WASHINGTON — President Trump’s tariffs were initially seen as a cudgel to force other countries to drop their trade barriers. But they increasingly look like a more permanent tool to shelter American industry, block imports and banish an undesirable trade deficit.
More than two years into the Trump administration, the United States has emerged as a nation with the highest tariff rate among developed countries, outranking Canada, Germany and France, as well as China, Russia and Turkey. And with further trade confrontations brewing, the rate may only increase from here.
On Tuesday, the president continued to praise his trade war with China, saying that the 25 percent tariffs he imposed on $250 billion worth of Chinese goods would benefit the United States, and that he was looking “very strongly” at imposing additional levies on nearly every Chinese import.
“I think it’s going to turn out extremely well. We’re in a very strong position,” Mr. Trump said in remarks from the White House lawn. “Our economy is fantastic; theirs is not so good. We’ve gone up trillions and trillions of dollars since the election; they’ve gone way down since my election.”
He called the trade dispute “a little squabble” and suggested he was in no rush to end his fight, though he held out the possibility an agreement could be reached, saying: “They want to make a deal. It could absolutely happen.” Stock markets rebounded on Tuesday, after plunging on Monday as China and the United States resumed their tariff war.
Additional tariffs could be on the way. Mr. Trump faces a Friday deadline to determine whether the United States will proceed with his threat to impose global auto tariffs, a move that has been criticized by car companies and foreign policymakers. And despite complaints by Republican lawmakers and American companies, Mr. Trump’s global metal tariffs remain in place on Canada, Mexico, Europe and other allies.
The trade barriers are putting the United States, previously a steadfast advocate of global free trade, in an unfamiliar position. The country now has the highest overall trade-weighted tariff rate at 4.2 percent, higher than any of the Group of 7 industrialized nations, according to Torsten Slok, the chief economist of Deutsche Bank Securities. That is now more than twice as high as the rate for Canada, Britain, Italy, Germany and France, and higher than most emerging markets, including Russia, Turkey and even China, Mr. Slok said.
The shift is having consequences for an American economy that is dependent on global trade, including multinational companies like Boeing, General Motors, Apple, Caterpillar and other businesses that source components from abroad and want access to growing markets overseas.
While trade accounts for a smaller percentage of the American economy than in most other countries — just 27 percent in 2017, compared with 38 percent for China and 87 percent for Germany, according to World Bank data — it is still a critical driver of jobs and economic growth.
Mr. Trump and his economic advisers say the administration’s trade policy is aiding the American economy, companies and consumers. And despite the tough approach, the administration continues to insist its goal is to strike trade agreements that give American businesses better trade terms overseas.
At a briefing last week, Steven Mnuchin, the Treasury secretary, praised the president’s trade policies for helping economic growth thus far and said the administration supports “free and fair reciprocal trade.”
But if the goal really is freer trade, the administration has never been further from achieving that goal than it is today, said Chad Bown, a senior fellow at the Peterson Institute for International Economics.
“They’re heading in the opposite direction,” Mr. Bown said.
Beyond an update to the United States agreement with South Korea, no other free trade deals have been finalized. Mr. Trump’s revisions to the North American Free Trade Agreement with Canada and Mexico still await passage in Congress, while trade talks with the European Union and Japan have been troubled from the start, with governments squabbling over the scope of the agreement.
Mr. Trump came into office fiercely critical of the failure of past administrations and global bodies like the World Trade Organization for failing to police China’s unfair trade practices. He withdrew the United States from multilateral efforts like the Trans-Pacific Partnership, a multicountry trade deal negotiated by President Barack Obama, and the Paris climate accord.
That shift has created an opening for other countries to step forward as global leaders, including Europe, Japan and China, despite its position as one of the world’s most controversial economic actors. On Tuesday, China submitted its proposals for overhauling the World Trade Organization, including broadening the privileges of developing countries, a status that China claims for itself.
Advocates of free trade fear that governments in India, China, South Africa and elsewhere might find Mr. Trump’s model of protectionism appealing and erect even higher barriers to foreign companies.
While the United States and China could still strike a trade deal that would roll back many of their tariffs, that likelihood has appeared to diminish in recent weeks.
Progress toward a deal came to a sudden halt this month when China backtracked on certain commitments and Mr. Trump threatened to move ahead with higher tariffs.
“We had a deal that was very close, and then they broke it,” he said on Tuesday.
The two sides continue to disagree over whether the deal’s provisions must be enshrined in China’s laws. But they are also arguing over Mr. Trump’s tariffs, which were intended to prod the Chinese to agree to more favorable trade terms for the United States. China insists those tariffs must come off once a deal is reached, but the Trump administration wants some to remain in place, to ensure China abides by its commitments.
In an interview on Tuesday on CNBC, Senator Marco Rubio, Republican of Florida, supported the administration’s tactics.
“Ideally, you wouldn’t have tariffs,” he said. But the United States already faces “all kinds of impediments” to gaining access to the Chinese marketplace, including tariffs, subsidization of industries and theft of intellectual property.
