Wednesday, June 12, 2019

Trump's New Tariff Threats

In the days following the announcement of the Trump Administration’s border security deal with Mexico, President Trump has doubled down on his use of the what often seems to be the only arrow in his quiver.

“Tariffs are the answer,” the president told CNBC.

“As soon as I put tariffs on the table, it was done. It took two days,” Trump said. “If we didn’t have tariffs, we wouldn’t have made a deal with Mexico.”

Over the weekend, the New York Times disputed that claim, citing reports from negotiators on both sides that said that the major components of the deal had been reached months before. The timetable of the asylum agreement and the number of Mexican troops deployed to the country’s Guatemala border were apparently adjusted after Mr. Trump threatened to launch a new trade war.

Regardless of how true the president’s claim that tariffs saved the day is, Trump seems determined to repeat the strategy again and again. In fact, he has already threatened another country with a new round of tariffs.

On Monday, the president threatened to impose new tariffs on China if President Xi Jinping does not attend the G-20 meeting later this month. In a phone interview with CNBC, President Trump said that he would immediately implement tariffs on the approximately 60 percent of Chinese imports that are not currently subject to import taxes. American consumers ultimately pay the tariffs on imported goods, but the higher cost of the imported goods decreases demand and lower sales ultimately hurt the foreign companies… or so protectionists hope.

China is “going to make a deal because they’re going to have to make a deal,” Trump told the CNBC host, claiming “China is getting absolutely decimated by companies that are leaving China, going to other countries, including our own, because they don’t want to pay the tariffs.”

For their part, China has threatened to shut off supplies of rare earth minerals to the US. China controls 90 percent of the world’s supply of rare earths, which are vital to the construction of electronic items such as smartphones, electric vehicles, and weapon systems.

If that weren’t enough, President Trump is already threatening to raise tariffs on Mexico once again. In a Monday morning tweet, the president said that if Mexico’s legislature failed to approve the deal, “tariffs will be reinstated!”

Mexico and the United States have a new trade treaty pending ratification by both countries and Canada. Trump’s repeated tariff threats against Mexico may make ratification difficult.

President Trump’s tendency to go back to the well on the tool that he is able to implement without congressional approval is proving to be a problem. While the self-proclaimed “Tariff Man” says that “tariffs are a beautiful thing,” others disagree.

Myron Brilliant, the executive vice president of the Chamber of Commerce, warned against Trump’s use of tariffs, saying, “The weaponization of tariffs, the increase of threats on our economy, on our farmers, on our manufacturers, our consumers, is going to hurt our country. It also creates uncertainty with our trading partners.”

Trump fired back that Brilliant was “not so brilliant” and said, “He’s not protecting our country. He’s protecting companies who are members” of Chamber. The Chamber of Commerce represents American companies.

Mr. Trump’s tariff war runs risks both at home and abroad. Retaliatory tariffs by foreign trading partners hurt American exporters while Trump’s trade taxes are being paid by Americans, wiping out the gains from his tax reform. The constantly changing tax structure for imports and exports makes it difficult for American companies to plan for the future. If the trade war persists until the election, Republicans might find that businesses abandon them for Democrats who are perceived as more pro-business than a party that won’t challenge Mr. Trump’s erratic tax increases.

Originally published on The Resurgent

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