Trump's long-standing view on tariffs is poised for a critical trial
Rewritten Article:
President Trump's Trade Wars: A Disease Testing His Beliefs
President Donald J. Trump, who's long held the belief that tariffs can make America richer by strong-arming other nations, finds this conviction reinforced by his trade wars' early skirmishes. But as Americans brace for the tariffs' bite, this dogma confronts a severe test.
Secretary of the Treasury Steven Mnuchin and U.S. Trade Representative Robert Lighthizer will meet with Chinese officials this weekend in Switzerland – a setting reminiscent of US-Soviet Cold War summits - marking the most critical moment yet in the trade wars. Global markets eagerly anticipate some de-escalation, as this conflict was initiated by Trump's imposition of a devastating 145% tariff on Chinese goods.
However, Trump's steadfast confidence in tariffs, seemingly undimmed by a dose of negative U.S. growth and signs of a looming supply crunch, complicates Mnuchin's mission. In fact, the president's conviction has only hardened.
"They want to meet," Trump boldly declared in the Oval Office Tuesday. "They're doing no business right now, and those ships are turning around in the Pacific Ocean ... by not trading, we're losing nothing."
Investors, business leaders, and consumers desperately hope the president will recognize the need for a swift, face-saving exit from his trade wars, but Trump's words suggest that tariffs may not be just a means to an end, but the end itself. While trade agreements with the U.S. may be possible, the terms are likely to be unforgiving and never restore the low-tariff global economy of yesteryears.
Despite days of prophesying imminent trade agreements, the administration has yet to announce any new breakthroughs, so there's no real prospect of tariffs being lifted anytime soon. Trump's volatility and penchant for changing his mind on a dime mean that his statements should never be deemed definitive.
The gathering storm caused by his policies – as the threat of a recession looms, and Americans start experiencing shortages in stores – could leave him with no choice but to retreat.
The talks with China will be pivotal in determining whether a soft landing is possible for the trade wars, perhaps preventing a major economic slowdown. Mnuchin confirmed Tuesday that his initial plan is to cool the confrontation, proving the talks with Chinese officials represent the "missing piece" in the administration's strategy, which Mnuchin planned to discuss with Swiss officials prior to this meeting. However, China typically prefers protracted trade talks, stretching over several months. Mnuchin conceded that he doesn't expect to be discussing "the big trade deal" yet.
An increasing number of Trump's comments and posts on social media suggest that he's not yet ready to shift course, one-third of the way through a 90-day pause in reciprocal tariffs. On Tuesday, he tempered expectations for a flurry of trade deals that his senior aides and he had been forecasting were imminent for days, claiming he wishes people would stop asking about the number of deals signed this week. The president then contemplated the possibility of permanent protectionism.
"So, I wish they'd keep - you know, stop asking, 'How many deals are you signing this week?' Because one day, we'll come and we'll give you a hundred deals,'" Trump declared, adding, "And I think my people haven't made it clear. We will sign some deals, but much bigger than that is, we're going to put down the price that people are going to have to pay to shop in the United States."
Trump: The Globe's Exclusive Super-Luxury Store Owner
During an Oval Office meeting with Canadian Prime Minister Justin Trudeau, the president revealed his vision for operating as a retailer setting prices for individual customers. In this vision, tariffs are not a means to initiate talks for mutual benefits but a way to impose a premium, contingent on how much each nation sacrifices its own economic interests to boost America's. "Think of us as a super-luxury store, a store that has the goods. You're going to come and you're going to pay a price, and we're going to give you a very good price," Trump said.
This means the old world is gone.
Trump also stated last month that his 145% tariff on China will "come down substantially, but it won't be zero." Additionally, he told Time Magazine in a recent interview that he'd consider it a "total victory" if tariffs – an economic tool he's viewed with near-mythical reverence for decades – were at 50%.
This may require a recalibration of global markets and foreign capitals' expectations. Trump may fall short of his long-shot goal of returning manufacturing to the United States to levels seen before the entry of nations like China and Vietnam into the global economy in the late 20th century. But it's becoming increasingly apparent that, at least while he's in the Oval Office and controls the world's most powerful economy, the days of unfettered globalization are over.
Moreover, it's becoming clear that the president doesn't view future deals as mere resets for the global trading system. He wants to transform it – making the U.S. a manufacturing and exporting powerhouse while no longer purchasing goods from abroad. "They have to sign deals with us," the president said. "If they want a piece of our market – we don't want a piece of their market. We don't care about their market. They want a piece of our market."
This is a mind-boggling strategy, regardless of its unwavering faith in the American people and the country's industrial potential. It disregards the fact that millions of Americans enjoy purchasing lower-priced foreign goods. Such spending power has improved middle and working-class lifestyles, enabling them to afford electronics and essentials like clothes. Additionally, Trump's strategy overlooks other nations that manufacture the goods global consumers crave, not just basic goods.
A Potential Era of Austerity?
Trump's thinking could signal a new age of austerity, despite his promises of making America great again.
In this context, his comments to Trudeau, the leader of the country that buys more American products than any other, offered an intriguing glimpse into his thoughts.
Having the president set the price for access to the U.S. market would be an extraordinary way to run a 21st-century economy. It may also be an illegal and unconstitutional use of executive power.
Moreover, since Trump has a fuzzy grasp of tariffs – viewing them as a massive source of public revenue rather than a significant tax on American consumers – implementing the strategy would bring grave risks for the U.S. economy.
Attempts to artificially control the prices of goods usually lead to shortages and supply chain issues, while they can also inflate prices. A centralized system is also susceptible to manipulation. Trump has already provided temporary tariff carve-outs for certain tech products and parts manufacturers supplying the auto industry after lobbying from CEOs. Such interactions allow the president to grab headlines and maneuver the pieces on the global trade chessboard – a pattern that characterizes many of his policies.
In an administration with a remarkably casual attitude towards ethics, such a system opens up opportunities for corruption. What's to stop a company or country offering the president favors or inducements that boost his businesses to receive preferential treatment?
"We don't want steel from Canada 'cause we're making our own steel," Trump said Tuesday. "We really don't want Canadian steel and we don't want Canadian aluminum and various other things because we want to be able to do it ourselves."
Trump's aspirations extend beyond self-sufficiency. He envisions an attempt to drive other nations out of business to make them dependent on America. He may have soft-pedaled his territorial claim on Canada in Trudeau's presence, but his trade policies would have a similar impact.
"We don't really want cars from Canada. And we've put tariffs on cars from Canada, and at a certain point, it won't make economic sense for Canada to build those cars," Trump said, echoing the rationale of his "America first" foreign policy – leveraging U.S. might to exert control over smaller, less powerful nations.
"We've been ripped off by everybody for 50 years, for 50 years, and we're just not going to do that anymore. We can't do that, and we can't let any country do that to us," Trump said. He's been saying this for decades: as a businessman, as a candidate, and now as a second-term president. It's time for Trump's critics to accept that he means it.
- Despite the looming threat of a recession and supply crunch, President Trump remains undeterred in his conviction that tariffs can make America richer.
- Secretary Mnuchin's mission to de-escalate the trade wars with China faces complications due to Trump's readiness to announce even more tariffs.
- In Trump's vision, the U.S. functions like a super-luxury store, where nations pay a premium to access the American market, a departure from traditional trade agreements.
- The meeting with Chinese officials this weekend is crucial for determining whether a soft landing is possible for the trade wars, but Trump's words suggest he may not be ready to retreat from his tariff policies any time soon.
