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Trump Trade Blitz Produces Few Deals 07/09 06:14
The tally of trade deals stands at two -- one with the United Kingdom and
one with Vietnam. Trump has also announced the framework for a deal with China,
the details of which remain fuzzy.
WASHINGTON (AP) -- President Donald Trump and his advisers promised a
lightning round of global trade negotiations with dozens of countries back in
April.
White House trade adviser Peter Navarro predicted "90 deals in 90 days.''
Administration officials declared that other countries were desperate to make
concessions to avoid the massive import taxes -- tariffs -- that Trump was
threatening to plaster on their products starting July 9.
But the 90 days have come and gone. And the tally of trade deals stands at
two -- one with the United Kingdom and one with Vietnam. Trump has also
announced the framework for a deal with China, the details of which remain
fuzzy.
Trump has now extended the deadline for negotiations to Aug. 1 and tinkered
with his threatened tariffs, leaving the global trading system pretty much
where it stood three months ago -- in a state of limbo as businesses delay
decisions on investments, contracts and hiring because they don't know what the
rules will be.
"It's a rerun, basically,'' said William Reinsch, a former U.S. trade
official who's now an adviser with the Center for Strategic and International
Studies think tank. Trump and his team "don't have the deals they want. So
they're piling on the threats."
The pattern has repeated itself enough times to earn Trump the label TACO --
an acronym coined by The Financial Times' Robert Armstrong that stands for
"Trump Always Chickens Out."
"This is classic Trump: Threaten, threaten more, but then extend the
deadline," Reinsch said. "July 30 arrives, does he do it again if he still
doesn't have the deals?'' (Trump said Tuesday that there will be no more
extensions.)
The deal drought represents a collision with reality.
Negotiating simultaneously with every country on earth was always an
impossible task, as Trump himself belatedly admitted last month in an interview
with the Fox News Channel. ("There's 200 countries,'' the president said. "You
can't talk to all of them.'') And many trading partners -- such as Japan and
the European Union -- were always likely to balk at Trump's demands, at least
without getting something in return.
"It's really, really hard to negotiate trade agreements," which usually
takes several months even when it involves just one country or a small regional
group, said Chad Bown, an economic adviser in the Obama White House and now
senior fellow at the Peterson Institute for International Economics. "What the
administration is doing is negotiating a bunch of these at the same time.''
The drama began April 2 -- "Liberation Day,'' Trump called it -- when the
tariff-loving president announced a so-called baseline 10% import tax on
everybody and what he called "reciprocal'' levies of up to 50% on countries
with which the United States runs trade deficits.
The 10% baseline tariffs appear to be here to stay. Trump needs them to
raise money to patch the hole his massive tax-cut bill is blasting into the
federal budget deficit.
By themselves, the baseline tariffs represent a massive shift in American
trade policy: Tariffs averaged around 2.5% when Trump returned to the White
House and were even lower before he started raising them in his first term.
But the reciprocal tariffs are an even bigger deal.
In announcing them, Trump effectively blew up the rules governing world
trade. For decades, the United States and most other countries abided by tariff
rates set through a series of complex negotiations known as the Uruguay round.
Countries could set their own tariffs -- but under the "most favored nation''
approach, they couldn't charge one country more than they charged another.
Now Trump is setting the tariff rates himself, creating "tailor-made trade
plans for each and every country on this planet,'' in the words of White House
press secretary Karoline Leavitt.
But investors have recoiled at the audacious plan, fearing that it will
disrupt trade and damage the world economy. Trump's Liberation Day tariffs, for
instance, set off a four-day rout in global financial markets. Trump blinked.
Less than 13 hours after the reciprocal tariffs took effect April 9, he
abruptly suspended them for 90 days, giving countries time to negotiate with
his trade team.
Despite the Trump administration's expressions of confidence, the talks
turned into a slog.
"Countries have their own politics, their own domestic politics," Reinsch
said. "Trump structured this ideally so that all the concessions are made by
the other guys and the only U.S. concession is: We don't impose the tariffs.''
But countries like South Korea and Japan needed "to come back with
something,'' he said. Their thinking: "We have to get some concessions out of
the United States to make it look like this is a win-win agreement and not a
we-fold-and-surrender agreement. "
Japan, for example, wanted relief from another Trump tariff -- 50% levies on
steel and aluminum.
Countries may also be hesitant to reach a deal with the United States while
the Trump administration conducts investigations that might result in new
tariffs on a range of products, including pharmaceuticals and semiconductors.
Frustrated by the lack of progress, Trump on Monday sent letters to Japan,
South Korea and 12 other countries, saying he'd hit them with tariffs Aug. 1 if
they couldn't reach an agreement. The levies were close to what he'd announced
on April 2; Japan's, for example, would be 25%, compared to the 24% unveiled
April 2.
Trump did sign an agreement last month with the United Kingdom that, among
other provisions, reduced U.S. tariffs on British automotive and aerospace
products while opening the U.K. market for American beef and ethanol. But the
pact kept the baseline tariff on British products mostly in place, underlining
Trump's commitment to the 10% tax despite the United States running a trade
surplus -- not a deficit -- with the U.K. for 19 straight years, according to
the U.S. Commerce Department.
On July 2. Trump announced a deal with Vietnam. The Vietnamese agreed to let
U.S. products into the country duty free while accepting a 20% tax on their
exports to the United States, Trump said, though details of the agreement have
not been released.
The lopsided deal with Vietnam suggests that Trump can successfully use the
tariff threat to bully concessions out of smaller economies.
"They just can't really negotiate in the same way that the (European Union)
or Korea or Japan (or) Canada can negotiate with the United States,'' said Dan
McCarthy, principal in McCarthy Consulting and a former official with the
Office of the U.S. Trade Representative in the Biden administration. "A lot of
(smaller) countries just want to get out of this and are willing to cut their
losses.''
But wrangling a deal with bigger trading partners is likely to remain
tougher.
"The U.S. is gambling that these countries will ultimately be intimidated
and fold," Reinsch said. "And the countries are gambling that the longer this
stretches out, and the longer it goes without Trump producing any more deals,
the more desperate he gets; and he lowers his standards.
"It's kind of a giant game of chicken.''
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