Since re-entering office, President Trump has announced a barrage of tariffs to try to rewire the global economy. The trade actions have taken effect in fits and starts and created wild swings in markets and fresh tension among some of America’s closest trading partners. They have drawn warnings from economists about an economic downturn that could punish consumers.
What’s the latest?
In April, Mr. Trump rolled out his most punishing tariffs yet on dozens of U.S. trading partners before abruptly reversing them for 90 days for every country except China to give governments time to make deals. On May 12, he temporarily paused the China tariffs. On Friday, he appeared to revive his global trade war by threatening steeper tariffs on the European Union; by Sunday, he had backed down.
European Union:
On Sunday, Mr. Trump said he would delay a 50 percent tariff on goods from the European Union until July 9. A couple days earlier, he said that discussions with the European Union were “going nowhere” and that steep tariffs would take effect in a week. The climb-down came after a weekend call with Ursula von der Leyen, president of the European Commission, who said that trade talks would advance “swiftly and decisively.”
Apple:
Mr. Trump also targeted the chief executive of Apple, Tim Cook, on Friday. He said he had told Mr. Cook he expected iPhones sold in the United States to be “manufactured and built in the United States, not India, or anyplace else” or face a 25 percent tariff.
China:
The United States and China on May 12 said they had reached an agreement to reduce the tariffs they have imposed on each other for 90 days while they try to negotiate a trade deal.
The announcement came after a weekend of high-stakes negotiations between officials from the two countries in Switzerland.
Many Chinese imports entering the United States had been subject to at least a 145 percent tariff — essentially a tax equal to one-and-a-half times the cost of the product itself. That will now be 30 percent. For its part, China agreed to lower the tariffs it had put on imports from the United States to 10 percent, from 125 percent. Separately, Mr. Trump eliminated a longstanding exception that allowed many relatively inexpensive goods from China to enter the country duty free. Such imports now face a 54 percent tariff or a $100 flat fee.
Britain:
Last month, Mr. Trump imposed the same 10 percent tariff on Britain that he put on other countries. Cars shipped to the United States from Britain face a 27.5 percent tariff, and British steel is subjected to an import duty of 25 percent.
In early May, Mr. Trump unveiled a preliminary agreement with Britain that would pare back these tariffs. Under the terms of the deal, Britain would be allowed to send 100,000 vehicles to the United States under a tariff of 10 percent, and U.S. tariffs on steel would fall to zero.
The 10 percent levy in place for all British exports would remain in place, though the British government said it was still pushing to bring it down.
Though Britain is not one of America’s biggest trading partners, Mr. Trump said the agreement would be the first of many. U.S. officials have also been negotiating with India, Israel, Japan, South Korea and Vietnam, among other trading partners.
Why is Trump using tariffs?
Mr. Trump’s point of view appears to be that any trade deficit — the value of goods the United States imports from a country, minus what it sends as exports — is bad. He has long described bilateral trade deficits as examples of America being “ripped off” or “subsidizing” other countries.
The president and his advisers say their goal is to make the tariffs so painful that they force companies to make their products in the United States. They argue that this will create more American jobs and push up wages.
But Mr. Trump has also described tariffs as an all-purpose tool that will force Canada, Mexico and China to crack down on the flow of drugs and migrants coming into the United States. The president also maintains that tariffs will rake in huge sums of revenue that the government can use to pay for domestic tax cuts.
Economists say that tariffs cannot simultaneously achieve all of the goals that Mr. Trump has set. In fact, many of his aims contradict one another. The same tariffs that are supposed to increase U.S. manufacturing are also making life painful for U.S. manufacturers, by disrupting their supply chains and raising the cost of their raw materials.
“All of these tariffs are internally inconsistent with each other,” said Chad Bown, a senior fellow at the Peterson Institute for International Economics, a Washington think tank. “So what is the real priority? Because you can’t have all those things happen at once.”
Who pays for tariffs, and where does the money go?
A tariff is a government surcharge on products imported from other countries.
