The second main development regarding the US trade policy is that the government wants to use legal regulations based on different acts. “Now the administration uses section 301 tariffs based on forced labor as unfair trade practice to justify this step”, Harrell said. Importers of European Union (EU) goods, for example, pay tariffs of 10 percent. In his view, this measure is consistent with the Turnberry agreement between the EU and the United States, which caps tariffs on European products at 15 percent. Elaborating on forced labor as pretext, Harell stressed: “President Trump has lawyers who work very hard to come up with theories how to implement a baseline tariff of 10 or 15 percent”. According to the former Senior Director for International Economics and Competitiveness at the White House, there is nothing US trade partners can do to prevent tariffs of 10 or 15 percent. At the same time, USTR is conducting an investigation into trading partners’ industrial overcapacity that could also lead to section 301 tariffs.

Thirdly, the United States’ trade conflict with Canada is getting a lot of attention by the US government. Harrell calls this a “trade war against Canada” in which President Trump had announced tariffs of 50 percent that are in force now. Canada’s Prime Minister Mark Carney then announced retaliatory tariffs. Over the past couple of months, the US has tried to renegotiate its free trade agreement with Mexico and Canada (USMCA). “Trump is much happier with how the negotiations are going with Mexico,” Harrell said. “In contrast, he has felt that the negotiations are not going well with Canada”. Despite long-standing issues with Canada over dairy products and aircraft he is “reasonably optimistic” that Canada and the US will manage to get through this conflict and renegotiate the USMCA.

For Harrell, the disadvantages of the trade policy in President Trump’s second term are clear. “The overwhelming majority of economists say the US consumers are paying for the tariffs. Moreover, the tariffs have not contributed to an increasing manufacturing base,” he said. Looking at the sectors which are most affected by the US tariffs, Harrell highlighted steel, aluminum, and cars. Especially the automotive industry is highly important for the United States and its trade partners. “The US, the EU, Japan, and South Korea should agree on effectively zero tariffs for cars,” Harrell recommended. The policy solution for American industries should involve partners and allies. He worried that the US, while protecting its markets in sectors such as semiconductors, drones, and robots and trying to de-risk from China, is falling behind on the quality and speed of innovation: “Look at how fast China is gaining market shares in cars. We have to move at Chinese speed”.

Here you can watch the full webinar.

Der Beitrag “There is nothing US trade partners can do to prevent tariffs of 10 or 15 percent” erschien zuerst auf Atlantik-Brücke e.V..

Dan Mullaney, former assistant United States Trade Representative for Europe and the Middle East, answers the question to what extent Trump and Harris will use import tariffs.

By Dan Mullaney

“Now l don’t want to swear it, but it’s something that l heard
A gun in the first act always goes off in the third”

Peter Case. “Put Down the Gun”

Like Chekhov’s gun, tariffs will go off in the next act, regardless of who is elected U.S. President. Tariffs are now unholstered as a popular, if imprecise, trade policy tool: there is no going back to the self-restraint that characterized the not-so-distant past.

[related]But there are significant differences in how the two candidates would likely approach those tariffs. A Trump administration would likely try to impose significant across-the-board tariffs presumptively, requiring strong reasons not to impose them in particular cases. A Harris administration, by contrast, would look at the relevant policy goals and consider whether increased tariffs can contribute to those goals, without presuming that increased tariffs are the answer.

The difference may be nuanced, but it is critical for trading partners. A Trump administration would view increased across-the-board tariffs as a way to (1) restore lost negotiating leverage vis-à-vis trading partners, (2) protect all U.S. manufacturing industries, (3) generate needed revenue to make up for tax cuts, and (4) incentivize foreign investment in the United States. Special deals with trading partners would (of course!) be on the table, but any deal would have to overcome a strong presumption in favor of increased tariffs.

A Harris administration, by contrast, would first consider the effectiveness of tariffs in achieving a specific policy objective, and would likely give greater weight to the costs of increased tariffs – the burden on U.S. industries buying foreign inputs, the impact on consumer prices, and potential retaliation from trading partners, among others. A Harris administration would also give greater weight to maintaining solidarity with allies like the EU, who could join forces with the United States on joint trade challenges, such as non-market economy policies and practices. A Trump Administration would also take these factors into account, but likely to a lesser degree.

Under either administration, of course, the question of domestic legal authority to impose tariffs will arise (as well as their consistency with international rules), but, as the last administration demonstrated, trade lawyers are nothing if not creative.

In sum, the successful policy arguments for shaping tariff policy in the next administration will be different, depending on which candidate wins, but there will be plenty of scope for doing so whatever the election’s outcome.

(One important caveat to this discussion is that if the EU imposes retaliatory tariffs on the United States in March in the absence of a steel and aluminum agreement, as it has threatened, or if it imposes charges on US trade, such as under CBAM or the Deforestation Regulation, or taxes on digital services, the response from either administration would likely be similar and emphatic.)

By the way, Peter Case’s song ends with “put down your gun and we’ll talk”.

Maybe some day!

Dan Mullaney is a nonresident Senior Fellow at the Atlantic Council’s Europe Center and GeoEconomics Center and former assistant United States Trade Representative for Europe and the Middle East.

Der Beitrag “Trump and Harris and Tariffs, Oh My!” erschien zuerst auf Atlantik-Brücke e.V..