In April, Donald Trump announced sweeping new import tariffs, only to put most on hold amid the resulting global financial panic. Four months later, Trump is touting a series of victories, having unveiled a handful of deals with trading partners and unilaterally imposed tariffs on others. The US president is promising that the US will reap the benefits of new revenue, rekindle domestic manufacturing, and generate hundreds of billions of dollars in foreign investment and purchases.
However, it is still uncertain whether these actions will have negative consequences. The tide that was turning on free trade has become a wave crashing across the globe, reshaping the economic landscape. While the short-term result might be a victory for Trump, the impact on his overarching goals is far less certain. The long-term repercussions could well pan out rather differently for Trump and the America he leaves behind.
The agreement of tariff terms has reduced uncertainty, allowing businesses to make plans and investment decisions. However, the typical tariff for selling into the US is higher than before, and more extreme than analysts predicted. The greatest fears of potential disaster have receded, but the implications for the US economy are still unclear. Growth in the late spring benefited from a flurry of export sales, but economists expect growth to lose momentum over the rest of the year.
Tariffs have increased from an average of 2% at the beginning of the year to around 17% now, having a notable impact on US government revenue. Import duties have brought in over $100bn so far this year, about 5% of US federal revenue. However, American shoppers remain in the front line and have yet to see higher prices passed on in full. Forecasts are uncertain, but this represents a very real political threat for a president who promised to lower consumer prices.
The US administration has yet to pronounce its decisions for the pharmaceuticals and steel industry, and the colossal issue of China remains unresolved. Many of the deals that have been struck have been verbal, as yet unsigned, and it is uncertain if and how the strings attached to Trump’s agreements will actually be delivered on. The world has shifted back from the brink of a ruinous trade war, but nations are grappling with a new set of trade barriers. Trump aims to call the shots, but his overarching aim to return production and jobs to America may meet with very limited success.
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