Category Archives: Tariffs

What is This? Trump and His Tariffs

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With the 100 days now reached, and just passed by Trump and his second administration, there is a desperate search to uncover a logic and goal or goals in Trump’s return to the White House and his most pointed policy action – the imposition of tariffs for all. I must say, it is not easy.

 

Now where to begin. I must say I am partial to David Brooks and his insights into Trump and his actions.  And sure enough he gave us a view recently in the NYTimes in a piece entitled, ‘Trump’s Single Stroke of Brilliance”: 

“Some of this is inherent in President Trump’s nature. He is not a learned man, but he is a spirited man, an assertive man. The ancient Greeks would say he possesses a torrential thumos, [passion]  a burning core of anger, a lust for recognition. All his life, he has moved forward with new projects and attempted new conquests, despite repeated failures and bankruptcies that would have humbled a nonnarcissist.”

 

“Initiative depends on motivation. The Trump administration is driven by some of the most atavistic and powerful of all human desires: resentment, the desire for power, the desire for retribution.”

Well, I must say, the resentment is pretty evident. But it still leaves rather unclear the possible, if it can be found, a Trump strategic logic. Many opinion folk are trying. Though there are so many initial policy actions by way of Trump’s ‘Executive Orders’ – indeed it seems to be a record for an incoming President – actions against immigrants, especially deportation actions, universities, research initiatives, development assistance, and much much more. Still nothing seems to be more dramatic than Trump tariffs. And the search is on, just as it is elsewhere, for a logic for the dramatic global imposition of wide-ranging tariffs.

Peter Warr prepared a piece for the East Asia Forum (EAF)  that attempts to crystallize, if possible, a Trump tariff policy logic. Warr is the John Crawford Professor of Agricultural Economics Emeritus at the Crawford School of Public Policy, The Australian National University (ANU) and Visiting Professor of Development Economics at the National Institute for Development Administration, Bangkok. Here is his first statement on the logic of Trump tariffs: 

“He is imposing huge tariffs on the countries most vulnerable to them, then waiting to exploit the new position of strength to make demands. The uncertainty and fear they generate are not byproducts — they are the point, establishing the leverage Trump needs for the predatory negotiations that follow.” 

So, it is about gaining leverage over allies and adversaries alike. As Warr suggests:   

“The tariffs are surely harmful, even from a US perspective, but they are not ‘crazy’. Given the way Trump sees the world and himself, they almost make sense.” 

But then it becomes clear that the actual tariff levels imposed are not particularly sensible: 

“In his Rose Garden speech, Trump revealed supposed figures for ‘tariffs charged to the USA including currency manipulation and trade barriers’ and ‘USA discounted reciprocal tariffs’. The numbers mystified observers until analysts including James Surowiecki worked out that they reflected each country’s goods trade surplus with the United States as a percentage of their goods exports to the United States — with a minimum 10 per cent tariff imposed on all countries, even those with trade deficits.”

Now Warr, accepts that many analysts think the calculations from the administration are not sensible: 

“As an estimate of protection rates against US goods, this calculation is absurd. Surowiecki called the formula ‘surprisingly silly’, and economist Paul Krugman called it ‘completely crazy’. But is it?”

So, Warr suggests there may in fact be a certain logic. The tariffs are designed, according to Warr to target those most vulnerable to Trump leverage: 

“The critics missed the point that the formula attempts a rudimentary indication of countries’ vulnerability to US tariffs. Countries receiving the highest tariffs have the highest ratio of exports relative to imports from the United States, even if they have no restrictions against US goods, tariffs or otherwise.” 

Though he attempts to highlight a certain logic – targeting what he sees as those with significant vulnerability to the US, in the end Warr has to concede that the approach is not exactly optimal: 

“A better, but still approximate, measure of that vulnerability would have been gross exports to the United States divided by a country’s GDP, but that would produce much smaller tariffs, which presumably is why it was not used. This may also explain why services were excluded from the formula. The United States is a net importer of goods but a net exporter of services and it is much harder to levy tariffs on services than goods. Placing a country’s trade surplus with the United States in the numerator falsely suggests that the tariffs reduce the US trade deficit.” 

