‘America First’ policy could see all imports targeted
US President has vowed to levy 10-20% tariffs on all goods entering the in a bid to boost domestic manufacturing. The president said he wants to encourage consumers and businesses to buy American-made products by making imported goods more expensive. He believes this would boost jobs and reduce the US trade deficit.
Critics have warned that a flat tariff on all imports would ultimately hit US consumers through higher prices, affecting lower-income earners the most. Trump has been warned that across-the-board tariffs, including on parts and raw materials, would make US production more expensive, thus making less competitive globally.
China readies for new round of trade tensions
Amid intense competition from the world’s second-largest economy, Trump targeted for tariffs during his first term, a policy that the Biden administration continued by restricting access to advanced US technology like chips and .
As his second term begins, Trump has threatened to slap 20-60% tariffs on Chinese imports, with the first measures expected to be announced shortly after he is sworn in. Economists and trade experts predict his next wave of tariffs could apply to finished goods rather than raw materials.
In the first 11 months of 2024, the US had a $270.4 billion (€262.5 billion) imbalance with China. Trump wants to reduce the trade deficit by encouraging more manufacturers to move production to the US. However, the London-based research house Capital Economics warned in a recent report that the primary beneficiaries of 60% tariffs on China would be other low-cost manufacturers, not the US.
Ahead of Trump’s inauguration, US importers boosted shipments from China to avoid the new tariffs. US seaports handled 14.5% more containers of goods from China in December than in the same month in 2023, Reuters news agency reported, citing trade data supplier Descartes Systems Group.
Anticipating Trump’s next move, Beijing has announced provisional tariffs on imports of industrial plastics from the US. Although the Chinese government hasn’t publicly announced other measures, China responded with tit-for-tat measures during Trump’s first term.
The Wall Street Journal reported last week that Trump has told senior officials that he wants to travel to Beijing to meet with Chinese President during his first 100 days in office, indicating that he wants to strike a deal.
100% tariff warning to BRICS nations
Trump has expressed concern about discussions by , a grouping of the world’s fastest-growing economies, to establish a new currency to rival the US dollar.
During the US presidential election campaign, Trump threatened to impose on BRICS countries, including Brazil, Russia, India, China, and South Africa, if they tried to challenge the dollar’s dominance.
According to the International Monetary Fund, almost two-thirds of the world’s foreign exchange reserves are held in dollars. Major commodities like oil are still primarily bought and sold in dollars.
BRICS has responded by saying it has no plans to launch a new currency and that talks about becoming less reliant on the dollar are still in the exploratory stage.
Trump seeks revisions to Canada-Mexico trade deal
Trump accused and of not keeping to the terms of a free trade deal he helped negotiate. The president now says the United States-Mexico-Canada Agreement (USMCA), which took effect in 2020, is “the worst trade deal ever made” and said he plans to renegotiate the accord when it comes up for review next year.
Trump accused his North American neighbors of not doing enough to tackle drug smuggling or stop the movement of across their borders with the US. He said USMCA hasn’t cut the US trade deficit, so he has threatened to impose on goods from both nations.
The president recently told Fox News, a conservative US news station, that he also wants a better deal for the US . Trump ratcheted up his rhetoric, by threatening a 200% tariff on cars made in Mexico, which would likely wipe out the country’s vehicle exports to the US.
Both Canada and Mexico are reportedly readying . Last week, outgoing Canadian Prime Minister Justin Trudeau announced the creation of an 18-member Canada-US relations council to help the government deal with the tariff threat.
The council comprises representatives from the auto industry, nuclear power, agriculture and the labor movement, as well as Canada’s Ambassador to the US.
European carmakers seek deal over Trump threat
Trump has also demanded that European automakers boost their US production. At an election campaign rally in Savannah, Georgia, he stated, “I want to become American car companies.”
While he didn’t specify a tariff figure, Trump has proposed tax benefits to foreign automakers that move more manufacturing to the US.
European carmakers are already facing stiff competition from Chinese electric carmakers and see China and the US as key markets for their future growth.
According to Germany’s federal statistics agency Destatis, nearly 13% of cars and auto parts shipped from in 2023 ended up in the United States.
In November, the Kiel Institute for the World Economy (IfW) warned that Trump’s second term marks the “most economically difficult moment” in Germany’s post-war history.
Last week, German car giants including and called on the European Commission, the EU’s executive arm, to agree to a “grand bargain” with Washington to protect the sector from potential tariffs.
Edited by: Rob Mudge
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