For Trump, it was a summer of tariffs and more tariffs. Here’s where things stand.

Chad P. Bown (PIIE)

September 17, 2018
Photo Credit: 
REUTERS/Bryan Woolston

The Trump administration is reportedly now open to trade talks with China, the largest US trade partner. For China—and most of America’s trade partners—it was a long summer. President Trump spent June, July, and August imposing new tariffs to discourage imports. His administration has also announced that further tariffs are on the way.

The scale of Trump’s potential new protection is enormous, even if the president limits further tariffs to only the auto imports and trade with China that he has under threat. By the midterm elections, 40 percent of total US imports could be hit by new tariffs that Trump imposed in 2018 alone.

To trade economists, the point of these tariffs is puzzling. Countries followed through with immediate retaliation when Trump failed to heed advanced warnings and imposed his tariffs anyway. Trump’s message seems to be that America should trade less with the world, not more. Some of his tariffs, such as those on China, appear punitive. Others are an attempt to coerce countries to negotiate trade deals. But even Trump’s self-professed “deals” may reduce as much American trade as they create.

Here’s a recap to catch you up on the Trump trade and tariffs story:

1. The US imposed tariffs and quotas on imports of $48 billion of steel and aluminum

On June 1, Trump imposed new tariffs on metal imports from Canada, Mexico, and the European Union. This extended earlier steel and aluminum restrictions on imports from China, Russia, and other countries after the Trump administration declared these were a threat to “national security.”

Nevertheless, the June 1 tariffs came as a surprise. The European Union and Canada are key economic and military allies, as well as the United States’ top two foreign sources of steel. Their industries also suffer from global overcapacity and feel the effects of Chinese industrial subsidies.

The United States uses Canadian exports to make things like the bumpers of the Ford F-150 truck, so these tariffs aren’t necessarily a good thing for US companies. Politically, both the US-based Aluminum Association, as well as the union representing industry workers, came out against Trump’s treatment of Canada, in particular.

And US trade partners made good on threats to retaliate swiftly. Canada, Mexico, the European Union, China, and Turkey responded with new duties on more than $23 billion of US exports. Some tariffs targeted American steel and aluminum, the primary industrial beneficiaries of Trump’s actions. Other tariffs hit Harley-Davidson motorcycles, Kentucky bourbon, and US agricultural products—strategic choices aimed at engaging key US legislators or electoral interests that might push back against Trump’s trade policy.

2. China got hit with $50 billion in tariffs—and, potentially, an additional $455 billion

On July 6, the United States slapped levies on $34 billion of imports, followed by $16 billion more on August 23. After that $50 billion, Trump may impose tariffs on an additional $200 billion of imports as early as September. On multiple occasions—including September 7—Trump has stated he may cover the entire $500 billion of annual imports from China with tariffs.

China retaliated immediately with tariffs on $50 billion of US goods, including American cars, as well as agricultural and food products. In early August, Beijing announced counter-tariffs on an additional $60 billion in US products.

China remains a big target for Trump—and his tariffs fulfill a campaign promise. Whether the president wants anything aside from tariffs remains unclear. After a halfhearted attempt at negotiations in May, even sustaining high-level talks remain an elusive goal. Beijing appears miffed at both the scope and nature of the negotiations—e.g., the bilateral trade deficit or China’s structural economic reform—as well as with whom in the Trump administration it should be negotiating.

3. Trump offered $12 billion in subsidies to American farmers

The US agriculture and fishing industries have begun to complain about the economic fallout. The retaliation triggered by Trump’s tariffs hit $27 billion of US farm and seafood exports, including Kansas sorghum, soybeans from the upper Midwest, fruits and nuts from California, and lobster from Maine.

To head off a political backlash that might color the midterm elections, Trump announced up to $12 billion of new subsidies. On September 4, the US Department of Agriculture rolled out payments to some farmers and directed federal government purchases of certain excess commodities now shut out of foreign markets.

4. There are looming tariffs on $350 billion of auto imports

Trump has threatened tariffs on cars coming in from Canada and Mexico. Along with the European Union, Japan, and South Korea, these countries account for most of the roughly $350 billion of US imports of cars, trucks, and parts. Trump is expected to be granted legal authority to impose such tariffs after another soon-to-be-completed investigation, under the same US law used to impose his tariffs on steel and aluminum.

5. North American supply chains are threatened by NAFTA renegotiations

Trump’s threat led Mexico to accept terms of a renegotiated NAFTA on August 27, including costly new “rules of origin”—the amount of North American content required for a car to benefit from a zero tariff. Mexico reportedly also agreed to an explicit, voluntary restraint on the number of cars it will export to the United States.

Canada remains locked in its NAFTA renegotiation. When announcing the Mexico deal, Trump threatened, “I think with Canada, frankly, the easiest thing we can do is to tariff their cars coming in.” Because cross-border supply chains—and the costs of new tariffs to US businesses and workers—did not stop Trump’s tariffs on Canadian aluminum, Ottawa may fear similar arguments are unlikely to block new tariffs on Canadian cars unless they, too, agree to a new deal.

While the overall US economy remains on solid ground, Trump’s tariffs and the resulting retaliation have caused suffering for thousands of US farmers, companies, workers, and consumers. None of the tariffs that President Trump has imposed thus far in 2018 have been lifted. And his trade policy has also gone unchecked by US courts, as well as Congress.

These tariffs may fulfill political promises. But the collateral damage hitting other Americans seems likely to ramp up, raising new questions about the longer-term purpose behind Trump’s tariffs.

Chad P. Bown is a senior fellow at the Peterson Institute for International Economics in Washington. With Melina Kolb, he maintains “Trump’s Trade War Timeline: An Up-to-Date Guide.” Follow him on Twitter @ChadBown.