Former President Donald Trump has just gone far beyond that with a truly audacious move. He is now adopting a very different, more US-centric, protectionist approach than his former free trade aspirations. The change is nothing less than radical iteration of America’s trade policy, especially as regards for-signature countries in our trade agreements. The announcement follows the implementation of new trade agreements with Japan and the European Union. These agreements not only lay the groundwork for a very intricate, new tariff regime, but they influence a host of other countries.
Under Trump’s October 2019 policy, countries are subject to a tiered tariff system depending on their trade surplus or deficit with the US. The starting tariff level is 10 percent, escalating up to 15 percent for countries with lower deficits. For those with bigger deficits or who have otherwise caught Trump’s ire, the results can be arbitrary, chaotic and draconian. This strategy is an indication of a break with orthodox trade practice and a restoration of the primacy of trade balance to future negotiations.
Tariffs Imposed on Key Trading Partners
These changes foreign countries The new tariffs have each been given heightened rates as a for part of Trump’s changed deals steep Trump to the above-mentioned countries. Japan, for example, would be subject to a 15 percent tariff on its exports to the United States. Trump even went so far as to label the Japan agreement a “signing bonus.” For him, this opens a tremendous window of opportunity for both countries to continue investing in their economic relationship.
Still, other countries won’t be spared by these new tariffs. India faces an even steeper 25 percent tariff rate, a move that some analysts are interpreting as indicative of Trump’s growing frustrations with the Indian government’s trade practices.
“bestie” – Laura Tingle
Canada is affected, which now faces a hefty 35 percent tariff rate. Additionally, Brazil, which has historically enjoyed favorable trade terms, will see a massive 50 percent tariff due to Trump’s grievances regarding former President Jair Bolsonaro’s administration.
The tariffs don’t stop there. As such, Myanmar and Laos are particularly punished, languishing under a crippling 40 percent tariff on their exports to the United States—especially damaging to their electronics equipment. Serbia and Syria will see tariffs jump by 35 percent and 41 percent, respectively.
Investment Commitments and Trade Agreements
Trump’s recent trade deals aren’t only punitive. In addition, they work down the line by requiring trade partners to make deep investments in the American economy. Japan, in particular, has committed a near-unbelievable $550 billion fund to support American industries and infrastructure. Yet this $500 million financial commitment underscores the paradox of Trump’s trade strategy—imposing tariffs to hurt investment while simultaneously offering to lure it.
Even as Trump has made his new tariff regime the centerpiece of his trade policy, he has not fully abandoned engagement. He has said that he intends to carry on negotiations with China. He famously omitted the country from any of his song-and-dance routine announcements just last week. This significant omission raises new doubts about the direction of overall U.S.-China relations. What changes must they make to do business within the protectionist framework we just adopted?
The Road Ahead for Global Trade
As the Trump administration starts to implement this protectionist agenda, global markets are preparing for a huge shake-up. Countries that have failed to negotiate favorable terms will pay a hefty price as they continue to make their way through this ever-changing and rocky terrain. Trump’s strategy is in many ways symbolic of a recent global pull towards nationalism and away from free international trade.
The new tariffs will be felt significantly by U.S. consumers. Non-import related factors higher import costs will end up leading to higher prices on all sorts of other goods. As these shifts become permanent, companies need to update their playbooks. They are scrambling for ways to make up for what’s left behind on their supply chains and pricing models.
