He really means it. Until a week or two ago, President Donald Trump’s conflicting statements left open a strong possibility that the leader of the free world was threatening sweeping tariffs as a cudgel to extract better terms from exporters, as well as succeed in pushing Canada and Mexico to curb the smuggling of lethal drugs across our borders, and that he wouldn’t unleash a trade war if he got all or even part of what he wanted. Now, it’s becoming increasingly clear that the president is determined to do exactly what friendly governments and consumers and businesses from Paris to Sydney, not to US folks and funds, feared but didn’t really believe could happen in this day and age: reverse decades of global free trade, and build another “wall,” not the barrier along the Mexican border, but a protectionist barricade around America that repels even our closest allies and trading partners. That realization has sent stocks skidding. Following a peak of Trumpian euphoria reached in mid-February, the S&P 500 has tumbled 11% into correction territory as of market close on March 13, while the Nasdaq Composite has tumbled 16%.
Trump’s stated plan all along: impose tariffs of never-before-witnessed weight, mostly at 25%, on most if not virtually all imports from our four largest trading partners, China, the EU, Mexico, and Canada. It’s been a start-stop-reverse process. But now, Trump’s actions are matching his fiery rhetoric. Trump got going in early March by doubling import duties on China from 10% to 20%. In early March, he hit a broad range of products from Canada and Mexico with 25% tariffs. At the same time, he partially retreated by granting a one-month reprieve on one-third of exports from the Great White North and one-half from our southern neighbor covered by the USMCA free trade agreement he himself had negotiated in late 2018. A call to the Oval Office placed by CEOs of the Big Three automakers won them a comparable 30-day reprieve for cars and parts from Canada and Mexico. Now he’s targeting global steel and aluminum, EU textiles, apparel, and agricultural products, and sundry other categories for future tariffs.
