President Donald Trump has been struck by the rules that have been running world trade in decades. The“Reciprocal” tariffsIt is expected to announce Wednesday, he is likely to create chaos for global businesses and in conflict with America’s allies and opponents.
Since the 1960s, tariffs –or importing taxes– They came out of the negotiations between dozens of countries. Trump wants to use the process.
“Obviously, it disrupts the way things are done for a very long time,” said Richard Mojica, a trade lawyer in Miller and Chevalier. “Trump throws that window … clearly this is increasing the trade.
Referring to America’s massive and permanent trade deficits – not since 1975, the United States has sold the rest of the world more than bought – Trump accuses the field of playing against US companies. A big reason, he and his advisers say, is because other countries usually tax US exports at a higher rate than their taxes.
Trump has a repair: he increases US tariffs to match what other countries charge.
The president is an uncertain supporter of tariffs. He used them liberally in his first term and deploys them even more aggressively in his second. Since returning to the White House, he struck 20% tariffs for China, revealed a 25% tax on imported cars and trucks to take effect on Thursday, effectively raising US foreign steel and aluminum taxes and imposed taxes on some Canada and Mexico goods, which could expand them this week.
Economists do not share Trump’s enthusiasm for tariffs. They are a tax on importers who are usually transmitted to consumers. But it is possible for Trump’s reciprocal tariff to bring other countries to the table and make them cut their own import taxes.
“It can be a victory,” said Christine McDaniel, a former US trade clerk, now at the George Mason University Center. “It is in the interests of other countries to reduce those tariffs.”
She noted that India has already cut tariffs on motorcycle items to luxury cars and has agreed to purchase US energy purchases.
What are reciprocal tariffs and how do they work?
They sound simple: the United States will raise their tariff for foreign products to suit what other countries impose on American products.
“If we charge us, we charge them,” the president said in February. “If they are 25 years old, we are 25 years old. If they are 10 years old, we are at 10 years old. And if they are much higher than 25, that’s what we are and.”
But the White House did not reveal much details. He directed Trade Secretary Howard Lunno to submit a report this week on how the new tariffs would actually function.
Among the outstanding questions, observed Antonio Rivera, a partner at Arentfox Schiff and a former lawyer with US customs and border protection, is whether the United States will look at thousands of cases in the tariff code – from motorcycles to mango – and try to level one country. Or whether it will look wider on the average tariff of each country and how it compares to America. Or something else in full.
“It’s just a very, very chaotic environment,” said Steven Lamar, president and CEO of the American Clothing and Footwear Association. “It’s hard to plan in any long -term, sustainable way. ”
How did the tariffs become so bad?
America’s tariffs are generally lower than those of its trading partners. After World War II, the United States made other countries reduce trade barriers and tariffs, watching free trade as a way to promote peace, prosperity and US exports around the world. And it was most practiced by what he preached, in general, maintaining his low level tariffs and giving access to US consumers access to cheap foreign products.
Trump has broken with the old free trade consensus, saying the unfair foreign competition has harmed US manufacturers and destroyed factory cities in the American heart. During his first term, he slapped tariffs for foreign steel, aluminum, washing machines, solar panels and almost everything from China. Democratic President Oeo Biden has largely extended Trump’s protectionist policies.
The White House cited several examples of particularly bad tariffs: Ethanol imports into Brazil taxes, including America, to 18%, but the US tariff for ethanol is only 2.5%. India also taxed foreign motorcycles at 100%, America only 2.4%.
Does this mean that the United States was used?
The higher foreign tariffs that Trump complains were not temporarily adopted by foreign countries. The United States agreed after several years of complex negotiations known as the Uruguayan Circle, which ended up in a trade pact involving 123 countries.
As part of the agreement, countries could set their own tariffs for different products – but according to the “preferred nation” approach, they could not charge one country more than accused another. So, high tariffs complain of Trump, not aimed at the United States. They hit everyone.
Trump’s fires against US trading partners also come in strange weather. The United States, working on strong consumer and healthy productivity improvements, surpass other advanced economies in the world. The US economy has grown by almost 9% shortly before Covid-19 by the middle of last year-equipped with only 5.5% for Canada and only 1.9% for the European Union. Germany’s economy declined by 2% at the time.
Trump’s plan exceeds tariffs of foreign countries
Not satisfied with the violation of the tariff code, Trump also goes to other foreign practices he considers unfair barriers to US exports. These include subsidies that give preference to home -made manufacturers in terms of US exports; Basic health rules used to store foreign products; and loose regulations that encourage the theft of trade secrets and other intellectual property.
To determine the import tax that neutralizes the damage from those practices will add another level of complexity to Trump’s reciprocal tariff scheme.
Trump’s team also chooses a fight with the European Union and other trading partners regarding so -called value added taxes. Known as DVD, these taxes are essentially a tax on sales of products spent within the borders of a country. Trump and his advisers believe VAT is a tariff because they are applying for exports to us.
However, most economists disagree, for the simple reason: VAT applies to both domestic and imported products, so they do not specifically target foreign products and are traditionally not considered a trade barrier.
And there is a bigger problem: DVDs are huge revenue for European governments. “There is no chance that most countries can negotiate their VAT … Because it is a key part of their income base,” “Brad Sethser, older colleague in the Foreign Relations Council, announced on X.
Paul Ashworth, chief economist in North America, for Capital Economics, says the top 15 exporting to the United States has an average DVD with 14%, as well as 6%duties. That would mean that US retaliatory tariffs could reach 20% – much higher than Trump’s proposal for a universal 10% duties.
Tariffs and trade deficit
Trump and some of his advisers argue that stricter tariffs will help restore the United States’ long -standing trade deficits.
But tariffs have not proved to be successful in narrowing the trade gap: Despite Trump-Biden’s import tax, the deficit rose to $ 918 billion last year, the second highest in record.
The deficit, economists say, is a result of the unique features of the US economy. Since the federal government leads a huge deficit and US consumers want to spend so much, US consumption and investment far goes beyond savings. As a result, a piece of that demand goes to foreign goods and services.
The United States covers the cost of the trade gap with essential borrowing from abroad, partly by selling treasury securities and other assets.
“The trade deficit is really a macroeconomic imbalance,” said Kimberly Clausing, an economist of UCLA and a former finance officer. “It comes from this lack of desire to save and this lack of desire to tax yourself. Until you fix those things, we will imbalance in trade.”
This story was originally shown on Fortune.com
Source link