 

“All these simplistic formulae still overlook the fact that countries have differing alternative, non-US export opportunities. They also ignore the effect of global value chains, with products crossing international borders multiple times during production. Reported trade balances misleadingly record the final assembly point as the source of US imports.” 

Recognizing that the formula for tariffs is ‘simplistic’ Warr is left a bottom line that acknowledges only that Trump is a ‘protectionist’: 

“Trump is a protectionist. He sees the decline of US manufacturing as foreigners stealing US jobs — grievance politics gone global. He thinks tariffs might reverse that.”

 

“Trump is a dealmaker. By ‘deal’ he means a zero-sum transaction in which one party wins at the expense of the other. Trump is obsessed with winning and believes tariffs can create coercive bargaining power for the United States as a major importer.” 

 

“Trump’s deal-making strategy is now transparent. First, enact huge tariffs on the countries most vulnerable to the US. Then wait for their desperate leaders to call, pleading for special treatment. Then exploit the new position of strength to demand something he wants.” 

It is not much of a strategic logic as Warr accepts in the end:

“This is the outlook Trump brings to trade policy. To respond most effectively to the tariffs, their function must first be recognised. The uncertainty and fear they produce is their essential purpose, establishing the bargaining power he requires for the predatory negotiations that follow.” 

In fact I am more inclined to see Trump’s tariffs in the way described by Alan Beattie of the FT. Beattie was previously the FT’s international economy editor and world trade editor and these days he writes ‘Trade Secrets’.The title of his opinion says a lot: “Vision of a Trump master plan is fading in a storm of incoherence. As Beattie writes: 

“The weeks and months since Donald Trump took office — in fact since he was elected — have seen companies, foreign governments, commentators and the media play the somewhat frustrating game of Hunt The Rationale.”

 

“They have watched a dizzying carousel of tariffs being threatened and then delayed, or imposed and then lifted, or imposed only to be shot through with loopholes.” 

 

“Over time, the ranks of those claiming there’s a master plan have thinned — and their arguments have grown less persuasive. Increasingly it has become obvious that there is no plan, or at least no coherent plan with a single target and a way of hitting it. Instead, Trump’s tariff policy reflects a mixture of competing and often flat-out contradictory aims and a misunderstanding of the power of the crude instruments he is using.” 

 

“All at once, he appears to be trying to cut trade deficits, protect US manufacturing, boost federal revenues, bring down other countries’ tariffs by offering deals, coerce them into a variety of actions (including allowing the US to annex Greenland or Canada), extract favours for granting exceptions to US companies, and keep the spotlight squarely on himself. The chaos surrounding his tariff policy is not just ineptitude — it is the result of huge contradictions.” 

Now look it won’t stop analysts – both those determined to extract a logic and those likely not to, to keep examining the Trump policy action. Indeed I was attracted to the piece prepared by Stacie Goddard in Foreign Affairs  (FA), “The Rise and Fall of Great-Power Competition: Trump’s New Spheres of Influence”. Now Goddard in the piece tackled the view that Trump’s strategic actions were driven by great power competition – a view adopted by many realist thinkers who see this as Trump’s logic focusing on US ‘interests’ in contrast to other administrations that have focused on ‘values’ and ‘collective global governance action’. As Goddard writes: 

“But in the mid-2010s, a new consensus took hold. The era of cooperation was over, and U.S. strategy had to focus on Washington’s contests with its major rivals, China and Russia. The main priority of American foreign policy was clear: stay ahead of them.” 

 

“Some hailed this consensus on great-power competition; others lamented it. But as Russia amped up its aggression in Ukraine, China made clear its designs on Taiwan, and the two autocratic powers deepened their ties and collaborated more closely with other U.S. rivals, few predicted that Washington would abandon competition as its guiding light. As Trump returned to the White House in 2025,many analysts expected continuity: a “Trump-Biden-Trump foreign policy,” as the title of an essay in Foreign Affairs described it.” 

 

“Then came the first two months of Trump’s second term. With astonishing speed, Trump has shattered the consensus he helped create. Rather than compete with China and Russia, Trump now wants to work with them, seeking deals that, during his first term, would have seemed antithetical to U.S. interests.” 

 

“These interpretations might have been persuasive in January. But it should now be clear that Trump’s vision of the world is not one of great-power competition but of great-power collusion: a “concert” system akin to the one that shaped Europe during the nineteenth century.”

