When it comes to international trade, President Elect Donald Trump has consistently positioned himself as a proponent of tariffs. During his time in office (2016-2020), and in his ongoing political campaigns, he has criticised what he sees as the unfair treatment of the US in global trade. His administration imposed significant tariffs on imports from China and even US allies. Looking ahead, Trump has floated the idea of broad tariffs on all foreign trade, ranging from 10% to 20%, and suggested increasing duties on all Chinese goods to as much as 60%.
However, there’s a lot of uncertainty about how these plans would play out in practice.
One clear outcome of Trump’s first term was a shift in how the US approaches China. Even the Biden administration maintained Trump’s tariffs on Chinese goods and added new ones targeting electric vehicles and semiconductors. With bipartisan support for tough stances on China, it seems likely that Trump would push this even further if re-elected.
While some have speculated that Trump’s tariff proposals are a bargaining tool to secure lower trade barriers for US goods, this doesn’t seem to be the case with China. According to Peter Navarro, Trump’s former economic adviser, and a potential key figure in his future administration, further negotiations with China are seen as “fruitless and dangerous.” Instead, the focus appears to be on increasing pressure.
A major unknown is Trump’s proposal for uniform tariffs, a flat rate on all imports. Trump might see a blanket 10% tariff as a straightforward way to raise trade barriers and support domestic industries. However, insights from Navarro and Robert Lighthizer, Trump’s former U.S. Trade Representative, suggest that universal tariffs could be part of a broader strategy to negotiate lower trade barriers globally.
Under this approach, the US wouldn’t necessarily impose a flat rate immediately. Instead, tariffs might be adjusted to match the trade barriers imposed by other countries. For example, if a country imposes high tariffs on US goods, the US could respond by raising its tariffs on imports from that country to encourage them to lower their rates.
This idea, while seemingly fair, brings its own challenges. Countries impose tariffs for various reasons, often tied to their economic priorities. For instance, Colombia has high tariffs on coffee to protect its domestic growers. If the US mirrored Colombia’s coffee tariffs, it would create an unnecessary burden since the US doesn’t produce coffee. Such a policy might hurt American consumers more than it helps.
Additionally, if the US adopts this approach, other countries might retaliate. They could raise their tariffs to the maximum levels allowed under World Trade Organization (WTO) rules, escalating trade tensions. Alternatively, the US might bypass WTO rules entirely and impose tariffs at these maximum rates, which could provoke further retaliation and undermine global trade agreements.
The logistics of implementing universal tariffs are daunting. US trade involves thousands of products from over 200 countries, regions, and territories. If countries resist lowering their trade barriers, renegotiating tariffs product by product and country by country could become a lengthy and complex process.
Moreover, there’s limited legal precedent for imposing blanket tariffs. Past US trade laws, such as the International Emergency Economic Powers Act and Sections 232 and 301 of the Trade Act of 1974, have not been used to justify universal tariffs. Any attempt to do so would likely lead to legal challenges. Even efforts to grant broader tariff authority to the president, like the proposed US Reciprocal Trade Act, face significant political hurdles. For instance, Republican lawmakers representing export-driven districts may oppose such measures due to their potential economic impact.
As Alan Wolff, a former deputy director of the WTO, puts it, “We are in that time of life in international trade where strange incredulity is maybe the order of the day.” In other words, the global trade environment is already complex and unpredictable, and bold moves like universal tariffs could add even more uncertainty.
So, Trump’s tariff policies, particularly his ideas about universal tariffs, are ambitious but contentious. While they may serve as a negotiating tool to push for fairer trade practices, the potential for unintended consequences is significant. Industries reliant on international supply chains, from technology to construction, could face serious challenges. At the same time, legal and political obstacles could make these policies difficult to implement. As the US grapples with its role in the global economy, the debate over tariffs underscores the complexity of balancing domestic priorities with international relationships.
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