US and Japan Enter New Trade Era with 15% Duty on Imports
This week, President Donald Trump revealed a new trade agreement, on this occasion, with Japan. The conditions set forward stipulate that Japanese imports will now incur a 15 percent duty upon their entry into the United States. The negotiations were intense; we had top-level engagement from both sides. According to the President, it’s a win-win deal for everyone.
The United States had a total import of nearly $150 billion from Japan as of the previous year, and the World Bank had estimated the average tariff paid on Japanese goods imports to be about 2%. Essentially a 2% tax. This supposedly excellent deal will now see this rise to an unprecedented 15%.
This appears to be a major increased figure from the earlier average tariff paid by Americans when importing goods from Japan. This aligns with an emerging trend of making global trade dearer for American consumers, as seen with a recently announced trade agreement with Vietnam which essentially doubled the import taxes for American consumers to 20% from the Southeast Asian nation.
What seems rather unusual is the silent acquiescence of the Republicans on this matter. The Republican party, once seemingly programmed to instinctively push back on any form of taxation, is watching as the United States President unilaterally imposes taxation on American businesses and the public.
The narrative of declaring abuses of power, echoing fears of Socialism seem conspicuously missing now. The party seems to have descended into populist rhetoric around commerce deficits and a certain kind of wistfulness for factory jobs from the Midwest that are unlikely to resurface.
Free market economist Milton Friedman had famously dubbed a tariff as a protective measure. In his view, the one thing it definitely serves to protect is the consumer against low prices. Ironically, it appears that it might be these so-called low prices that the current President is attempting to shield Americans from.
The growing inflation over the past five years already has Americans grappling, and the President’s persistent ambition to apply taxation to foreign goods seems to offer no respite. As former President Ronald Reagan noted in 1988, we often discuss trade using terms from warfare. He argued that war necessitates one side to be victorious, thereby establishing the other as defeated. However, business interactions do not function on the same premises.
Contrarily, commerce is a practice of economic partnership that brings mutual gains, creating winners on both sides. It fortifies the free world. It’s this understanding and these principles that the current administration and its proponents appear to be sidelining.
Regrettably, there seem to be no indications that this populist trend will be fading out in the near future. These recent shifts in international trade relations seem to be setting a new dynamic, with every indication of remaining on this trajectory for at least the foreseeable future.