 

“In Trump’s vision of a new concert, Russia and China must be treated as kindred spirits in quelling rampant disorder and worrisome social change. The United States will continue to compete with its peers, especially with China on issues of trade, but not at the expense of aiding the forces that Trump and his vice president, JD Vance, have called “enemies within”: illegal immigrants, Islamist terrorists, “woke” progressives, European-style socialists, and sexual minorities.”

Now digging back 200 years to describe a political order that might raise similarities to the actions of today’s Trump actions and others is intriguing but not strongly convincing. Leave aside the dangers of historical comparison, and there are many, the problem here  is imposing strategic logic to a not very strategic actor. We’ve already seen it with his major initiative, tariffs. And, moreover, there is little to suggest that the other major actors accept and act in a concert-like manner. There is too much unilateral unconcert-like action.

But let’s keep our eye on Trump’s collaborative initiatives, if they are in fact there and determine whether great power collusion is in fact an operative framing for Trump 2.0 global order actions. Paint me skeptical.

Image Credit: NBC News

This Post first appeared at my Substack Alan’s Newsletter – https://globalsummitryproject.substack.com/publish/posts/detail/162614458/share-center

Taming the ‘Bully and the Dragon’

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It is hard to deal with a ‘Bully’. Usually efforts, even reasonable ones of accommodation only lead generally to further demands – just ask Columbia University. That was why I was pleased to see Harvard University ‘dig in’ rather than try to accommodate the Trump administration. As Philip Stephens, contributing editor of the FT wrote in a recent piece on various allied responses to Trump’s tariff actions titled, ‘Placate or retaliate? Starmer and Carney are both right on Trump’:

“Canada’s Mark Carney has picked up the gauntlet. Britain’s Keir Starmer prefers to look the other way. Japan and South Korea lead the queue to strike a bilateral deal. … Kudos generally goes to those willing to stand up to “the bully”. Carney has transformed his Liberal party’s electoral prospects by relishing the fight. In Europe, Gaullism has gone mainstream. Emmanuel Macron’s call for Europe to break free of the Americans is echoed by chancellor-in-waiting Friedrich Merz in Berlin.”

 

“None of this makes pandering to Trump look heroic, particularly when, with characteristic vulgarity, the president publicly mocks the softly spoken. Opinion polls suggest Europeans would prefer their leaders to join Carney in the ring. Appeasing Trump may simply encourage him. He clearly enjoys humiliating America’s old friends. The answer surely is to show him that Trumpism has costs. Didn’t we learn at school that the way to beat bullies is to fight back?”

So a round of applause for the Harvard folk. But there will continue to be hard times – note the request by Trump to the IRS to end Harvard’s tax-free status. What additionally is needed then to blunt Trump’s actions? What is needed is: collaboration and group support from other universities and then collective action in the courts. Bending the knee to Trump will not work. Nobody said it would be easy.

David Wallace-Wells has pointed out in the NYT what the actions of the Trump administration have led to the following actions by US partners:

“Last week Spain’s democratic-socialist government proudly announced plans to intensify relations with China, after Treasury Secretary Scott Bessent warned that doing so would amount to “cutting your own throat.” President Emmanuel Macron of France urged European companies to stop investing in the United States, and the European Union as a whole, which is developing a retaliatory tariff response and plotting potential tax increases on American tech companies, announced it is sending a delegation to Beijing in July.

 

What comes next? Perhaps it shouldn’t be so hard to imagine, given the drift of what’s now called geoeconomics. Already, China commands global trade, and modeling from Bloomberg shows that, as constituted today, the tariffs will only add to the lead — pushing many more countries to work more with China and less with America. According to one model, 30 percent of American trading partners would fully recover from even total cessation of U.S. trade within one year; within five years, more than half would. This is why chaos is rarely the chosen strategy for a hegemon: Barring what Trump calls a “beautiful deal,” the biggest single beneficiary of the whole crusade may well end up being its intended target.”

So how do we deal with the dragon? Clearly there is ‘fire’ and a certain amount of ‘huffing and puffing’. But beyond the aggressiveness, think Taiwan, and even aggression – talk to the Philippines – about that, is there the prospect of securing a deal? And in the more immediate circumstances, is there the prospect of securing a bilateral trade arrangement, or even an enlarged one with China.

