WASHINGTON: President Donald Trump on Thursday rolled out his plan to increase US tariffs to match the tax rates that other countries charge on imports, possibly triggering a broader economic confrontation with allies and rivals alike as he hopes to eliminate any trade imbalances.
\n\u201cI\u2019ve decided for purposes of fairness that I will charge a reciprocal tariff,\u201d Trump said in the Oval Office at the proclamation signing. \u201cIt\u2019s fair to all. No other country can complain.\u201d
\nTrump\u2019s Republican administration has insisted that its new tariffs would equalize the ability of US and foreign manufacturers to compete, though under current law these new taxes would likely be paid by American consumers and businesses either directly or in the form of higher prices.
\nThe politics of tariffs could easily backfire on Trump if his agenda pushes up inflation and grinds down growth, making this a high stakes wager for a president eager to declare his authority over the US economy.
\nThe tariff increases would be customized for each country with the partial goal of starting new trade negotiations. But other nations might also feel the need to respond with their own tariff increases on American goods. As a result, Trump may need to find ways to reassure consumers and businesses to counteract any uncertainty caused by his tariffs.
\nThe United States does have low average tariffs, but Trump\u2019s proclamation as written would seem designed to jack up taxes on imports, rather than pursue fairness as the United States also has regulatory restrictions that limit foreign products, said Scott Lincicome, a trade expert at the Cato Institute, a libertarian think tank.
\n\u201cIt will inevitably mean higher tariffs, and thus higher taxes for American consumers and manufacturers,\u201d he said. Trump\u2019s tariffs plan \u201creflects a fundamental misunderstanding of how the global economy works.\u201d
\nTrump\u2019s proclamation identifies value-added taxes \u2014 which are similar to sales taxes and common in the European Union \u2014 as a trade barrier to be included in any reciprocal tariff calculations. Other nations\u2019 tariff rates, subsidies to industries, regulations and possible undervaluing of currencies would be among the factors the Trump administration would use to assess tariffs.
\nA senior White House official, who insisted on anonymity to preview the details on a call with reporters, said that the expected tariff revenues would separately help to balance the expected $1.9 trillion budget deficit. The official also said the reviews needed for the tariffs could be completed within a matter of weeks or a few months.
\nThe possible tax increases on imports and exports could be large compared to the comparatively modest tariffs that Trump imposed during his first term. Trade in goods between Europe and the United States nearly totaled $1.3 trillion last year, with the United States exporting $267 billion less than it imports, according to the Census Bureau.
\nThe president has openly antagonized multiple US trading partners over the past several weeks, levying tariff threats and inviting them to retaliate with import taxes of their own that could send the economy hurtling into a trade war.
\nTrump has put an additional 10 percent tariff on Chinese imports due to that country\u2019s role in the production of the opioid fentanyl. He also has readied tariffs on Canada and Mexico, America\u2019s two largest trading partners, that could take effect in March after being suspended for 30 days. On top of that, on Monday, he removed the exemptions from his 2018 steel and aluminum tariffs. And he\u2019s mused about new tariffs on computer chips and pharmaceutical drugs.
\nBut by Trump\u2019s own admission, his separate tariffs for national security and other reasons would be on top of the reciprocal tariffs, meaning that the playing field would not necessarily be level.
\nIn the case of the 25 percent steel and aluminum tariffs, \u201cthat\u2019s over and above this,\u201d Trump said. Autos, computer chips and pharmaceuticals would also be tariffed at higher rates than what his reciprocal plan charges, he said.
\nThe EU, Canada and Mexico have countermeasures ready to inflict economic pain on the United States in response to Trump\u2019s actions, while China has already taken retaliatory steps with its own tariffs on US energy, agricultural machinery and large-engine autos as well as an antitrust investigation of Google.
\nThe White House has argued that charging the same import taxes as other countries do would improve the fairness of trade, potentially raising revenues for the US government while also enabling negotiations that could eventually improve trade.
\nBut Trump is also making a political wager that voters can tolerate higher inflation levels. Price spikes in 2021 and 2022 severely weakened the popularity of then-President Joe Biden, with voters so frustrated by inflation eroding their buying power that they chose last year to put Trump back in the White House to address the problem. Inflation has risen since November\u2019s election, with the government reporting on Wednesday that the consumer price index is running at an annual rate of 3 percent.
\nThe Trump team has decried criticism of its tariffs even as it has acknowledged the likelihood of some financial pain. It says that the tariffs have to be weighed against the possible extension and expansion of Trump\u2019s 2017 tax cuts as well as efforts to curb regulations and force savings through the spending freezes and staff reductions in billionaire adviser Elon Musk\u2019s Department of Government Efficiency initiative.
\nBut an obstacle to this approach might be the sequencing of the various policies and the possibilities of a wider trade conflict stifling investment and hiring amid the greater inflationary pressures.
\nAnalysts at the bank Wells Fargo said in a Thursday report that the tariffs would likely hurt growth this year, just as the possibility of extended and expanded tax cuts could help growth recover in 2026.
\nTrump tried to minimize the likelihood that his policies would trigger anything more than a brief bump in inflation. But when asked if he would ask agencies to analyze the possible impact on prices, the president declined.
\n\u201cThere\u2019s nothing to study,\u201d Trump said. \u201cIt\u2019s going to go well.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"
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