CNN
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If the tariff plan of the US president, Donald Trump, is confusing, you are not the only one.
Trump and his economic team have made many contradictory statements about the justification of tariffs, which has left the US multinational companies insecure about how to plan foreign countries without knowing how to negotiate.
Trump imposed huge and punitive import tariffs on Canada and Mexico, only to postpone them for a month in exchange for relatively little of the neighbors of the United States.
The general tariffs to China are in force, but an exemption repealed on small items caused colossal confusion in the US postal service and temporarily put into effect again. And more tariffs on steel and aluminum are expected to be announced on Monday, before this week a potentially broader reciprocal tariff plan will be announced at the end of this week.
That can only be the beginning: Trump has hinted at the application of tariffs to the European Union and has also promised a broader tariff on all the articles that enter in the United States.
Tariffs serve an important purpose in the economy. The United States has frequently used tariffs to protect its manufacturing industry, its farmers, its technology and their national security interests. While the previous administrations, including Trump’s first mandate, with their high tariffs, tended to use the scalpel as their favorite tariff tool, Trump, in his second mandate, threatens to use a demolition ball, saying that he will impose tariffs to many goods that the United States does not even produce.
The big US companies, outraged by tariffs, have pressed a lot against them. Conventional economists coincide to a large extent that Trump’s tariff plan will revive inflation and decelerate the economic growth of the United States. Last month, the editors of The Wall Street Journal, who normally put on the side of the president’s policies, qualified Trump’s tariff plan as “the most stupid commercial war in history.”
But there is a method behind Trump’s tariff plan.
Trump has used and promised to expand tariffs with three main objectives: increase income, balance trade and submit rival countries.
Often these are contradictory reasons that can hinder negotiations and unable business planning. For example, a country that Trump imposes punitive tariffs can go to the negotiating table to try to resolve a conflict, as Canada and Mexico did to help reduce the flow of fentanyl and undocumented immigrants to the United States. But if Trump will impose general tariffs to increase reciprocal income and tariffs to balance trade, then Mexico and Canada can end up being affected by tariffs anyway.
Even so, the logic behind Trump’s tariffs, even if debatable, exists.
The United States is suffering a huge budget deficit, and Trump has said that tariffs will compensate for the loss of income, in particular, its 2017 tax cuts, which has said it wants to extend and expand. In an opening speech of the annual meeting of the World Economic Forum, last month, Trump predicted that his tariffs would contribute hundreds of billions of dollars, perhaps billion dollars, to the United States Treasury.
Trump usually criticizes American commercial policy for “subsidizing” foreign countries, saying that the United States is “losing” hundreds of billions of dollars in front of its neighboring nations. Trump speaks imprecisely about the commercial gap, the difference between what the United States exports and imports.
Some economists warn that Trump’s language on the United States commercial gap unfairly represents what has become a crucial mechanism for the US economy: its ability to buy services offered by other countries, as well as things that are not much manufactured to national level, such as coffee. But reciprocal tariffs, which Trump says he will announce on Tuesday or Wednesday, would match dollar per dollar the tariffs of other countries with the aim of balanceing trade.
And Trump has threatened with tariffs because they can force countries to give up something he believes is the best for the United States. For example, their punitive tariffs on China and delayed tariffs on Canada and Mexico aim to ensure that the largest commercial partners of the United States reduce the number of undocumented and fentanyl immigrants that cross the borders of the United States.
Although the tariffs are charged to importers, they can deter buyers from acquiring goods from countries subject to tariffs, harming the economies of those nations. That has led some countries to seek agreements to avoid tariffs; For example, Mexico and Canada agreed last week to expand border patrols.
That is why Trump has called “tariff” the fourth most beautiful word in the dictionary, after “God”, “love” and “religion”: it is a multifaceted tool to achieve three goals.
The problem is that it is difficult to achieve three simultaneously. If countries do what Trump wants to avoid tariffs, the United States cannot increase the income it needs. If the United States will impose tariffs on countries anyway, countries have no incentive to sit down to negotiate. And if it is necessary to balance trade, the application of tariffs has resulted in retaliation tariffs, which has triggered a commercial war that can harm the industry and US consumers.
Last week, Trump imposed a 10% tariff on all Chinese products imported by the United States, in addition to all existing tariffs on China. After these tariffs came into force on Tuesday, China quickly took reprisals imposing tariffs on some chips and metals, began investigating Google and included the manufacturer of the Calvin Klein and Tommy Hilfiger brands on their list of non -reliable entities.
But Trump has already begun to reduce these tariffs, suspending taxes on any merchandise worth US $ 800 or less imported to the US until the Department of Commerce can develop a system to impose those articles difficult to track. Trump has also suspended the general tariffs of 25 % on Mexican and Canadian imports until at least March 1.
Trump announces his plans on tariffs on board the Air Force One
Trump, speaking with journalists at the Air Force One on Sunday, said he planned to announce a 25 % tariff on Monday over all imports from the United States of steel and aluminum. China has been flooding the world market with cheap steel, harming production worldwide, even in the United States. Steel tariffs in the first Trump administration promoted national hiring and production, but also prices.
Trump also said he planned to celebrate a separate press conference on Tuesday or Wednesday to announce huge new reciprocal tariffs, which could match those of other countries over US dollar products per dollar.
“Very simple, if they charge us, we charge them,” Trump said.
In addition to the 10% general tariff over all imports and threats of the European Union, Trump has suggested in the past that could use tariffs to force Denmark to yield to the United States the control of Greenland.
He did not give many details about the magnitude of the new tariffs or when they could go into force.