Let’s start with an assessment of what the Trump administration is up to. This is not an easy determination. What is the goal of the Trump administration? Kyla Scanlon, author of, the author of “In This Economy? How Money & Markets Really Work” wrote recently in the NYT:

“What is an overarching goal of these actions? Or, what is the purpose of Trumponomics?

In a word, reindustrialization.”

It is hard to see at times what is the end point for Trump and his minions: is it revenues, China decoupling, reshoring of manufacturing – all or none of the above. But for Scanlon it is evident – reindustrialization in the US and she goes on to say:

“To reindustrialize will require investment in people and machines — and a coherent strategy. Given the Trump administration’s aversion to collaboration and the internal contradictions of the factions within the administration, its reindustrialization drive appears disconnected from reality and destined to fail.”

She concludes that a successful strategy in the 21st century today, in her opinion, require the following from the US and its partners ultimately:

“Modern manufacturing is high-tech and requires different skills from those of the 20th century. The focus should be on advanced manufacturing sectors where America can lead through innovation, not just protectionism: pharmaceuticals, clean-energy technology, robotics and semiconductors.

 

Second, it would invest substantially in the foundations for industrial competitiveness like education, infrastructure, research and development (like the CHIPS Act) and work force training.

 

Third, a serious strategy would recognize that alliances matter. Rather than needlessly alienate partners like Canada, Mexico, Japan and the European Union, a sound approach would build cooperative frameworks that reduce dependence on geopolitical rivals while strengthening ties with allies. Selective decoupling would better serve America’s long-term interests.”

But what appears to be evident is that the Trump administration seems dramatically unwilling to work with partners and allies to enhance trade with them and to press China on what remains today a damaging economic policy from Beijing that increases production and exports as opposed to a more determined effort to improve domestic consumption. Yes, Xi Jinping and his associates have once again targeted energizing domestic consumption, but seeing is believing. We shall see.

What then is possible? Tom Friedman describes why it is highly unlikely that Trump will, or can, act in concert. As Friedman put in a recent NYT piece:

“So much crazy happens with the Trump administration every day that some downright weird but incredibly telling stuff gets lost in the noise. A recent example was the scene on April 8 at the White House where, in the middle of his raging trade war, our president decided it was the perfect time to sign an executive order to bolster coal mining.”

 

“It’s commendable that the president honors men and women who work with their hands. But when he singles out coal miners for praise while he tries to zero out development of clean-tech jobs from his budget — in 2023, the U.S. wind energy industry employed approximately 130,000 workers, while the solar industry employed 280,000 — it suggests that Trump is trapped in a right-wing woke ideology that doesn’t recognize green manufacturing jobs as “real” jobs. How is that going to make us stronger?”

 

“This whole Trump II administration is a cruel farce. Trump ran for another term not because he had any clue how to transform America for the 21st century. He ran in order to stay out of jail and to get revenge on those who, with real evidence, had tried to hold him accountable to the law. I doubt he has ever spent five minutes studying the work force of the future.”

 

“But this farce is about to touch every American. By attacking our closest allies — Canada, Mexico, Japan, South Korea and the European Union — and our biggest rival, China, at the same time he makes clear he favors Russia over Ukraine and prefers climate-destroying energy industries over future-oriented ones, the planet be damned, Trump is triggering a serious loss of global confidence in America.”

 

“The world is now seeing Trump’s America for exactly what it is becoming: a rogue state led by an impulsive strongman disconnected from the rule of law and other constitutional American principles and values.”

If indeed the US under a Trump administration is a rogue actor, and on too many days it does indeed look exactly like that. Put simply what is required and the answer may well be: coordination without the United States. And I’d add it begins with the Informals, most notably the G20.

There has been on and off talk that Trump will not attend the G20 Leaders’ Summit which will be held in Johannesburg, South Africa, on November 22-23rd. And senior US officials including Secretary of State Marco Rubio and Treasury Secretary Scott Bessent have failed to show up for at least early meetings. On the other hand, apparently, the United States has been active in the Troika – the gathering of the G20 members – the past host, the present one and future host – in assisting in carrying out a successful G20 Summit. As it turns out the United States is scheduled to take hosting in 2026. But the point is whether the US participates – if it doesn’t the UK would likely take the hosting in 2026 – and indeed possibly US absence might benefit the working of the G20 at the moment – a serious gathering like this may be critical in advancing needed global governance action.

