WASHINGTON: At a glance, U.S. President Donald Trump appears to be winning the trade war he unleashed after returning to the White House in January, bending major trading partners to his will, imposing double-digit tariff rates on nearly all imports, narrowing the trade deficit, and raking in tens of billions of dollars a month in much-needed cash for federal government coffers.
Significant hurdles remain, however, including whether U.S. trading partners will make good on investment and goods-purchase commitments, how much tariffs will drive up inflation or stymie demand and growth, and whether the courts allow many of his ad-hoc levies to stand.
On inauguration day, the effective U.S. tariff rate was about 2.5%. It has since jumped to somewhere between 17% and 19%, according to a range of estimates. The Atlantic Council estimates it will edge closer to 20%, the highest in a century, with higher duties taking effect on Thursday.
Trading partners have largely refrained from retaliatory tariffs, sparing the global economy from a more painful tit-for-tat trade war. Data on Tuesday showed a 16% narrowing of the U.S. trade deficit in June, while the U.S. trade gap with China shrank to its smallest in more than 21 years.
American consumers have shown themselves to be more resilient than expected, but some recent data indicate the tariffs are already affecting jobs, growth and inflation.
“The question is, what does winning mean?” said Josh Lipsky, who heads economic studies at the Atlantic Council. “He’s raising tariffs on the rest of the world and avoiding a retaliatory trade war far easier than even he anticipated, but the bigger question is what effect does that have on the U.S. economy.”
Michael Strain, head of economic policy studies at the conservative American Enterprise Institute, said Trump’s geopolitical victories could prove hollow.
“In a geopolitical sense, Trump’s obviously getting tons of concessions from other countries, but in an economic sense, he’s not winning the trade war,” he said. “What we’re seeing is that he is more willing to inflict economic harm on Americans than other countries are willing to inflict on their nations. And I think of that as losing.”
Kelly Ann Shaw, a White House trade adviser during Trump’s first term who is now a partner at Akin Gump Strauss Hauer & Feld, said a still-strong economy and near-record-high stock prices “support a more aggressive tariff strategy.”
But Trump’s tariffs, tax cuts, deregulation and policies to boost energy production would take time to play out.
“I think history will judge these policies, but he is the first president in my lifetime to make major changes to the global trading system,” she added.
DEALS SO FAR
Trump has concluded eight framework agreements with the European Union, Japan, Britain, South Korea, Vietnam, Indonesia, Pakistan and the Philippines that impose tariffs on their goods ranging from 10% to 20%.
That’s well short of the “90 deals in 90 days” administration officials had touted in April, but they account for some 40% of U.S. trade flows. Adding in China, currently saddled with a 30% levy on its goods but likely to win another reprieve from even higher tariffs before an August 12 deadline, would raise that to nearly 54%.
Deals aside, many of Trump’s tariff actions have been mercurial.
On Wednesday he ratcheted up pressure on India, doubling new tariffs on goods from there to 50% from 25% because of its imports of oil from Russia. The same rate is in store for goods from Brazil, after Trump complained about its prosecution of former leader Jair Bolsonaro, a Trump ally. And Switzerland, which Trump had previously praised, is facing 39% tariffs after a conversation between its leader and Trump derailed a deal.
Ryan Majerus, a trade lawyer who worked in both the first Trump administration and the Biden government, said what’s been announced so far fails to address “longstanding, politically entrenched trade issues” that have bothered U.S. policymakers for decades, and getting there would likely take “months, if not years.”
He also noted they lack specific enforcement mechanisms for the big investments announced, including $550 billion for Japan and $600 billion for the EU.
– Andrea Shalal
