Trump’s Lizzyable “mutual” tariffs

“Reciprocity”: Yes, that’s right. please. Don’t believe that word. He’s laughing. Sorry, where were you? Ah that’s right. Welcome to Trade Secrets. If you’re one of my new readers, you’ve chosen an exciting time to participate.

Starting the fifth week of the Trump administration, the president threatens five sets of significantly destructive tariffs (Colombia, China, Canada, Mexico, steel and aluminum, so-called “mutual”) and ends up all but the next time It has been postponed to a time other than that for a few months. The last of these, announced last week, is undoubtedly still eccentric. Today’s newsletter explains why Trump best looks at why he abandons his rule-bound token attempts and creates it as he goes on. Meanwhile, a much greater threat to globalization (as I previously wrote) escalated last week in a link with Trump with Russia against Ukrainian invasion, potential for indefinite disruption on the eastern side of Europe and weaken the EU. The Charted Waters section, which examines the data behind world trade, is in the dollar.

The US trade policy is a bit more Chinese

To scream at my colleagues on the reporting side (someone who plays a complete heroic, that looks like a lot of work). lead. This plan is not “reciprocity.” It is narcissism and merchandising cloaked in caprice.

As I wrote before, the Trump Campaign platform has a slightly logical (legally complicated) policy that matches the tariffs imposed on US goods with comparable tariffs. It included plans for destructive cases. There is a historical symmetry in this idea. It is somewhat similar to the Franklin D. Roosevelt Mutual Trade Agreement Act of 1934. Of course, the system of interest is By destroying the most outsourced national foundation, Trump’s plans will be reversed.

I said it’s politically impossible – because it means reducing US tariffs for highly protected American producers, such as sugar cane growers. surprise! It’s the latter. In fact, it’s worse than the latter.

The plan is responsible for the heavy imprint of White House trade warrior Peter Navarro, so the US can punish trading partners not only for US equivalent tariffs but also for using VAT. (Long-run trade obsession Washingtonians or other taxes maintain inconvenient regulations, mean to the US tech industry, have currency-defense, look at the US in an interesting way, workers’ It means wearing white after the day etc. It is a toxic stew from the cauldron of trade complaints that has been foaming for years.

This is how I think about it. “Reciprocity” is simply what Trump and Navarro are saying. The US offers multiple tools to impose customs duties of your choice for any reason, which can be compensated on a very flexible and legal basis with a set of arbitrary and highly variable deadlines. . In addition to the tariffs already in China, the US currently has 25% fentanyl and immigration tariffs, which are expected to be scheduled for March 4th in Canada and Mexico. Onboard and aluminum tariffs were received on March 12th. And this “mutual” nonsense. This should be discussed in light of the various reports Trump commissioned on April 1, followed by what God knew. Ad hoc assembly of such customs weapons appears to be primarily designed to create negotiation leverage for concessions and bribery.

It’s a bit fanciful, and in a way the US is a bit Chinese. It implements an increasingly centralized, export-oriented merchantalism, providing support through trade restrictions and subsidies to favorable industries. Also, in the Xi Jinping case, Australia and President of Lithuania, he is willing to use import duties and blocs as a compulsory tool for foreign policy. In Trump’s case, Columbia, Mexico, Canada, and now clearly everyone else.

There is one slightly obvious difference. China has literally hone the abilities of bureaucrats over the centuries, holding its first written exams for competitive civil servants in the 6th century AD. Trump wants to allow Elon Musk and his destroyers to assault US federal civil servants and destroy their ability to manage them. I feel this doesn’t end well for the US.

How do you solve problems like Navarro?

Ok, the horror story is sufficient. What are multinational corporations and trade partner governments?

First of all, remember that all of this may not be anything or very much. Of the five sets of tariffs Trump has threatened so far, he only implements one of them (China). Investors may be completely wrong, but at least worth noting, it is far from decisive, but the financial markets clearly do not believe there are massive, dislocated changes .

Secondly, playing “mutual” games would certainly be a bad idea. Reducing tariffs to match US equivalents will destroy the most harmful national foundations of the multilateral trading system. If the rest of the world were to exchange more between themselves, the system would be the bedrock of it, although it is very incomplete. Anyway, what is the guarantee that the US will keep its bargain side? This is the cards we are talking about. It appears even more wise for the government to do something as dramatic as dismantling the VAT system in the hopes of getting a more simple ride.

Third, given the different capabilities and trading patterns, coordinating retaliation between different trading partners is less practical. The idea for everyone who tariffs on Elon Musk’s Teslas is great, but it’s difficult for the EU and China, where Tesla factories are. But the government has at least a plan for what they could do (as I wrote last week, Canada and Mexico) and is ready to take action as soon as possible. It may be.

It is clearly ideal to hit Trump hard without immediately causing damage to the retaliator’s economy. For example, the EU can do something with technical regulations. Imagine Trump and Navarro announced the start date of “mutual” tariffs and immediately met a global array of threats of retaliation that suffer from trade, investment and regulated weapons. Even they may alk by launching a generalized trade war with other parts of the world.

Fourth, if the US is signaling clearly enough that exports are about to be attacked, foreign companies (probably with government support) should do exactly what the Chinese did last time. You can plan. If I were an Indian manufacturer that relies on US consumers, I would be planning contingencies on how to route exports or invest in stop-off countries. We could be a truly global game mall game. And while there’s a lot of confusion in the short term, in the medium term, we’ll bet on Outfox Navarro on superheroes in the global supply chain.

Overall, this is it. It is more than a crime for the United States to launch a generalized world trade war against other parts of the world to carry the old proverbs that stem from one or other French wisdom of the 18th and 19th centuries. Yes, that’s a mistake. If the US is really trying to close the overall deficit with big tariffs, it will cause a recession. If Trump distinguishes between trading partners, tariff partners can pinch the side doors of those who have escaped lighter.

Charted water

There is no sign of a weak dollar that Trump is intermittently enthusiastic, nor many clear directions from the administration. His Treasury Secretary Scott Becent tautology to submission last week by making a brilliantly pointless claim that the US, which has a strong dollar policy, did not mean that other countries would weaken their monetary policy. I decided to try. i know right? me too.

Trade Link

FT explains how Trump’s USAID spread is affecting development support around the world.

Thinktank Merrick is looking at how well China is positioned for a trade war with the US.

The EU is considering banning the import of foods not added to EU regulatory standards, particularly with regard to the use of pesticides.

Hosuk Lee-Makiyama of Ecipe Think-Tank looks at the trade and security situation in the Far North Atlantic.

I was a guest on FT’s Peerless Hofded Garkets and Finance Podcasts last week, talking about tariffs, steel and the uselessness of giant pandas.

Trade Secrets are edited by Harvey Nriapia