Former President Donald Trump’s approach to tariffs and trade has been assailed by a bi-partisan chorus of economists. Further, they contend that his initiatives have not produced the promised outcomes. Trump continues to hold close ties with Chinese President Xi Jinping and boast about new agreements with Vietnam and the United Kingdom. His tariff policies towards Southeast Asia and the BRICS countries make for a confusing economic picture.
Yet on April 2, Trump unveiled one of his biggest tariff salvos yet, targeting primarily Southeast Asian nations. For agricultural products, these tariffs will begin at the very high rate of 46 percent starting. As the U.S. grapples with its international trade relationships, experts point out that these tariffs have not resulted in the anticipated economic benefits. The stated purpose of that increased engagement appears to be to encourage these countries to invest more in the U.S. economy. When you look at what’s really going on, that’s not the case.
In case you missed it, Trump again threatened to impose a new 10 percent tariff on BRICS developing countries. This account group consists of Brazil, Russia, India, China and South Africa. As negotiations continue, uncertainty looms large over these agreements, with experts cautioning that this unpredictability may undermine the very goals the tariffs aim to achieve.
Tariffs and Trade Deals Under Scrutiny
Trump’s administration takes pride in having negotiated trade deals with Vietnam and the United Kingdom. They tout these agreements as big wins for American companies. The way these agreements are executed has come into question. Update, March 20, 2019 Last week, Trump touted the recently concluded agreement with Vietnam. He did not allow the public to see the specifics. While this is not a perfect agreement, it at least includes a strong trans-shipment clause. It would prevent the circumvention of tariffs by rerouting goods through other countries.
In the wake of these developments, Southeast Asian nations still find themselves with high tariff rates in Trump’s most recent trade schemes. Veteran trade experts such as Steve Okun make clear that U.S. tariffs to fight illegal circumvention are perceived as punishment for their use of Southeast Asia as a trans-shipment hub. This tactic is enabling Chinese products to escape U.S. tariffs.
“The ire of the United States … is because South-East Asia is seen as a trans-shipment point, legally and illegally,” – Steve Okun.
Moreover, Trump’s approach has brought forth tsunami-levels of uncertainty that will make smart negotiation and faith in these agreements infeasible. Ben Bland has remarked on the difficulties this creates for other parties involved:
“That’s the flip side about Donald Trump using uncertainty to gain extra leverage — it’s very hard for the other side to put their faith in an agreement if they think you’re always going to be changing the terms.” – Ben Bland
Inquiries from this uncertainty have led to questions from all parts. Will nations seek to pour more capital into American markets, or seek out new partners for trade and investment?
Economic Impacts and Revenue Projections
Despite all the justifiable criticisms of Trump’s unworkable tariff policies, there’s a big financial elephant in the room we all need to address. U.S. Secretary of the Treasury, Scott Bessent, then dropped some serious bombshells. Look at all the tariff revenue the U.S. has already created this year – about $100 billion! Projections say this will quickly increase to $300 billion by the end of 2025. This major source of revenue is probably a driving force incentive behind keeping tariffs this high.
Industry experts warn that revenue generation is a bit more opaque. This narrow focus will ultimately do little to provide sustained, broad-based benefits for American workers or industries.
“These clouds of uncertainty hanging over Asia’s big trading economies are going to be there for some time,” – Ben Bland remarked, adding that this uncertainty could undermine the intended effects of the tariffs.
Most are concerned these tariffs will spark trade wars through retaliatory measures taken by other countries, aggravating already tense global trading relationships.
The Future of Trade Agreements
Trump’s administration continues to double-down on their tariffs and trade strategies even in the face of criticism from the public, Congress, and corroborating evidence. He has made clear there would be no extensions on tariff deadlines, doubling down on his commitment to further open Chinese markets to foreign competition.
“There has been no change to this date, and there will be no change. In other words, all money will be due and payable starting August 1, 2025 — No extensions will be granted,” – Donald Trump stated.
The administration is walking a tightrope here. At the same time, industry advocates urge clear terms and strict enforcement be part of any trade deal.
“But as always, the real test lies in enforcement,” – Dr. Nguyen Khac Giang noted.
Still, experts such as David Henig are cautiously optimistic about the new predictability that can be found in recent negotiations.
“We’re not going into the next couple of weeks wondering whether we need to get a deal… at least we have some element of predictability,” – David Henig stated.
