On Thursday, President Trump began moving forward with plans for new tariffs in other countries around the world. This is an ambitious move that could shatter global trading rules and is likely to trigger fierce negotiations.
The president directed his advisors to come up with new tariff levels that take into account the various trade barriers and other economic approaches adopted by American trading partners. This includes not only tariffs charged by other countries to the United States, but also taxes charged on foreign products, subsidies granted to industries, exchange rates, and other actions the President deems unfair.
The president says this step is necessary to uniformize America's “unfair” relationships and stop other countries from using the United States for trade. However, he made it clear that his ultimate goal is to force businesses to return manufacturing to the US.
“If you build a product in the US, there are no tariffs,” he said in his elliptical office statement.
Howard Lutnick, presidential candidate for commerce secretary, and his trade representative pick, Jamieson Greer, will work with other advisors and White House officials to come up with numbers “quickly.” said on a phone call with a reporter on Thursday.
When asked about the timeline at the White House, the president postponed it to Lutnick.
The US decision to remake tariffs charged on imports represents a dramatic overhaul of the global trading system. For decades, the US has set tariff levels through negotiations with international trade agencies, such as the World Trade Organization.
When we set up a new tax that is likely higher than what the US charges today, only US officials decide, and effectively discard the system in favor of one determined based on its own standards. I will.
Wiley Rein's lawyer Timothy Brightbill said the move towards a reciprocal tariff system was “a fundamental shift into US trade policy, the biggest in over 75 years.” 1947.
Chad Bowun, a senior fellow at the Peterson Institute for International Economics, said Trump's tariffs violate WTO rules in two ways. Applying different tariff charges to different countries violates the commitment of WTO members to not discriminate against each other. And if the US raises tariff rates beyond its maximum fee, negotiations with other members would also break trading rules.
“Dec. on a unilateral decision to increase import duties in the US, by product and by country, President Trump's biggest blow will be a rule-based trading system,” Bown said.
The action appears likely to begin intense negotiations with governments whose economy relies on exports to the US. Additionally, if other countries choose to increase their own tariffs in retaliation, they could elicit trade wars in multiple ways.
White House officials said other countries were called to be given the opportunity to negotiate the taxation they face.
Almost every country will be affected, but the move could have particularly important consequences for India, Japan and the European Union. Trump and his staff have repeatedly pointed to European VAT as additional fraud in addition to tariffs.
Peter Navarro, the president's senior trade counselor, called the European Union's VAT “poster child” for unfair trade to American businesses, and with such treatment, the number of cars Germany has purchased It said it allowed exports several times more than that.
“President Trump is no longer going to tolerate it,” Navarro said. “Trump's fair and mutual planning will quickly end such exploitation of American workers.”
The European Union requires a standard VAT rate for most products and services, with tax rates varying from country to country, but averages around 22% in European countries. Taxes apply at each stage of the supply chain, and costs are usually borne by the end consumer.
The United States is an outlier among developed countries that do not impose a VAT on products such as automobiles.
Trump's proposal shows a major reversal in decades of pushing for trade policy towards lowering international barriers. Past presidents have often negotiated with foreign countries over tariffs, but these agreements usually lead to lower taxes rather than higher taxes. No president has taken Trump's approach to raising our tariffs to suit other countries' fees.
Mutual tariff plans are the latest move by Trump to punish allies and enemies with extraordinary trade actions. On Monday, the president signed a declaration that imposed a 25% tariff on all foreign steel and aluminum. Trump said his advisors will also meet over the next four weeks to discuss measures regarding automobiles, medicines, tips and other products.
Trump acknowledged that his mutual tariff plans could raise prices. This is because consumers tend to pay higher prices when products are taxed at a higher tax rate. However, the president said the increase is short-lived and his plans will bring more work. “Prices could rise slightly in the short term, but prices would also fall.”
Over the long term, he said, “to make our country a property.”
Over the past few weeks, Trump's almost day tariff threat has shaken up diplomatic and economic ties. The US imposed an additional 10% tariff on all products from China last week, charging cleaning fees to Canada and Mexico, unlikely to bring tariff charges to levels that have not been seen since the 1940s.
The president criticized Canada and Mexico for sending drugs and immigrants to the United States, but agreed to postpone tariffs for 30 days after the country offered him some concessions.
Mutual tariffs could expand Trump's trade fight against more countries. It is still unknown as the president uses the strategy to significantly raise the US barrier to imports or to draw concessions from countries opening foreign markets.
When asked which legal powers are used to impose tariffs, White House officials said the president could draw out some actions, including section 232 related to national security and some, according to the country. He said he could. Section 301 related to unfair transactions. International Emergency Economic Power Act.
Officials said Trump later did not rule out even more “universal” tariffs to reduce the US trade deficit, but for now the president chose to pursue mutual treatment.
Trump has raised proposals in his 2024 campaign to make trade more conflicting by matching his first term and tariff charges that levy trade on American products. .
He often points to a decline in US tariff rates as evidence that the country is being used. The average tariff rate in the US is about 3% lower than in other countries, but is roughly in line with that in Canada, the UK, Japan and the European Union. Globally, wealthy countries tend to have lower tariff rates, while poor countries negotiate higher countries to protect non-developed industries and subsistence farmers.
Average tariff rates for all products
Average tariff rates for all products
But Trump has criticized other countries for charging higher tariffs on certain American products than the US accused. For example, he points to the 10% tariffs that the European Union charges on American cars and the 2.5% tariffs on cars sold in other directions.
For decades, the US has set tariff rates at lower import rates than some trading partner partners because US officials have been convinced of the benefits of freer trade. They believed that lower tariffs would allow the US to import cheap products for US consumers and their factories' raw materials and fuel the American economy.
Trump's views are different. He argues that equals the US tariff rate is essential to recovering US manufacturing, with higher tariffs reducing the trade deficit. Some economists do not oppose it, claiming that currency movements could offset the impact on the trade deficit.
Economists and historians also say that the various tariffs involved in each other's products are not evidence of discrimination. Rather, they reflect the priorities that each government had when it agreed to the largest tariff rate in negotiations with other members of the World Trade Organization.
These negotiations gave the government the opportunity to fight for higher tariff rates in the industries they wanted to protect, and accepted a decline in tariff rates on products that are likely to import.
INU Manak, a trade expert at the Council of Foreign Relations, said the tariff rates “reflect the concerns of certain domestic political and economics of certain countries.” For example, US officials said they negotiated double-digit tariffs on wool sweaters and footwear to protect American producers at the time.
Other countries also protect the industry, she said, but she wants to keep tariffs low “to ensure that consumers and manufacturers have access to a wide range of items at the most competitive prices.”
Douglas Irwin, a professor of economics at Dartmouth College, said countries came out with significantly different tariff codes from Great Repression and World War II. When trade negotiations began in 1947, countries began to cut tariffs in fragments. In the 1960s, many countries agreed to lower all tariffs, but there was no effort to equalize them with certain products.
“The reciprocity in this case is not “everything is cut off by the same amount,” but “Let's equal our tariffs on a product basis,” and this should be Trump's view of reciprocity. It seems,” he said.
If the US raises tariffs above the rate agreed to at the WTO, it violates the trade group's commitment and allows other members of the WTO to challenge their actions. However, the WTO panel responsible for resolving such a dispute was effectively castrated in the first Trump administration when the US refused to appoint any further members. The Biden administration continued its policy.
Jeanna Smialek contributed the report.
