Donald Trump has not adhered to agreement. But some people were surprised last week when he threatened to attack China, Mexico, and Canada over what his trade policy would be when he took office on January 20. Presidents-elect are not supposed to announce policies in advance, but he does n’t care about such niceties.
Strangely enough, but, his statement was really very soothing, perhaps more convincing than he meant it to be.
How could it be regarded as comforting to know that the first day of his presidency would threaten to impose 25 % tariffs on all exports of goods from America’s two biggest and closest investing partners? How could it be comforting to be threatened with a 10 % tax increase on Chinese goods? The obvious motivation behind these risks is what provides the answer.
Trump’s stated love of tariffs, which he described as” the most beautiful word in the dictionary,” is the subject of a heated debate over whether he views them as economic and fiscal policy tools or as leverage in negotiations. If they are instruments of financial and fiscal policy, the taxes will be popular and long-lasting. They will be targeted at particular places and may be very short-lived if they are negotiating weapons.
The threat of tariffs as negotiating weapons was really comforting because of how they were placed in the next category. And since the names of the arms ‘ potential targets were so ambiguous and impossible, it should be relatively simple for China, Mexico, and Canada to deal with them.
In reality, each of the three threats was aimed at putting an American national issue on the shoulders of foreign nations. Trump claimed that the threats made against China and Mexico were meant to force those nations into halting the flow of the methadone drug that results in 100, 000 deaths annually in America as a result of overdoses.
None of these nations may fulfill their obligations. Fentanyl and its components are subject to stricter controls in China, but it can be purchased from numerous sources and is notoriously difficult to control. According to the , Financial Times, deaths caused by fentanyl abuse in the US actually decreased by 20 % last year. It is unclear why Mexico could be any worse at policing the US-Mexico border than the US itself, given that the illegal immigration across the French border is currently little.
The expectations are clear. Trump may only want to sway a small amount from each of these governments so that he can consider a victory and demonstrate earlier in his administration how strong he is and how America may outperform different nations under his leadership.
This kind of bullying behavior is not the real cause of Trump’s and taxes ‘ worries. Nor does it stay in his employ of tariffs against certain places, such as China. In the same way that he did during his first term in office, he dealt with challenges of the kind this year. Perhaps a nation as large as China would simply defer business through other channels rather than completely halt it with high tariffs against it. After Trump imposed 25 % tariffs on Chinese goods in 2018, this was the case, and it would happen once more.
The real worry
The real worry is that he might want to use tariffs as a genuine tool of economic and fiscal policy, believing that imposing high tariff barriers around America will raise fiscal revenues, promote domestic manufacturing and eliminate America’s trade deficits. If so, then his campaign promise of implementing a 10% or 20% universal tariff – on goods imports from all countries except those on which even higher tariffs are imposed – would be carried out.
This would not be a communicating technique, which would force Europe to spend more on defense or purchase more American liquefied natural gas. In the belief that doing so would render the US more productive and stronger, it would adhere to a deeply held deglobalization idea. Such a plan may be sustained until at least the close of Trump’s word in 2028 and had basically make the existing laws of the world trading system, policed by the World Trade Organization in Geneva, outdated (or, at best, in expulsion ).
Trump’s deglobalization theory is still a mystery as of right now. His choice of Scott Bessent as the Treasury Secretary suggests that he wo n’t attempt to implement a radical change in economic policy. Bessent is a fairly orthodox investment fund manager. However, his nominations for Commerce secretary ( Howard Lutnick, another financier ) and US trade representative ( Jamieson Greer, a lawyer ) suggest that he might, for those men have voiced strong support for broad tariffs.
The manufacturing sector in America typically relies on imported components and raw materials, which would present a significant challenge for Trump, Lutnick, and Greer in imposing a 10 % or 20 % universal tariff. While some manufacturers may welcome defense against foreign competitors, others, including in the defense industry, had notice their input costs rise sharply as a result. Replacing global supply chains with local ones would be problematic, time-consuming, and costly and generally might not even be feasible.
The best chance is that any proposal to implement a universal tariff will receive a wave of lobbying for specific exemptions, enough to postpone the policy or possibly discredit it immediately.
This year’s tax risks were all about negotiating with foreign institutions. Also Trump’s pretended best buddy, Elon Musk, whose Tesla electric car company, Starlink satellite online company, and SpaceX rocket-launcher all rely on world markets and supply chains, would need to negotiate a large tariff.
Discussions with foreigners might be much simpler than those with Americans.
Previously editor-in-chief of The Economist,  , Bill Emmott , is currently president of the , Japan Society of the UK, the , International Institute for Strategic Studies , and the , International Trade Institute.
This post, originally published on Bill Emmott’s Global View, is the English classic of an essay published December 2 in Italian by La Stampa. It is republished with authority.