Trump has started a trade war with the world by attacking his neighbors and China. Who’s next?
Donald Trump, after 40 days of thrashing around, has nevertheless started a trade war with the world. He imposed import tariffs against the U.S.’s main trading partners Canada, Mexico and China, violating agreements he himself forced them to sign in his first presidential term a few years ago. It didn’t take long for the response to come.
Trump has imposed duties on about $1.5 trillion worth of imported goods a year. He imposed a 25% tariff on nearly all imports from Canada and Mexico, and doubled the import tax on Chinese goods to 20%.
Trump decided on the trade aggression despite warnings from economists that it would undermine the U.S. economy and stoke inflation because the tariffs are paid for by American consumers.
Further damage to U.S. companies and farmers will come from retaliatory measures. Canada has already announced it is imposing duties on more than $100 billion of U.S. imports, and China has imposed tariffs of up to 15 percent, mostly on U.S. agricultural products, and has launched investigations against several U.S. companies. Mexico promised to respond later Tuesday as it wakes up.
The decline of Europe and the West. How Trump is collapsing Pax Americana to the delight of China and Russia
“Trump thinks like Putin”: has the end of the ‘liberal world order’ come?
Trump’s new tariffs will cost each American family one and a half to two thousand dollars a year, the Budget Lab research center at Yale University has calculated. The economy will lose about 100 billion dollars a year, and inflation will increase by another 1%, with food, electronics, clothing and cars becoming more expensive.
The overall tariff burden on goods imported into the U.S. would nearly triple to about 10%.
“This is the highest rate since 1943,” the researchers calculated.
Escalation
In other words, the new tariffs are bringing the U.S. back to the World War II era, when duties were the main tool of economic policy. Since then, the world has recognized that free trade serves the common good and prosperity, and began to use tariffs not universally to fill the coffers, but point-by-point to eliminate temporary distortions in trade. This was the case until Trump came to power in the US.
In his first run in the White House, Trump won concessions from China, Canada and Mexico with a trade war and negotiated new trade agreements with them. Trump was elected to his second term with the promise of a major escalation of the trade war on his first day back in power. But instead, he limited himself to threats and a small increase in tariffs against China, while he first imposed tariffs against Mexico and Canada and then postponed them for a month.
And now the month is up – the tariffs have gone into effect.
They brought back trade barriers in North America, which was a single customs area with a common pool of resources thanks to the USMCA treaty under Trump. Mexico had a warm climate and cheap labor, America had technology and credit, and Canada had vast natural resources, from oil to timber. Combining them allowed businesses to optimize production, increasing profits, employment and tax revenues in all three countries. Now these production and trade chains have been severed.
In addition to the economic aspect, the severing of trade ties with neighbors has a political aspect. Trump has consistently led the U.S. toward isolation, quarreling with allies, withdrawing from international organizations and alliances, and moving closer to Russia.
What’s next
The duties against Mexico and Canada are the debut salvo of Trump’s World War II trade war. He is preparing others.
In one of his first executive orders, Trump directed his administration to have all tariff proposals ready by April 1. He said they would all go into effect on April 2. And even earlier – on March 12 – steel and aluminum shipments to the United States from all countries of the world will fall under the 25% duty.
European manufacturers, among others, will fall under them. It is in Europe that Trump is going to open the next front of the trade war. He promised in general terms to impose duties on German cars and other imports, but has not yet announced any specific solutions.
Photo caption,Trump is unhappy that companies from the EU and China assemble cars in Mexico and sell them duty-free in the US. Volkswagen’s Mexican auto plant
On top of all this, Trump is promising some sort of “retaliatory” tariffs – mirroring duties on anyone who imposes import taxes on U.S. goods.
Donald Trump’s tariffs. What are they, why are they necessary, and will they help make America great?
Trump’s golden mountains. What’s wrong with his plan to “make America great again”?
Trump’s trade policy is chaotic: he’s
