And so, while the short term result might be – as Trump sees it – a triumph, the impact on his overarching goals is far less certain. As are the long-term repercussions, which could well pan out rather differently for Trump – or the America he leaves behind after his current term.
Methinks, nobody benefits from a tariff war. And right now, it is too soon to come to any conclusions yet because there will always be a lag before impact is fully seen. For now, the potential economic fallout (for the US and elsewhere) has not been realised.
These are the major deals supposedly in the bag:
- United Kingdom agreed to a 10 percent tariff rate on its exports to the US. It also received a 25 percent sectoral tariff on steel and aluminium – half the 50 percent being imposed on other countries.
- The European Union have agreed to a 15 percent tariff on most of their exports to the US, including cars and pharmaceuticals, in exchange for zero tariffs on select US exports and commitments to buy US gas and increase investments. Initially, Trump had threatened a 30 percent rate.
- Japan has secured a 15 percent reciprocal tariff on its goods exported to the US, reduced from a threatened 25 percent, with Japan promising to invest $550 billion in the US economy.
- Philippines has agreed to a 19 percent tariff on its exports to the US, with zero tariffs on US exports to the Philippines, alongside commitments for enhanced military cooperation. A poor deal for the country as I had alluded to in my July 28 post.
- Vietnam has agreed to a 20 percent tariff on most exports to the US, with an additional 40 percent levy to be applied to “transshipped” goods – those entering the US via another location – while also agreeing to zero tariffs on US imports like large-engine automobiles.
- Indonesia has negotiated a 19 percent tariff on its exports to the US, down from a threatened 32 percent, by making a commitment to buy US Boeing aircraft and to remove or reduce trade barriers.
- Malaysia enjoys a reduced tariff of 19 percent on its exports and which is lower than the initially scheduled 25 percent. And I'm pretty sure the country, like Indonesia, made similar-type commitments too.
- South Korean exports to the US will enjoy a lower 15 percent tariff, in return for a $350 billion investment pledge and zero tariffs on US imports like cars and agricultural products.
- Pakistan struck a deal to jointly develop oil reserves with the US, but specific tariff rates on goods still remain unclear.
You may think there is a method to his madness. But no, actually, it boils down to his arbitrariness, his capriciousness, his volatility. And I have this nagging feeling that these tariffs are not cast in stone. With Trump, he has a propensity to amend, change and revise according to his whim and fancy, and the world should brace for it.
We should recall that, originally, Trump has justified these tariffs as being necessary to redress US trade imbalances as well as to boost US manufacturing and jobs. Even though economists point out that deficits are not direct evidence of unfair trade practices.
But now, it has gone beyond trade. In fact, Trump is weaponizing tariffs to blanket broader agendas, e.g., curbing immigration, combating the opioid and fentanyl crisis, and pressing allies and partners on geopolitical issues, including India’s energy ties with Russia or Brazil’s legal action against Trump ally Jair Bolsonaro.
And lest we forget, many of the deals that have been struck have been verbal, as yet unsigned. Moreover it is uncertain if and how the strings attached to Trump's agreements – more money to be spent purchasing American energy or invested in America – will actually be delivered on.
Putting aside all of the above, I reckon Trump's own voters will still have to pick up the tab – through higher prices, less choice and slower growth.
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