Tariffs are paid by the companies that import the goods. The revenue from U.S. tariffs is paid by U.S. importers to the U.S. Treasury Department.
For example, if Walmart imports a $100 shoe from Vietnam — which faces a 46 percent tariff — Walmart will owe $46.00 in tariffs to the U.S. government.
What happens next?
-
Walmart could try to force the cost onto the Vietnamese shoe manufacturer, by telling it Walmart will pay less for the product.
-
Walmart could cut into its own profit margins and absorb the cost of the tariff.
-
Walmart could raise the price of the shoes at its stores.
-
Or, some combination of the above.
Earlier this month, Walmart’s chief executive cautioned that tariffs would push the company to start raising prices soon, and refrained from projecting profits for its current quarter. Mr. Trump, in turn, scolded the retailer on social media, telling it to “EAT THE TARIFFS” and keep prices down.
How could tariffs affect consumer prices?
It’s hard to imagine an American home without Chinese products. Many essentials are imported almost entirely from China — and with new tariffs, they’re likely to become more expensive.
The New York Times analyzed import data to show where Americans may see product shortages, fewer choices and price increases.
What happens if shelves are emptier? Sacrifice for your country, the president says.
“You know, somebody said, ‘Oh, the shelves are going to be open,’” Mr. Trump recently said. “Well, maybe the children will have two dolls instead of 30 dolls, you know? And maybe the two dolls will cost a couple of bucks more than they would normally.”
Mr. Trump’s tariffs target countries that supply a wide variety of goods to the United States. In some cases, prices have already started to go up. But for American families, the full effect of the new policies is still to come, but they are likely to result in higher prices at grocery stores, car dealerships, electronics retailers and clothing outlets.
Wirecutter has advice about how consumers can cope.
How have companies responded?
One way to understand how companies are reacting to the tariffs is to think about Christmas.
The production of toys, Christmas trees and decorations is usually in full swing by now. It takes four to five months to manufacture, package and ship products to the United States. And factories in China produce nearly 80 percent of all toys and 90 percent of Christmas goods sold in America.
Toy makers, children’s shops and specialty retailers have recently begun pausing orders for the winter holidays as the import taxes cascade through supply chains.
“If we don’t start production soon, there’s a high probability of a toy shortage this holiday season,” said Greg Ahearn, chief executive of the Toy Association, a U.S. industry group representing 850 toy manufacturers.
Mattel, the U.S. toy company and maker of Barbies, recently said it would raise prices on U.S. toys because of Mr. Trump’s tariffs on imports from China.
What is the history of tariffs in the U.S.?
1789: At its founding, the United States relied heavily on tariffs to finance the federal government and protect domestic manufacturers, as proposed by Alexander Hamilton, the first Treasury secretary.
1828: The federal government passed tariffs averaging 38 percent to shield the country’s manufacturing sector from foreign competitors. These were labeled the “Tariff of Abominations” by Southern states, whose economies relied on exporting raw materials and importing manufactured goods, leading to a constitutional standoff.
1930: The Smoot-Hawley Tariff Act of 1930 was enacted after the stock market crash of 1929, an attempt to protect U.S. businesses. Instead, as described in “Ferris Bueller’s Day Off,” the tariffs “did not work, and the United States sank deeper into the Great Depression.”
1934: Franklin D. Roosevelt signed the Reciprocal Trade Agreements Act, which gave the president the authority to negotiate bilateral trade agreements. This set the stage for more than 90 years of liberal free trade policies.
This article is by Ana Swanson, Lazaro Gamio, Daisuke Wakabayashi, Jack Ewing Tyler Pager, Ben Protess, Andrea Fuller, Joe Rennison, Jeanna Smialek, Mark Landler, Eshe Nelson, Alexandra Stevenson, Andrew Duehren, June Kim, Jack Ewing, Karl Russell, Colby Smith, Ian Austen, Vjosa Isai, Annie Correal, Keith Bradsher, Alan Rappeport and Christine Zhang.
The post Trump Tariffs: What’s the Latest on the Trade War? appeared first on New York Times.
