Understanding the Trade Disputes Initiated by Donald Trump

Comprehending the ongoing trade disputes initiated by ex-President Donald Trump can be quite a task. From the assertive rhetoric during the election campaign to the sporadic execution of trade tariffs following his return to the Oval Office in January, his approach towards protective policies remained inconsistent. International trade affiliates, export-oriented corporations, custom agents, and even members of his own trade panel grappled with frequently changing deadlines and fluctuating tariff figures. The United Kingdom was the first to attain a kind of ceasefire, labeled as a ‘deal’. Despite this, most nations failed to secure an agreement, and as it stands, no country is enjoying better trade relations with the U.S than previously.

Herein we delve into the nations and alliances most affected, and the possible implications of Trump’s halted ‘reciprocal’ tariffs. To make sense of the current scenario, we need to revisit April. Trump showed off a list of countries with corresponding tariffs they were about to face as a response to the amounts they imposed on U.S products. He dubbed it ‘liberation day’. The levies were substantial, causing a stir in the financial markets. A brief respite was announced by Trump after a few days, pausing these rates for all countries, excluding China, as negotiation talks commenced.

The initial 9th July deadline for negotiations was further extended to 1st August. On the eve of 1st August, an executive order was signed by Trump, however, he stated that the tariffs wouldn’t come into effect for another week, ensuring ample time for the communication of the orders.

Since April, only eight countries or trading blocs have managed to secure ‘deals’, limiting the reciprocal and in some cases, already in effect sectoral tariffs. Among these eight countries are the U.K., Japan, Indonesia, the European Union, and South Korea, all of which are now dealing with lesser rates than those threatened in April.

Speaking of China, it hasn’t truly reached a deal but has managed to avoid tariffs exceeding 100%. In response to the U.S tariffs, it decided to retaliate, leading to a tentative 30% tarriff, with more negotiations yet to take place. The deadline for these negotiations, previously set for August 12th, is likely to be extended.

Meanwhile, the European Union faces criticism as national leaders accuse the European Commission of an overly hasty submission. Now, a 15% rate, commuted from a threatened 30%, is enforced while the EU has vowed to increase its investment in the U.S and purchase U.S-produced natural gas.

Donald Trump has set openly stated that he will be monitoring the bloc closely to verify that it remains true to its commitments. But what about the U.K’s position? It was the first to mitigate the worst of the proposed changes. Primarily, U.K exports to the U.S, barring Aerospace products, face a 10% baseline tariff. Fortunately, our steel sector is not subjected to Trump’s 50% tariffs, encountering instead a 25% rate.

Just last week, it was announced by the U.K government that they would not adhere to a quota system. Until the end of June, a 25% rate was facing U.K car exports. However, an agreement finalized in May reduced this to 10% via a quota system, exempting the first 100,000 cars from any taxation.

Who’s still without a deal? Notably, Canada is dealing with a 35% baseline tariff rate, a steep rise from the previous 25%, covering all goods outside of the US-Mexico-Canada trade agreement. America is Canada’s biggest export market, and therefore, has always been a target of Trump’s. Mexico is another country embedded in the U.S supply chain and now faces a 30% but a 90-day extension has been granted for negotiation talks. Switzerland faces a 39% rate, and Brazil and India are grappling with an overwhelming 50%.

Threats are still looming large. Trump expressed a desire to hit a 100% tariff on all semiconductors and chips manufactured outside America, thus incentivizing production within its boundaries. The result could be an increase in the cost of electronic goods, from computers to vehicles. He also hinted at the possibility of imposing up to 250% tariff on pharmaceutical products manufactured outside the U.S.

As of now, no fixed dates have been set for when these import taxes could come into effect. The implications of such tariff hikes remain speculative. The scale and global reach of this trade dispute are unparalleled in modern business.

The delays in the official statistics, coupled with the continually shifting tariff rates, make it a complex situation. Any export taxes directed to the U.S pose a risk to global companies and economic growth, affecting the U.S and the rest of the world alike. It has led to some car manufacturers hesitating to make predictions about revenue and profit.

Last month, Apple revealed that American tariffs would lead to an increase in costs to the tune of $1.1 billion for the quarter ending in September alone. Subsequently, they announced a $100 billion investment in U.S manufacturing.

Trade barriers often have negative consequences, yet the International Monetary Fund has increased its forecast for global economic growth this year from 2.8% to 3%. A portion of this growth can be attributed to new deals with significant economies such as Japan, the European Union, and the United Kingdom.

Meanwhile, the elephant in the room is inflation. If duties are imposed on imports, it is the consumers of these goods that bear the extra cost. However, it remains to be seen whether the cost will be absrored by the consumers or passed on.

Recent U.S data has shown that the charges of tariffs are now filtering down to the national supply chains, pressuring American consumers. High inflation over an extended period may not be popular with U.S businesses or the general electorate. Expectations are that Trump may retreat if inflation becomes uncontrollable. However, with weak job data in July and the tariffs negatively impacting business confidence, Trump’s wish for an interest rate cut may materialize. The inflation figures due next week could play a pivotal role in this development.