Trump’s tariff push: Strategic gambit or economic peril?
According to the Washington Post, Donald Trump is preparing to implement the broadest tariffs in a century, some of which will be used strategically in trade negotiations. The newspaper notes that the introduction of a universal basic tariff is, however, unlikely.
"Trump wants to use high tariffs to rebalance global trade to favour domestic manufacturing and to raise additional government revenue that could help reduce income taxes or pay for other programs," explains the "WP".
The President-elect has announced plans to impose 60% tariffs on imports from China and 10-20% on all other foreign products.
Trump in the White House: will there be a tariff increase?
According to several trade lawyers interviewed by the American newspaper, Trump's initial trade decisions will likely focus on China. "Trump’s first trade action will probably target China, since he could rely on existing legal authority stemming from a 2018 investigation of Chinese trade practices," notes the "WP".
However, "his ability to impose universal tariffs is less certain," adds the newspaper.
Michael Feroli, chief economist at JPMorgan in the USA, states in his analysis that "procedural reasons" are likely to hinder the implementation of a universal tariff. Still, actions against Chinese products could be implemented much sooner.
"The threat of tariffs is used as a tool, as part of an arsenal of incentivizing domestic investment and production and less like an independent policy to be implemented on day one," observes Bob Elliott, chief executive of Unlimited Funds.
Economists issue warnings
"Economists have warned that the tariffs together with Trump’s plans for mass deportation of unauthorized migrants will raise prices and slow the economy. Already, the prospect of new tariffs has some executives delaying planned investments," writes the "WP".
John Veroneau, a former deputy US trade representative under President George W. Bush, underscores that "Congress has never given the president broad authority to impose tariffs under any conditions and for any reason he or she wishes." Thus, he believes a universal basic tariff would face significant legal challenges.
Some trade lawyers who spoke with the newspaper believe Donald Trump could justify introducing such a tariff by citing the president's extensive powers under the International Emergency Economic Powers Act, which he used multiple times during his first term, including against Chinese apps TikTok and WeChat.
- Alternatively, he could rely on a provision of a 1974 trade law that allows the president to impose a universal tariff of up to 15 per cent for 150 days in response to a "large and serious" balance of payments deficit - claims Wendy Cutler, vice president of the Asia Society Policy Institute.
This provision has never been utilised before, highlights the "WP".