Coordination without US participation – at least during Trump 2.0 – may be the necessary ingredient for advancing critical multilateral action. I will return to this soon.

Image Credit: FT and Neil Hall/EPA

This Post first appeared at Alan’s Newsletter: https://globalsummitryproject.substack.com/p/taming-the-bully-and-the-dragon

‘The Spiral of Disorder’ – Building then Destroying Trust – Let’s Start with Tariffs

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It is mind-boggling to watch this second term of Trump, or Trump 2.0. First the flood of ‘executive orders’, though apparently they are technically not really  ‘orders’. And now the long awaited ‘Liberation Day’ announcement of tariffs including Trump’s incoherent ‘reciprocal tariffs’, though, in fact, it is no liberation. As The Economist described the Rose Garden event: 

Speaking in the Rose Garden of the White House, the president announced new “reciprocal” tariffs on almost all America’s trading partners. There will be levies of 34% on China, 27% on India, 24% on Japan and 20% on the European Union. Many small economies face swingeing rates; all targets face a tariff of at least 10%. Including existing duties, the total levy on China will now be 65%. Canada and Mexico were spared additional tariffs, and the new levies will not be added to industry-specific measures, such as a 25% tariff on cars, or a promised tariff on semiconductors. But America’s overall tariff rate will soar above its Depression-era level back to the 19th century.”

As Glenn Kessler in WAPO describes these Trump Liberation Day tariffs: 

Trump’s speech announcing a huge increase in tariffs on American trading partners was riddled with falsehoods and misleading statements on trade that he has made for years. But now they are determining policy that will increase the costs of goods for many Americans.

But as The Economist pointed out about this tariff announcement: 

Almost everything Mr Trump said this week—on history, economics and the technicalities of trade—was utterly deluded. His reading of history is upside down. He has long glorified the high-tariff, low-income-tax era of the late-19th century. In fact, the best scholarship shows that tariffs impeded the economy back then. He has now added the bizarre claim that lifting tariffs caused the Depression of the 1930s and that the Smoot-Hawley tariffs were too late to rescue the situation. The reality is that tariffs made the Depression much worse, just as they will harm all economies today. It was the painstaking rounds of trade talks in the subsequent 80 years that lowered tariffs and helped increase prosperity.

Take a look at the tariffs imposed by Trump as described in Upshot at the NYTimes: 

New tariffs for select trading partners

Country New

tariff

 Share of

U.S. imports

 Goods trade

balance
E.U. +20% 18.5% –$241 bil.
China +34% 13.4% –$292 bil.
Japan +24% 4.5% –$69 bil.
Vietnam +46% 4.2% –$123 bil.
South Korea +26% 4.0% –$66 bil.
Taiwan +32% 3.6% –$74 bil.
India +27% 2.7% –$46 bil.
Switzerland +32% 1.9% –$39 bil.
Thailand +37% 1.9% –$46 bil.
Malaysia +24% 1.6% –$25 bil.

Show 50 more rows +

Sources: White House, Observatory of Economic Complexity Notes: Trade balance and import share figures based on 2024 trade data.” 

And Mr Trump’s grasp of the technicalities was pathetic. He suggested that the new tariffs were based on an assessment of a country’s tariffs against America, plus currency manipulation and other supposed distortions, such as value-added tax. But it looks as if officials set the tariffs using a formula that takes America’s bilateral trade deficit as a share of goods imported from each country and halves it—which is almost as random as taxing you on the number of vowels in your name.

Anthony DeBarros, the data news manager at the WSJ, describes it this way: 

The White House’s new tariffs were pegged to amounts it said other countries impose on the U.S. In many cases, those amounts appear to match a basic formula: the size of a country’s goods-trade imbalance with the U.S., divided by how much America imports from that nation.

 

The chart President Trump read from in the Rose Garden [image above] listed tariffs charged on imports from the U.S. as “including currency manipulation and trade barriers.” The numbers don’t necessarily match what foreign countries charge against imports from the U.S.

