If the strategies from Trump's first term as president have any guiding significance, then his recent threats to impose tariffs on America's major trading partners are just the beginning of negotiations, not the end.
Trump posted on social media that unless Mexico and Canada strengthen their control over immigrants and illegal drugs entering the US, he will impose a 25% tariff on imports from these two countries and an additional 10% tariff on Chinese goods.
All of this brings to mind a series of threats from his first term. In May 2019, Trump announced on social media that if Mexico did not stop immigrants from reaching the southern border of the United States, he would impose a 5% tariff on Mexican goods within 10 days, gradually increasing the tariffs. Mexico ultimately complied with the demand, and the tariffs were never implemented.
Juan Carlos Baker, who helped negotiate the current trade agreement between Mexico, the US, and Canada, said: 'I feel a strong sense of déjà vu.'
Baker said that trade partners during Trump's first term 'did learn some things, and that experience is now coming into play.' But I still want to warn everyone not to assume that just because we went through Trump 1.0, we fully understand what is happening now and how to respond.
One challenge this time is that Trump has nearly two months before taking office. How far he wants to push the situation is another huge unknown.
Trump threatened to withdraw from the North American Free Trade Agreement, leading to the birth of the US-Mexico-Canada Agreement. He threatened to impose tariffs on Mexico if it did not use the National Guard to stop immigrants, while this new agreement was being finalized.
He also imposed a series of tariffs on China, which decreased after a US-China agreement was reached.
He imposed tariffs on steel and aluminum products from around the world, including those from the European Union, America's largest trading partner.
Daniel Tannebaum, a partner at consulting firm Oliver Wyman, said: 'Announcing these messages two months before he takes office is certainly hinting at a readiness to negotiate. We will have to see what actions the new government team will actually take after inauguration.'
Trump's new term has two major differences.
First, Trump is more familiar with how power operates. People familiar with the plan but who wished to remain anonymous revealed that this time, he plans to quickly implement tariffs by declaring a national emergency under the International Emergency Economic Powers Act, similar to how he used the law to obtain some 'border wall' funding from a reluctant Congress in 2019.
In contrast, his initial tariffs took about a year to implement because the necessary investigation procedures moved slowly through the trade bureaucracy in the US.
Dan Ujczo, a senior legal advisor at Thompson Hine, said: 'This will move at a rapid pace,' having dealt with trade issues in North America and China, 'the tariffs announced on Monday night are 'tactical and transactional,' aimed at achieving target outcomes.'
Secondly, some market-friendly and restraint-oriented officials from Trump's first term have left, such as his Treasury Secretary Steven Mnuchin and former Goldman Sachs executive Gary Cohn—Cohn constrained Trump when he threatened to withdraw from NAFTA, and even his first Secretary of State, former ExxonMobil CEO Rex Tillerson.
Among the other recently announced cabinet nominees, the most important characteristic seems to be loyalty to Trump and his attacks on the establishment.
A major exception might be Treasury Secretary pick Steven Mnuchin. This hedge fund manager has called for a gradual approach to limiting trade and seems willing to negotiate the specifics of tariffs.
America's neighbors quickly responded to the threats issued on Monday. According to an informed government official, Canadian Prime Minister Justin Trudeau had a phone call with Trump to discuss border security and trade issues.
Mexican President Claudia Sheinbaum called for cooperation but also hinted that Mexico would take retaliatory action. This is because the tariffs would violate the US-Mexico-Canada Agreement, which would only lead Mexico and Canada to retaliate with their own tariffs.
Trump's tariff policies continue to impact US-China trade. For a time, he effectively raised tariffs on more than $500 billion worth of US imports each year, showing a willingness to accept the costs to American consumers, with most economists estimating that American consumers will ultimately bear the cost of these tariffs.
In the trade agreement reached with China in 2020, these tariffs were reduced. The tariffs on about $300 billion worth of goods that Trump maintained have been retained by Biden, who even increased some tariffs earlier this year, demonstrating the lasting influence of some of Trump's decisions.
Article reposted from: Jin Shi Data