“We already have a series of hundreds of billions of dollars of Chinese penalties against the United States which are threatening our long-term viability,” Mr. Rubio said.
Canada and Mexico have repeatedly pressed the administration to lift its tariffs on steel and aluminum now that negotiations over the Nafta revision are done. The three countries signed the United States-Mexico-Canada Agreement in November, but the pact awaits passage in all three legislatures.
The Trump administration still views the tariffs as a source of leverage in case it needs to demand final changes to the deal from Canada and Mexico. But Canadian and Mexican officials — as well as many in Congress — say the levies are actually an impediment because all three legislatures will refuse to finalize the deal while they are in place.
A similar standoff could soon unfold with the European Union, which Mr. Trump has accused of being a “brutal trading partner” and being “tougher than China.”
The president, who wants Europe to open its markets to American farmers and companies, has already imposed tariffs on European metals and is threatening to levy a 25 percent tax on imports of European cars and car parts if the bloc does not give the United States better trade terms.
Europe has absorbed Mr. Trump’s steel and aluminum tariffs without too much damage. But car tariffs would strike the most important industry in Germany, which has the Continent’s biggest economy. European officials would regard car tariffs as a breach of a truce they worked out last year with Mr. Trump, and they have said they would refuse to negotiate as long as car tariffs were in place.
Cecilia Malmstrom, the European commissioner for trade, repeated on Monday that the European Union had prepared a list of American products worth $22.5 billion — including ketchup, suitcases and tractors — that would face immediate retaliatory tariffs.
“We’re prepared for the worst,” Ms. Malmstrom said in an interview with the Süddeutsche Zeitung newspaper in Germany.
European officials still hold out hope that Mr. Trump will see them as allies and not geopolitical rivals like the Chinese. And he could ultimately delay the decision and extend the Friday deadline for countries that are in trade talks with the United States.
But the president shows no signs of backing away from his stance that tariffs have helped the United States.
On Tuesday morning, Mr. Trump posted on Twitter that tariffs had rebuilt America’s steel industry and were encouraging companies to leave China, making it “more competitive” for buyers in the United States.
“China buys MUCH less from us than we buy from them, by almost 500 Billion Dollars, so we are in a fantastic position,” Mr. Trump tweeted. “Make your product at home in the USA and there is no Tariff.”
start with a country that, for whatever reason, became a favorite of foreign lenders, and experienced a large inflow of foreign capital over a number of years. Crucially, the debt thus incurred is denominated in foreign currency, not domestic (which is why the U.S., also a recipient of large inflows in the past, isn’t similarly vulnerable — we borrow in dollars).
.. Whatever the shock, the crucial thing is that foreign debt has made your economy vulnerable to a death spiral. Loss of confidence causes your currency to drop; this makes it harder to repay debts in foreign currency; this hurts the real economy and further reduces confidence, leading to a further decline in your currency; and so on.
.. Indonesia came into the ’90s financial crisis with foreign debt less than 60 percent of GDP, roughly comparable to Turkey early this year. By 1998 a plunging rupiah had sent that debt to almost 170 percent of GDP.
.. How does such a crisis end? If there is no effective policy response, what happens is that the currency drops and debt measured in domestic currency balloons until everyone who can go bankrupt, does. At that point the weak currency fuels an export boom, and the economy starts a recovery built around huge trade surpluses.
.. stop the explosion of the debt ratio with some combination of temporary capital controls, to place a curfew on panicked capital flight, and possibly the repudiation of some foreign-currency debt.
.. get things in place for a fiscally sustainable regime once the crisis is over.
.. Malaysia did this in 1998; South Korea, with U.S. aid, effectively did something like it at the same time, by pressuring banks into maintaining their short-term credit lines. A decade later, Iceland did very well with a combination of capital controls and debt repudiation (strictly speaking, refusing to take public responsibility for the debts run up by private bankers).
.. Argentina also did quite well with heterodox policies in 2002 and for a few years after, effectively repudiating 2/3 of its debt.
- .. You need a government that is both
- flexible and
- responsible, not to mention
- technically competent enough to implement special measures and
- honest enough to carry out that implementation without massive corruption.
Mr. Trump seems to have followed a blueprint for a resolution to the Korean conflict that China and Russia proposed a year before.
“The idea is to ensure a double freeze,” Russia’s foreign minister, Sergey Lavrov, said in an interview with NBC in Moscow on July 21, 2017. “North Korea suspends all their launches and tests, and in response, the U.S. and South Korea reduce the scale of their war maneuvers in the region.”
But all the meeting really accomplished was to open the prospect of new and probably lengthy negotiations for a final peace on the peninsula. Achieving that will depend on how the interests of five countries — North Korea, South Korea, China, Russia and the United States — can all be served.
North Korea and South Korea were created when World War II ended with Soviet troops occupying the northern part of the Korean Peninsula and American troops the south. After North Korea invaded the South in 1950, only to be driven back to China’s border by American-led forces, the fighting didn’t stop until after Chinese troops poured in and restored Communist control in the North.
