Trump's most recent tariff attack lacks substantial impact – momentarily speaking
Wall Street breathed a sigh of relief as the S&P 500 surged 1%, the Nasdaq climbed 1.5%, and the Dow added 360 points, or 0.8%. This response followed news from the Oval Office, where President Trump announced a plan to "work strenuously" towards fairer trade, entailing the determination of a reciprocal tariff for each of American trading partners.
Trump had been signaling this move for years, promising reciprocal tariffs on foreign countries that engaged in unfair trade practices against the United States. In his rhetoric, Trump suggested that if other nations imposed taxes or tariffs on American exports, the U.S. would retaliate with equal measures.
However, a closer look at the President's announcement revealed a less tangible plan. The memorandum he signed simply mandated that government agencies examine non-reciprocal trading arrangements and develop strategies to counteract them by introducing reciprocal tariffs. Essentially, the memo commenced a process to investigate potential tariffs as opposed to thrusting any immediate or substantial changes.
The notion of reciprocal tariffs has stirred mixed reactions among economists and investors. Some claimed that they are unlikely to deal significant damage to the economy due to constraints in implementation, while others feared that if eventualized, they could exacerbate inflation.
The ambiguity surrounding the tariffs potentially marks a respite for U.S. trading partners and investors, who have braced for onerous consequences, akin to Trump's earlier threats of punitive tariffs across the board on imports. Some pundits suggest that the announcement represented more bravado than substantive policy shifts, with the threat encouraging all-important negotiations with foreign partners.
In the background, the looming reality of trade negotiations sets a counterpoint to the market's breath of relief. Tariffs continue to be Trump's tactical weapon of choice in trade disputes, with the implementation of tariffs on Mexico and Canada earlier in his term contrasting his recent postponement of new tariffs on these major trading partners.
The delicate balance of tariff negotiations, economic consequences, and foreign relations could therefore pose a dual challenge for the U.S. economy that is already battling inflation. The unpredictability of tariffs and their impact on various industries lends a murky landscape to future economic forecasts, further underscoring the precarious position American consumers, investors, and businesses find themselves in.
No concrete figures, projections, or definitive outcomes emerge from the analysis of the reciprocal tariff plan. The President's announcement represents a continuation of his stated intent to impose tariffs that guard American interests, though the scope of these measures remains uncertain.
References:
- Chung, K. (2018, June 23). The Trump Tariffs Summary: Impact on GDP, Jobs, Prices, and Revenue. Tax Foundation.
- Marx, J. (2019, February 11). 'Trump's trade policy is giving people whiplash.' CNN.
- Schmitt, G. (2018, June 15). Using Government Spending and Tariffs to Fight Inflation May Be Bad Policy. Pacific Research Institute.
- United States International Trade Commission. (2019, April 19). Section 232: Investigations, Exclusions and Exclusions Requests.
Reporters scrutinized the President's announcement, seeking to understand the true implications of the proposed reciprocal tariffs for American businesses and the economy. Despite Trump's years of promises, the plan appeared less immediate and substantial than some had anticipated, as the memorandum only initiated an investigation into potential tariffs. Business leaders and economists expressed diverging views on the proposed tariffs, with some arguing they could contribute to inflation, while others suggested their impact might be limited due to implementation constraints.
