The Trump tariff strategy
“We saw the successful negotiating strategy that President Trump implemented a week ago today. It has brought more than 75 countries forward to negotiate. It took great courage for him to stay the course until this moment and what we have ended up with here, as I told everyone a week ago, in this very spot, do not retaliate and you will be rewarded.”
That was Treasury Secretary Scott Bessent on April 9 crediting President Donald Trump with successfully using his reciprocal tariff strategy announced April 2 to bring more than 75 countries to the table to negotiate with the United States, with a 90-day pause on the reciprocal tariffs going into effect during the negotiations. In the meantime, tariffs on China have been raised by an additional 125 percent atop existing tariffs, after Beijing retaliated by raising tariffs on the U.S. to 84 percent.
For ten years, Trump has told anyone who would listen that as president he would use tariffs to try and get better trade deals for the American people. But to have any impact, words must be backed by action, and on April 2 Trump added real substance to the threat: The U.S. would enact the same tariffs that countries were imposing on the U.S.
Now, with the reciprocal tariffs, countries finally have an incentive to do what Trump has been asking: To engage in reciprocal tariff and other non-tariff barrier reductions. It only works if both parties are willing to use the stick. Otherwise, there’s no reason to talk to the U.S.
And none of it would be possible with legislation now contemplated by Congress to lock in the current trade imbalances forever. Since the 1930s, Congress has seen fit more or less to allow the President the ability to use reciprocal tariffs with the goal of reducing barriers to trade.
But it only works when there’s tariffs to be traded away.
As Bessent explained, the goal of the tariffs was always to prompt negotiation with allies who at least for a little while learned what it felt like: “we are confident that they having seen the other side of where this could go… those were maximum levels. The countries can think about those levels as they come to us to bring down their tariffs, their non-tariff trade barriers. We’re going to discuss currency manipulation, subsidy of labor and industry.”
Bessent added, “So, every country in the world who wants to come and negotiate, we are willing to hear you. We’re going to go down to a 10 percent baseline tariff for them. And China will be raised to 125 percent due to their insistence on escalation.”
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We will have to see whether this works and lowers the cost of doing business with the high-tariff countries. I think of tariffs as protectionism of local businesses.
See also:
And:
Trump Stands Firm on “Liberation Day” Tariffs Amid Market Turmoil and China’s Retaliation
And:
EU Will Put Tariff Retaliation on Hold for 90 Days to Match Trump's Pause
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