.. A person of Mr. Putin’s age and experience cannot help seeing in Korea a likeness to a divided Germany. Having served in East Germany as a K.G.B. officer, Mr. Putin was deeply dismayed at the Soviet Union’s decision nearly three decades ago to give up control of what had been the Communists’ East Bloc. Today, his most powerful narrative of grievance is of the West expanding its institutions — especially NATO — to Russia’s western border. He would surely be loath to see the West achieve a matching situation at its eastern door... Mr. Putin, speaking to Chinese reporters in Qingdao, called Mr. Trump’s decision to meet Mr. Kim “very brave and mature.”.. It is likely that without Mr. Xi’s nod, Mr. Kim would not have met with Mr. Trump. And China may have kept its distance and let the American president steal the spotlight, hoping that a peaceful North Korea colonized by Chinese, Russian and American businesses might emerge and make an American military presence on the peninsula irrelevant.. Mr. Trump’s foreign policy vision ignores concerns about other countries’ political structures as long as a deal can be reached. He clearly prefers bilateral deals to multilateral accords. He enjoys politics that are personal rather than institutional.
His 17 months in office have in fact been an exercise in futility for the art-of-the-deal president.
- No deal on immigration.
- No deal on health care.
- No deal on gun control.
- No deal on spending cuts.
- No deal on Nafta.
- No deal on China trade.
- No deal on steel and aluminum imports.
- No deal on Middle East peace.
- No deal on the Qatar blockade.
- No deal on Syria.
- No deal on Russia.
- No deal on Iran.
- No deal on climate change.
- No deal on Pacific trade.
.. Even routine deals sometimes elude Mr. Trump, or he chooses to blow them up.
.. “Trump is an anarchist,” said Jack O’Donnell, a former president of the Trump Plaza Hotel and Casino, who became a sharp critic. “It was his approach in business, it is his approach as president. It does not take good negotiating skills to cause chaos. Will this ever lead to concessions? Maybe, but concessions to what? Not anything that resembles a deal. I just do not see him getting much done.”
.. I don’t think it’s that counterintuitive to say that playing hardball will lead to better trade deals eventually,” said Andy Surabian, a Republican strategist and former aide to Mr. Trump.
.. We’ll see what the final outcome is, but it’s already a success just to get them to the table.”
.. the major tax-cutting package that passed late last year. But even that was negotiated mainly by Republican lawmakers, who said Mr. Trump did not seem engaged in the details.
.. And as legislative challenges go, handing out tax cuts without paying for them is not exactly the hardest thing that politicians do.
.. In effect, the agreement with Mr. Kim is like a deal to sell parts of Trump Tower without settling on a price, date, inspection or financing. It is not nearly as advanced as agreements that President Bill Clinton and Mr. Bush made with North Korea, both of which ultimately collapsed.
.. But no modern president has sold himself on the promise of negotiating skills more than Mr. Trump has. He regularly boasts that deals will be “easy” and “quick” and the best ever.
.. He has pulled out of Mr. Obama’s Iran nuclear deal, Paris climate accord and Trans-Pacific Partnership, but promises to negotiate better versions of those deal have gone nowhere.
.. Mr. Trump set his sights on what he called “the ultimate deal,” meaning peace between the Israelis and Palestinians. He said it was “frankly maybe not as difficult as people have thought.” A year later, his team is only now preparing to release a plan.
.. “What the president seemingly fails to understand is that in foreign policy and in trade policy — unlike in real estate transactions — the parties are all repeat players,”
.. “The country you insult or seek undue advantage over today you will have to work with again tomorrow.”
.. Mr. Trump’s approach so far has been to make expansive demands and apply as much pressure as he can. He argues that crushing sanctions he imposed on North Korea forced Mr. Kim to meet. He now hopes to extract concessions from China, Canada and Europe after slapping punishing tariffs on them.
.. “Trump is a bilateral player, in part because that’s what he is used to from his building days, but also because he keeps himself the king, the decider, the strongman,” said Wendy Sherman, who was Mr. Obama’s lead negotiator on the Iran nuclear deal. “In the case of North Korea, however, he wouldn’t have gotten this far — which isn’t all that far — without the South Koreans or the Chinese.”
.. When he gave up on immigration on Friday, he blamed it on Senate Democrats, even though the immediate impasse was among House Republicans who do not need the other party to pass a bill.
.. “Republicans should stop wasting their time on Immigration until after we elect more Senators and Congressmen/women in November,”
.. It was in effect an acknowledgment by Mr. Trump that he cannot reach across the aisle and can only govern with Republicans.
.. the challenge on immigration is that the president has to grapple not just with Democrats but also with Republicans who do not share his philosophy on the issue.
.. Mr. O’Donnell, the former casino president, said Mr. Trump has always oversold his deal-making skills. The casino he managed, Mr. O’Donnell noted, brought in $100 million a year yet still went bankrupt.
.. “The fact is, Trump casinos should have been one of the greatest success stories in the history of casino gambling, but bad deal making caused him to lose all three properties,” he said.