The News
President Donald Trump is expected to announce the most dramatic shift in US trade policy in decades in a Rose Garden press conference Wednesday. That’s about all we know right now.
Just hours from “Liberation Day,” details are scant on exactly how the president plans to upend 30 years of global commerce. His EU counterpart, Ursula von der Leyen, says the bloc has “a strong plan to retaliate,” but to what?
Reciprocal tariffs — “whatever they charge us, we charge them,” in the president’s words — are likely, plus some indirect tariffs for targeted political effect, like pressuring Vladimir Putin on peace talks by taxing imports to the US from countries that buy Russian oil.
Trump sees tariffs as a way to revive American manufacturing; a cudgel to settle scores and project strength; a source of revenue to pay for tax cuts; and an ideological war against a system that MAGA loathes. Most economists agree the first is unlikely and, outside of some national-security sectors, not worth subsidizing with an estimated $6 trillion tax on households. The second has yielded some foreign-policy wins.
The third would require high and sustained tariffs that could actually sap government coffers, if economic growth slows and tax receipts drop. Trump’s first-term tariffs were mostly harmless, but were smaller and set against a more favorable economic backdrop of low interest rates and steady growth.
The fourth — replacing the neoliberal world order — seems certain to work. Whatever the numbers are tomorrow, the economic world we’re heading into will look nothing like the postwar free-trade consensus that preceded it.
SIGNALS
Companies may hold off on relocating manufacturing to US
Trump has maintained that companies that move manufacturing to the US can bypass tariffs. This is the response the White House hopes to trigger — Trump has recently held press conferences alongside some top executives pledging enlarged US investments. But most firms are playing a wait-and-see game before rerouting supply chains. Trump’s on-again-off-again approach is “paralyzing for businesses, who are realizing that any kind of long-term commitment can turn out to have been a disastrous mistake,” left-of-center economist Paul Krugman wrote: “Build a plant that depends on imported parts, and Trump may cut you off at the knees with new tariffs. Build a plant that’s only profitable if tariffs stay in place, and Trump may cut you off at the knees by backing down.”
Reciprocal tariffs can get messy
Trump also sees reciprocal tariffs as a geopolitical bargaining chip that will force other nations to make concessions or remove their own trade barriers on the US. The strategy sounds “deceivingly straightforward,” and there are some cases whereby Washington can “sit down in a boardroom and hash out bilateral deals in which ‘you cut your tariffs and we’ll cut ours,’” Bloomberg’s Jonathan Levin wrote. But in practice, tit-for-tat duties are “a hornet’s nest of potential conflict and retaliation.” Major US trading partners have teased a variety of possible responses, underscoring the disparate consequences Washington will face: The European Union is mulling targeting Big Tech and American banks in retaliation, while Trump has said he expects India to cut tariffs “substantially.”
Huge Trump administration report gives glimpse into trade philosophy
Trump’s abiding philosophy is that other countries have treated the US unfairly in trade for decades, enacting tariffs and other policies that hurt American business. In a 397-page report released Monday, the administration gave more insight into what, exactly, it categorizes as such a barrier, including rules like food safety regulations and renewable energy requirements: The EU was called out for recycled packaging requirements, as was a Quebec law mandating French-language translations on imports. Trump may be correct that it’s “a little unfair” for US companies to pay more to sell overseas than foreign firms do to sell in the US, National Review’s Jim Geraghty wrote, but that “doesn’t make the economic harm any easier to take.”