Protectionism Under Donald Trump — particularly his recent escalation of trade tensions. He will announce a 30-percent tariff on all imports from Mexico and the European Union, effective August 1. Trump has made this move the centerpiece of a whiplash strategy that took hold after he retook the White House last January. Its cumulative impact in issuing new tariff orders has already created tens of billions of dollars a month in new revenue for the U.S. government.
This isn’t the first round of tariffs imposed by Trump this year. He threatened to impose a 25-percent tax on Mexican imports. He pointed to Mexico’s role in driving undocumented migration and illegal drugs into the United States as primary justifications for these tariffs. The newly announced tariffs are well above this previous levy, signaling a decidedly more hawkish attitude towards international trade.
Unsurprisingly, this 35-percent tariff would increase the overall cost of the trade war with Mexico and the EU to $10 billion annually. He has threatened a mind-boggling 50-percent tariff on products manufactured in Brazil. In addition, he has imposed new safeguard tariffs on 2 dozen other countries, such as Japan and South Korea. In FY 2019, revenue collected by U.S. Customs duties from these tariffs was over $100 billion. This milestone was achieved in the federal fiscal year leading up to last June.
Critics of Trump’s policies have had great success warning that these tariffs will cost U.S. consumers a lot more. They think this will bring about economic instability and inflationary pressures. Tariffs are set to escalate while negotiations over a trade imbalance continue. Having done much more to undermine transatlantic ties, Trump has cited the EU to support his recent devastating actions.
Although many in the European Union still believe that Trump’s threats are merely a negotiating tactic, they are coming under increasing pressure to react. Ursula von der Leyen noted the need for the EU to consider “including the adoption of proportionate countermeasures if required.” Similarly, Emmanuel Macron emphasized the importance of preparing “credible countermeasures by mobilising all instruments at its disposal, including anti-coercion.”
The situation is still developing as EU member states deal with strains from multiple directions. A faction of the members calls for an immediate settlement to avoid the situation from spiraling any further. At the same time, opponents criticize what they consider a lopsided deal.
Goods coming into the U.S. under the US-Mexico-Canada Agreement (USMCA) will remain exempt from these duties. This growing dilemma illustrates the complicated and contradictory relationship between trade agreements and unilateral tariff actions.
