No stranger to controversy, President Donald Trump announced a new haul of tariffs this past Wednesday, sending financial markets reeling and forcing world leaders to respond.
What are tariffs, and how will Trump’s announcement change the global balance of power?
In perhaps the biggest announcement yet of his second term, President Trump has followed through on campaign plans to reshape the US’ trade arrangement with the rest of the world. His so-called ‘reciprocal’ tariffs are a response to perceived imbalances in the trading arrangements between the USA and other world powers. The crucial word here is ‘perceived’ – the Trump administration claims that its trading partners already charge extortionate tariffs on US exports, in the case of the EU, some 39%; however, the EU claims it charges just 3%, with the World Trade Organisation estimating the actual figure to sit just below 5%. In any case, the actual figure is nowhere near Trump’s claim of 39%.
To start with, what are tariffs?
Tariffs are taxes on goods imported into a country. They are paid for not by the exporters (for example, French winemakers or Chinese car companies) but by the importers (American supermarkets, factories, etc.), driving up the cost of buying car parts, or champagne, or stuffed animals from abroad. This means that doing business with countries subject to high tariffs is that much less attractive for American companies, thus harming the economies of countries on the receiving end of tariffs. Trump has placed a 20% tariff on EU goods, a 67% charge on Chinese goods, and a 10% tariff on British goods, along with a host of other countries.
Unsurprisingly, the move has been met with near-unanimous criticism from the heads of the countries subject to tariffs. Some responses have played into Trump’s hands; the Vietnamese government offered to remove all of its tariffs on US imports in exchange for delaying Trump’s plan, but this was swiftly rejected.
Responses from more powerful blocs have been more resolute. EU Commissioner Ursula Von der Leyen claimed the EU was ‘prepared to respond through countermeasures’ should the necessity arise, but the EU is anxious to avoid a full-blown trade war or provoke an unpredictable US President.
Tariffs are nothing new. Trump made wide use of them during his first term; Biden also used tariffs as a political and diplomatic tool. What is new, however, is the change in approach from the White House with regard to international relations. The aim is still unclear: will the tariffs really be rolled out in full, or is it simply an effort to drag world leaders to the negotiation table? Is it, as the Guardian suggested, a ‘stress-test’ of global trade relations?
For all the uncertainty surrounding Trump’s manoeuvre, what is clear is how this trade spat signals a departure from decades of US foreign policy. The isolationist tendencies of Trump’s first term are hauled onto the world stage, writ large, and the (relative) dependability and cooperativeness of the world’s most powerful nation have vanished. Gone is any microbe of deference to the liberal-democratic world order.
A turn towards isolationism means a turn away from America’s longstanding allies; Trump has made no friends on the international stage with this move. The President’s flippance in the realm of globalised politics is well-documented; on the first day of his second term, he withdrew the USA from the World Health Organisation and slashed the USAID foreign aid scheme (because who needs food and medicine!)
For the time being, leaders in Brussels and London will have to figure out a plan for reversing tariff ultimatums whilst managing Trump’s fiery rhetoric and changeable nature. Whether the bonds built over decades between like-minded allies can weather Storm Trump remains to be seen.