 

For example, Chinese tariffs against the U.S. were about 23% overall as of last month, according to the Peterson Institute for International Economics.

 

But dividing the U.S.’s  2024 goods-trade deficit with China, of about $295 billion, by the amount the U.S. imported from China results in the 67% tariff value presented by the White House.

 

$295bn ÷ $439bn=67%

 

The math works out that way for at least 71 of the 184 nations, plus the European Union, included in Wednesday’s announcement. In most of those cases, the U.S. is charging a new tariff of roughly half the rate it calculated.

 

And indeed Trump’s chart that he showed with applied tariffs, identifies China with 34% tariffs being applied. 

As for many others, DeBarros points out: 

For the remaining nations, including all those where the U.S. has a trade surplus, the tariff charged on imports from the U.S. was listed as 10%. In these instances, the U.S. set a 10% reciprocal tariff.

And The Economist even offers a solution starting with constraining the desire to hit back. Instead it offers the following alternative response: 

Instead, governments should focus on increasing trade flows among themselves, especially in the services that power the 21st-century economy. With a share of final demand for imports of only 15%, America does not dominate global trade the way it does global finance or military spending. Even if it halted imports entirely, on current trends 100 of its trading partners would have recovered all their lost exports within just five years, calculates Global Trade Alert, a think-tank. The EU, the 12 members of the Comprehensive and Progressive Agreement for Trans Pacific Partnership (CPTPP), South Korea and small open economies like Norway account for 34% of global demand for imports.

As many point out, however, China’s distorted trade policy needs to be addressed. China has committed too many harmful trade policies as identified by  The Economist: 

Building a trading system with China is desirable, but will be viable only if it rebalances its economy towards domestic demand to ease worries about dumping. Also, China could be required to transfer technology and invest in production in Europe in exchange for lower tariffs.

As Alan Beattie writes in his FT column: 

There can be no logic-washing of Donald Trump’s tariffs. This isn’t part of a carefully-designed industrial policy or a cunning strategy to induce compliance among trading partners or a choreographed appearance of chaos to scare other governments into obedience. It’s wildly destructive stupidity, and the generations of American, and particularly Republican politicians, who allowed things to slide to this point are collectively to blame.

The message is: on those facing the  Trump craziness, don’t commit the errors of Trump 2.0. Act smarter. Maintaining and deepening global integration should remain the goal and endpoint, notwithstanding Trump. 

As The Economist  concludes: 

If this seems gruelling and slow, that is because integration always is. Throwing up barriers is easier and faster. There is no avoiding the havoc Mr Trump has wrought, but that does not mean his foolishness is destined to triumph.

The message is clear – don’t do what Trump has done. Hopefully, in the longer term major trading partners, friends and foes, will grasp the logic of greater trade with each other and leave the Trump trade strategy by the wayside.  

In the short term, however, it is not likely. I can’t say that is very surprising. Retaliating in the short term is just too attractive  – standing up to the bully.  And, indeed, China has already responded with trade retaliation. As Keith Bradsher and David Pierson report in the NYTimes, the day after Trump Liberation Day:

China has struck back at President Trump.

 

In a rapid fire series of policy announcements from Beijing on Friday evening, including 34 percent across-the-board tariffs, China showed that it has no intention of backing down in the trade war that Mr. Trump began this week with his own steep tariffs on imports from around the world.

 

China’s Finance Ministry said it will match Mr. Trump’s plan for 34 percent tariffs on goods from China with its own 34 percent tariff on imports from the United States.

 

Separately, China’s Ministry of Commerce said it was adding 11 American companies to its list of “unreliable entities,” essentially barring them from doing business in China or with Chinese companies. The ministry imposed a licensing system to restrict exports of seven rare earth elements that are mined and processed almost exclusively in China and are used in everything from electric cars to smart bombs.”

Hurtful and ‘Trump-like’. 

I had hoped not only to examine the impact of Trump 2.0 tariff policy on the global economy but also focus on policy actions that have enhanced, or possibly sustained the multilateral institutions or, alternately, weakened the multilateral institutions. And to that we will move to.

Image Credit: BBC 

This Post originally appeared at my Substack Post, Alan’s Newsletter – https://globalsummitryproject.substack.com/p/the-spiral-of-disorder-building-then