue of a hostile Congress could also make it difficult for Trump to get another multi-billion handout for US farmers hurting because of the trade war his tariffs have caused.
Trump should have known the importance of speed. Among his first acts as President was to officially kill the Trans-Pacific Partnership, a delicately negotiated 11-country trade deal joined by the Obama administration but never acted upon by Congress. It was meant to create a counterweight to the influence of China in the region.
The other countries in the Pacific have carried on without the US. Trump promised to seek unilateral deals and he’s done so not with carrots, but with sticks and tariffs.
What he lacks in clear strategy he has made up for with consistency, so far.