Gordon L. Weil
American exports should be greater than American imports
worldwide and for every country. That’s
the essence of President Trump’s tariff policy.
To the extent that any country has a positive trade balance
with the U.S., it is “robbing” the U.S. To fix the imbalance, the U.S. now imposes
tariffs or threatens to use them on imports to make them so expensive that American
producers, with higher costs, can compete.
Even taking this policy at its face value, it is a failure.
Trump has squeezed other countries to force them to the
negotiating table where they should make concessions to get him to back off the
tariffs. The signs are that he will achieve
a lot less than he set out to get. And
neither side may be better off.
Two talks last week revealed that his policy was not
working. Meeting with Canadian Prime
Minister Mark Carney, Trump said that the U.S. did not need his country’s
exports, asserting that America could be self-sufficient. Carney, an experienced negotiator, avoided debating
the point, but merely noted that Canada is the biggest customer in the world for
U.S. exports.
Trump is so focused on the trade balance in goods that he
ignored exports and the favorable U.S. balance in services or his country’s reliance
on Canadian oil, uranium and other essential goods. He failed to recognize that
many products, like automobiles, are truly international, making it impossible
to label them as coming from a single source.
After Trump again grandstanded about his desire to make Canada
the 51st state and Carney’s understandable rejection, the two sides retired to
begin closed, substantive talks going beyond scoring on one another. In effect, Trump recognized that he needs a
deal, which Carney already knew.
The second event was the announcement of a trade deal with
the U.K. Ever since Brexit, the Brits
have sought a comprehensive trade arrangement, possibly a free trade deal, with
the U.S., to compensate somewhat for losing Europe. But the U.S. has had a favorable trade balance
with Britain, giving it no reason to make a major deal.
That changed. Trump
needed an early trade deal to justify his tariff policy. British Prime Minister Keir Starmer needed an
accord to show the U.K. still has a special relationship with the U.S., and
that the Labour Party could bring home a trade deal responding to some of Britain’s
hopes. Both leaders congratulated
themselves on making a long sought after deal.
That may have been good politics for each of them, but it wasn’t
true. The deal removed some of the trade
measures that Trump had applied to the U.K. without justification, but the Financial
Times, a leading British newspaper, noted that it still left the U.K. worse
off than it had been before Trump returned to office.
A deal with China really could matter, and both sides need
it. Trump looked anxious in claiming prematurely
that talks with Beijing were under way, when at best contacts took place about
starting talks. At last, they have
begun. With China, the president’s
tariff policy might produce results, though whether China keeps its promises
would remain in doubt.
Overall, the Trump tariff policy is failing. Originally focused solely on imports of goods,
the policy missed the effects on domestic prices, access to essential imports, American
exports as other countries retaliated, and the trade-stopping effects of
astronomic tariff rates. He now seems to
begin to understand the implications of his one-note trade policy.
But his performance in talks with Carney and Starmer suggests
he can’t adjust his demands. Better
qualified negotiators try to save the appearance of his claims, while making
realistic arrangements. One result is that
the British deal is not a comprehensive pact, but simply covers specific items,
with many details left to be completed.
Not only is his high tariff policy fading into face-saving pacts
limited to a few products, but Trump himself seems to be fading. What should have been said about Joe Biden as
his term wore on, seems to be increasingly true for Trump. He restates broad themes,
but lacks the energy or grasp of details to go further. He leaves that to others.
When asked what the Declaration of Independence, posted on
his office wall meant to him, he said it was a declaration about “unity
and love” when it was about rebellion and anger. When describing the U.K. trade deal, he read
from prepared written remarks, possibly for the first time, showing no sign of
understanding the deal.
He continues to ring the chimes for his key policies: mass
deportation of illegal immigrants, stopping other countries from “robbing” the
U.S., and slashing the federal government.
The question arises if he is capable of making these policies work as
they face growing opposition.
