How Trump's one-on-one tariff plan threatens the global economy

The world economy was already tackling a variety of baffling variables, from geopolitical conflicts and slowing China to the evolving complexity of climate change. President Trump then unleashed plans to eradicate decades of trade policy.

Trump has increased the volatility of international companies when he launched the process of imposing so-called mutual tariffs on American trading partners. He expanded the scope of the unfolding trade war.

In a basic concept, discussion of mutual tariffs is simple. Anything that American companies face to export goods to other countries should apply to imports from the same country. Trump has long defended this principle and has presented it as a fair and simple question. It corrects the fact that many American trading partners maintain higher tariffs.

However, in reality, calculating individual tariff rates on thousands of products drawn from over 150 countries is from American manufacturers that rely on imported parts to retailers who purchase goods from overseas. poses monumental issues for a vast range of businesses.

Ted Murphy, an international trade expert at Sidley Austin, a Washington law firm, said: “For every widget, every tariff classification, you can have 150 mandatory rates. There is Albania in Zimbabwe.”

The order signed by Trump on Thursday directed his agency to study how to advance mutual tariffs. It challenged the president's own pledge to raise the risk of increasing costs for American consumers at a time when concerns about inflation became deeper, and to lower the prices of food and other everyday items. And it increased the possibility of greater delays from the Federal Reserve to reduce borrowing costs.

It also has been focused on multilateral blocs for a long time, and will speed up the decline in the world trade system, which has been ruled by the World Trade Organization. In the spirit of nationalist Brio, Trump aims to advance a new era in which treaties give way to negotiations from state to state.

This transition could add to stocks in the global supply chain after years of drastic changes. International companies are fighting a rolling trade war between the two largest economies in the world, the US and China. They faced obstacles to passing through the Suez and the Panama Canal, causing the prices of shipping to skyrocket.

Now, Trump has presented them with another formidable puzzle.

Under a system that has been shaking for 30 years, members of the World Trade Organization set tariffs on all kinds of good and extend the same base rate for all members. They also negotiated treaties with other countries and through regional trade blocs, further easing tariffs.

Trump has long described the United States as a victim of this structure, citing the trade deficits with China, Mexico and Germany. In announcing the emergence of mutual tariffs on Thursday, he provided a notice that he would assert his authority to renegotiate terms according to his preferences, without paying respect to existing trade agreements.

It seemed no coincidence that Trump announced on the day Indian Prime Minister Narendra Modi visited the White House. The US has a substantial trade deficit with India, with imports value exceeding the export volume of $45 billion last year.

These imports include plastics and chemicals that carry tariffs of less than 6% when shipped to the US, according to data compiled by the World Bank. When similar categories of American products are exported to India, they face 10-30% tariffs.

If the Trump administration raises US taxes to equal levels, it would force American factories to pay more for chemicals and plastics.

The same pattern applies to a wide range of consumer and industrial products, including footwear from Vietnam, Brazilian machinery, agriculture, Indonesian textiles, and rubber.

The IPC, the leading electronic industry and trade association, warned on Thursday that increased trade protectionism would damage the American economy.

“The new tariffs will raise manufacturing costs, disrupt supply chains, drive production offshore, and further weaken American electronics industrial bases,” association president John W. Mitchell said in a statement. Masu.

Some experts have seen potential negotiation tactics in Trump's approach that aim to force trading partners to lower their own tariffs, rather than assumptions for the US to lift their own. Masu. If that proves true, the process of calculating new tariff charges could actually reduce the price.

“They're doing this,” said Christine McDaniel, former Treasury Secretary under President George W. Bush and now a senior researcher at the Mercatus Center at George Mason University, Virginia. “But if he can open the market to other countries, there is a narrow path that will drive trade,” she said.

It also warns that the negotiation process is less guided by national goals than by Trump's allies. Tesla, an electric vehicle company run by administratively loyal Elon Musk, could benefit from an exemption from increased tariffs on key factors.

The uproar is that businesses operating in the US must speculate on how events will occur when comparing import costs for parts and finished products. Businesses long for more than certainty as clichés go. The products are becoming more scarce.

Since Trump's first term, President Joseph R. Biden Jr. expanded policy when he placed tariffs on Chinese imports – companies selling to the US market changed some production from China .

The surge in prices for moving cargo on container ships has led businesses to close the distance between factories and American customers.

Walmart, a retail empire dominated by the pursuit of low prices, has shifted orders from Chinese plants to India and Mexico. Columbia Sportswear scouted factory sites in Central America. Medical device manufacturer Medsource Labs has moved orders from its factory in China to a new factory in Colombia.

Trump has quickly delayed or set such plans after challenging the merits of such a strategy by threatening 25% tariffs on imports from Mexico, Canada and Colombia. He imposes a board-wide tax on steel and aluminum. He delivered 10% tariffs on Chinese imports. Where he might turn next is the subject of a potentially expensive parlor game that unfolds in the corporate executive office.

Some speculate that this is precisely the uncertainty caused by these movements. Trump has long argued that his ultimate goal is to have businesses establish factories in the US. This is the only reliable way to avoid US tariffs. The more he threatens the country, the greater the risk of companies investing in factories somewhere else.

The problem is that even companies with US factories rely on parts and raw materials from around the world. Over a quarter of American imports represent parts, components and raw materials. Damage to these products more expensively will make domestic companies competitive and disable American jobs.

Last week, Ford Motor warned that tariffs in Mexico and Canada would wreak havoc in the supply chain.

“The 25% tariff across the Mexico-Canada border will blow a hole in the US industry we've never seen,” said Jim Farley, the company's chief executive.

For now, the business world is once again struggling to make God which of Trump's declarations is merely a gambit and realise change.

In spreadsheets maintained by multinational companies, tariff rates that fall within all countries on the planet seem to be subject to sudden rework.

or not.

“We take Trump seriously, but not necessarily literal,” said Murphy, a trade lawyer. “He speaks with wide strokes, but you have to see what actually appears.”