The News
US President Donald Trump’s latest slate of tariffs came into effect Sunday, creating new urgency for countries scrambling to decide on how to respond.
Canada, China, and Australia have already swiped back with tariffs of their own, while the European Union has held off so far — but is reportedly set to approve a first raft of countermeasures on up to $28 billion of US imports.
Some, including Britain and Indonesia, said they would not retaliate; Vietnam offered to scrap its own import duties on American goods in order to avert Trump’s planned 46% tariff that is set to take effect Wednesday — but the president’s trade czar told CNBC Monday that the offer “means nothing to us.”
SIGNALS
Trump’s lens of conflict casts all countries as enemies
Despite the near-century-old consensus that global trade should be based on cooperation, President Donald Trump’s trade policy holds as its “first principle…[that countries] have inherent conflicts of interest,” a historian told The New York Times. Most economists disagree with the Trump administration’s calculus — many have said the rationale for calculating tariffs seemed nonsensical— but it would be “unwise to dismiss these visions,” a Chatham House analyst argued: Tariffs may resonate with voters who felt left out of globalization’s benefits. “One thing [Trump has] been consistent on, since the 1980s, is his belief that tariffs are an effective means of boosting the US economy,” the BBC noted.
No end in sight to escalatory measures
China’s decision to retaliate with 34% tariffs on US exports makes the prospect of a near-term deal to defuse the US-China trade war “highly unlikely,” a Capital Economics expert told the Financial Times. China, like many other countries, have a “pretty good case” for targeted retaliation toward the US, Nobel Prize-winning economist Paul Kruger said, adding that targeting companies like Tesla may be particularly effective: “There is some hope of changing U.S. policy and also some hope of at least offering some satisfaction to national concerns.” Bruegel experts argued the European Union should respond, too, even though some businesses could see higher costs in the short-term, because ”[b]ending the knee to a tyrant will most likely encourage the tyrant to ask for more.”
…but the global economy remains in a ‘position of relative strength’
Markets are in freefall, but the global economy is facing Donald Trump’s tariffs “from a position of relative strength,” The Economist noted, adding that the US economy, too, could weather the storm. That Trump’s trade war isn’t very popular at home also suggests it’s “too soon to assume the worst,” The Wall Street Journal’s chief economics commentator argued: Republican lawmakers have already begun to raise objections, and more could come out against tariffs as their constituents start to feel the pain, he wrote. Rather, the uncertainty — which predates Trump — is the greater recessionary threat, Bloomberg wrote: “The global economy is now a perpetual uncertainty machine. Get used to it.”