
World War 'T', from Tariffs: Donald Trump's Trade Bullying
Donald Trump's tactics to obtain his goals seem to be paying off. But it could become a 'shoot in the foot' for the U.S. economy.
The trade war has been one of Donald Trump's favorite tactics to consolidate his global influence. His strategy of pressuring his partners and rivals with tariffs has redefined U.S. economic policy. But how long will he be able to sustain this way of relating to the world?
Since his arrival at the White House, Trump has used tariffs as a weapon of economic pressure. His central argument has been the protection of U.S. industry and the fight against what he describes as unfair trade. Now he has unleashed a trade war against China, applying tariffs to products worth more than 300 billion dollars. Similarly, he threatened Mexico and Canada with levies of 25% if they did not comply with certain demands, such as greater immigration control and measures against fentanyl trafficking.
China did not stand idly by and responded with tariffs on U.S. oil, machinery and vehicles, in addition to filing a complaint with the World Trade Organization (WTO). At the same time, it initiated investigations against Google and other US corporations, tightening regulations on the export of rare metals, key in the technology industry.
In the case of Mexico and Canada, Trump's threats generated tension, but also negotiations. Both countries reacted and reached an agreement that avoided the application of tariffs, which led to a conditional truce with the United States.
Mexico agreed to deploy 10,000 troops to its northern border to combat drug trafficking, while Canada promised to beef up its border security and appoint a "fentanyl czar." In return, Trump suspended tariffs for 30 days.
However, the truce did not extend to China. Beijing increased tariffs on U.S. energy and agricultural products, while the EU expressed concern about the potential impact of Trump's trade policy on the European bloc. Several European leaders, including Emmanuel Macron and Olaf Scholz, warned about the negative effects of a potential trade conflict with the United States.
For how long?
The use of tariffs as a negotiating weapon has allowed Trump to obtain quick concessions, but it has also generated economic instability and tensions with his allies. The trade bullying strategy not only affects China, but also U.S. companies and consumers, who end up paying higher prices for imported products.
It would be nonsense to say that Trump is unaware of these impacts. That is why the pressure with tariffs and other drastic measures he has taken on the migration front can be read in another way: they are signs of weakness, because the President is clear that his time is numbered and that it is better to spend political capital now by taking measures that are completely counterproductive, and then correct the path.
The concern that arises is what the scenario will be if the president does not straighten the path and continues with this kind of measures for the next four years of his term. On the economic front, what can be expected with more tariffs is inflationary pressure, which would put the Fed on the ropes to raise rates and that would slow down the economy. Something no one wants, because during the previous campaign "it was the economy again, stupid!": inflation and unemployment greatly conditioned the position of voters who blamed the Biden administration for the bad time the country went through in those four years.
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What can come?
As Trump moves forward in his administration there is a risk that he will redouble his protectionist rhetoric. Confronting China remains a priority for his political base.
On the other hand, the EU could be forced to respond if tariffs are imposed on its exports, which could lead to a larger-scale trade war. In addition, negotiations with Mexico and Canada could intensify if Trump's demands become more severe.
Donald Trump's trade policy has changed the rules of the game in international trade. His strategy of tariffs as a pressure tool has yielded immediate results in some cases, but it has also generated uncertainty and economic risks.
If the expected risks materialize (inflation and economic slowdown) Trump is going to have to pull out another kind of weapon: Trump's trade bullying could soon run out of steam because of its negative effects on the U.S. economy itself.
With information from AFP
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