Tar­iffs may stay in trade tool­box as U.S. reorients

Trump­isin­norush­toend ‘lit­tle squabble’ with China

The Buffalo News - - FRONT PAGE - By Ana Swanson

WASH­ING­TON – Pres­i­dent Trump’s tar­iffs were ini­tially seen as a cud­gel to force other coun­tries to drop their trade bar­ri­ers. But they in­creas­ingly look like a more per­ma­nent tool to shel­ter U.S. in­dus­try, block im­ports and ban­ish an un­de­sir­able trade deficit.

More than two years into the Trump ad­min­is­tra­tion, the United States has emerged as a na­tion with the high­est tar­iff rate among de­vel­oped coun­tries, out­rank­ing Canada, Ger­many and France, as well as China, Rus­sia and Tur­key. And with fur­ther trade con­fronta­tions brew­ing, the rate may only in­crease from here.

On Tues­day, the pres­i­dent con­tin­ued to tout his trade war with China, say­ing that the 25% tar­iffs he im­posed on $250 bil­lion worth of Chi­nese goods would ben­e­fit the United States, and that he was look­ing “very strongly” at im­pos­ing ad­di­tional levies on nearly every Chi­nese im­port.

“I think it’s go­ing to turn out ex­tremely well. We’re in a very strong po­si­tion,”

Trump said in re­marks from the White House lawn. “Our econ­omy is fan­tas­tic; theirs is not so good. We’ve gone up tril­lions and tril­lions of dol­lars since the elec­tion; they’ve gone way down since my elec­tion.”

He called the trade dis­pute “a lit­tle squabble” and sug­gested he was in no rush to end his fight, though he held out the pos­si­bil­ity an agree­ment could be reached, say­ing: “They want to make a deal. It could ab­so­lutely hap­pen.” Stock mar­kets re­bounded Tues­day, af­ter plung­ing Mon­day as China and the United States re­sumed their tar­iff war.

Ad­di­tional tar­iffs could be on the way. Trump faces a Fri­day dead­line to de­ter­mine whether the U.S. will pro­ceed with his threat to im­pose global auto tar­iffs, a move that has been crit­i­cized by car com­pa­nies and for­eign pol­i­cy­mak­ers. And de­spite com­plaints by Repub­li­can law­mak­ers and U.S. com­pa­nies, Trump’s global metal tar­iffs re­main in place on Canada, Mex­ico, Europe and other al­lies.

The trade bar­ri­ers are put­ting the United States, pre­vi­ously a stead­fast ad­vo­cate of global free trade, in an un­fa­mil­iar po­si­tion. The coun­try now has the high­est over­all trade-weighted tar­iff rate at 4.2%, higher than any of the Group of 7 in­dus­tri­al­ized na­tions, ac­cord­ing to Torsten Slok, the chief econ­o­mist of Deutsche Bank Se­cu­ri­ties. That is more than twice as high as the rate for Canada, Bri­tain, Italy, Ger­many and France, and higher than most emerg­ing mar­kets, in­clud­ing Rus­sia, Tur­key and even China, Slok said.

The shift is hav­ing con­se­quences for an Amer­i­can econ­omy that is de­pen­dent on global trade, in­clud­ing multi­na­tional com­pa­nies like Boe­ing, Gen­eral Mo­tors, Ap­ple, Cater­pil­lar and other busi­nesses that source com­po­nents from abroad and want ac­cess to grow­ing mar­kets over­seas.

While trade ac­counts for a smaller per­cent­age of the U.S. econ­omy than in most other coun­tries – just 27% in 2017, com­pared with 38% for China and 87% for Ger­many, ac­cord­ing to World Bank data – it is still a crit­i­cal driver of jobs and eco­nomic growth.

Trump and his eco­nomic ad­vis­ers say the ad­min­is­tra­tion’s trade pol­icy is aid­ing the U.S. econ­omy, com­pa­nies and con­sumers. And de­spite the tough ap­proach, the ad­min­is­tra­tion con­tin­ues to in­sist its goal is to strike trade agree­ments that give U.S. busi­nesses bet­ter trade terms over­seas.

Last week, Trea­sury Sec­re­tary Steven Mnuchin praised Trumps’ trade poli­cies for help­ing eco­nomic growth thus far and said the ad­min­is­tra­tion sup­ports “free and fair re­cip­ro­cal trade.”

But if the goal is freer trade, the ad­min­is­tra­tion has never been fur­ther from achiev­ing that goal than it is to­day, said Chad Bown, a se­nior fel­low at the Peter­son In­sti­tute for In­ter­na­tional Eco­nom­ics. “They’re head­ing in the op­po­site di­rec­tion,” Bown said.

Be­yond an up­date to the U.S. agree­ment with South Korea, no other free trade deals have been fi­nal­ized. Trump’s re­vi­sions to the North Amer­i­can Free Trade Agree­ment with Canada and Mex­ico still await pas­sage in Congress, while trade talks with the Euro­pean Union and Ja­pan have been trou­bled from the start, with gov­ern­ments squab­bling over the scope of the agree­ment.

The eas­ier ex­pla­na­tion, said Michael Strain, di­rec­tor of eco­nomic pol­icy stud­ies at the Amer­i­can En­ter­prise In­sti­tute, is to take Trump at his word that he is a pro­tec­tion­ist. “Those are the words they’re us­ing, and those are the ac­tions they’re tak­ing,” he said.

While the United States and China could still strike a trade deal that would roll back many of their tar­iffs, that like­li­hood has ap­peared to di­min­ish in re­cent weeks. Progress to­ward a deal came to a sud­den halt this month when China back­tracked on cer­tain com­mit­ments and Trump threat­ened to move ahead with higher tar­iffs.

“We had a deal that was very close, and then they broke it,” he said Tues­day.

The two sides to dis­agree over whether the deal’s pro­vi­sions must be en­shrined in China’s laws. But they are also ar­gu­ing over Trump’s tar­iffs, which were in­tended to prod the Chi­nese to agree to more fa­vor­able trade terms for the U.S. China in­sists those tar­iffs must come off once a deal is reached, but the Trump ad­min­is­tra­tion wants some to re­main in place, to en­sure China abides by its com­mit­ments.

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