In his first month, President Trump has issued a non -repellent stream of tariff threats, accompanied by almost as many reasons why they should come into effect.
Rates in Canada, Mexico and China are a bat to force those countries, the largest trading partners in America, to resolve the Flow drugs and migrants in the United States. Exchange on steel, aluminum and copper are a way to protect the domestic industries that are important for defense, while they will support a critical production basis on cars. A new system of 'reciprocal' rates is seen as a way to prevent America from being 'stolen' by the rest of the world.
Those goals are almost always followed for another reason to hit both allies and competitors with rates: “Long term will make it a fortune from our country,” Mr Trump said, signing an executive order on mutual rates this month.
Mr Trump claims that the rates impose few or no costs on the United States and in enormous income that the government can use to pay for tax cuts and impose expenditure and even to balance the federal budget.
But trading experts indicate that rates cannot reach all the goals that Mr Trump has made at the same time. In fact, many of his goals are contradicted and undermine each other.
For example, if Mr Trump's rates poke companies to make more of their products in the United States, American consumers will buy less imported goods. As a result, rates would generate less income for the government.
The use of rates of Mr Trump as leverage in international negotiations can also chase away his reasons. If other countries meet their requirements to combat border crossings, to reduce drug flows or to correct other issues he finds problematic, the president is expected to threaten his rates. As a result, no extra income would be increased and companies would have no reason to move production to the United States.
“All these rates are internally inconsistent with each other,” says Chad Bown, a senior fellow at the Peterson Institute for International Economics, a think tank in Washington. “So what is the real priority? Because you can't let all those things happen at the same time. “
Treasury Secretary Scott Bessent said during his confirmation hearing in January that the president uses rates for various reasons. He outlined three main objectives: remedying unfair commercial practices, increasing income and encouraging other countries to negotiate conditions that are beneficial for the United States.
The use of rates by Mr. Trump with decades of precedent. The United States had not proposed any rates in this part since almost 100 years ago, when the soup-hawley tariff act rates increased for thousands of products and, historians, claim that the big depression was being deepened, said William A. Reinsch, the Scholl-President in International Business at the Center Think Tank.
For the Lord Trump, rates have become a full-purpose tool, Mr. Reinsch said.
“It doesn't matter what the crime is, the answer is rates,” he said.
Rates and taxes
The conflicting reasons behind the rates of Mr. Trump is perhaps the most important thing when it comes to income. The president has sometimes driven the idea to replace income tax with rates to finance the government.
Some house republicans have welcomed rates as a way to help pay for the extension of the tax cuts of Mr Trump 2017, which is expected to cost $ 4 trillion for a decade. One of the first executive orders of the president called for creating an external entry service to withdraw money from rates, an agency whose trade secretary has said he should replace the Internal Revenue Service.
The IRS has collected $ 5.1 trillion in taxes in the last tax year, and both liberal and conservative economists have said that replacing that amount is mathematically impossible due to rates. The United States imported around $ 3.3 trillion of goods last year, so the average rate for all American entry should exceed more than 150 percent to cover the gap.
Such high tasks would drastically increase the prices for input, which means that Americans probably buy much less from them – reduce income from the rates.
Mr Bessent recognized this month this month in an interview with Larry Kudlow about FOX Business, which implies that rates would not be reliable source of income.
“In theory, rates would be a shrinking ice cube,” said Mr Bessent. He added: “I think rates are a means to achieve a goal, and that end brings the production basis back to the US”
Mr. Trump said he was planning to impose steep rates on Canada and Mexico because he wanted them to stop immigration and drug trafficking on their limits with the United States. He prepared to place the duties last month before he reached an agreement to postpone them, but Mr Trump now says he will maintain them next week.
Both Canada and Mexico have worked feverishly to reach a deal across the border issues and set the rates-one back and forth that could ultimately mean that the United States does not collect new import load.
“There is tension between wanting to use rates for negotiations, having other countries collect their barriers and cancel our barriers and subsequently want rates income,” Erica York, an analyst at the Tax Foundation, a think tank that generally promotes lower taxes. “If you want income, some rates will have to be permanently in place.”
Mr Trump's arguments about the use of rates as a negotiating instrument to force other countries to lower their own taxes against the United States also seem to create confusion about whether his ultimate goal is to increase or lower rates.
Free traders within the Republican party seem to cross their fingers that Mr Trump will use rates to open international markets instead of concluding them, although many countries have responded to them with retaliation taxes on American exports.
Goals for the economy
There are also potential contradictions between Mr Trump's plans for rates and his goal to ignite an economic flowering that would increase American jobs and keep the growth high and keep prices low.
On Thursday, when he met the British Prime Minister, Mr. Trump praised rates for helping American companies.
“We're going to return our car industry,” he said. “We are going to return our chips. We are going to bring so many things back to our country, including medicines and drugs. And the thing that will get us there are rates. “
But many economists warn that rates can have negative effects on the economy, including increasing prices for consumers and slowing down growth. Although Mr Trump says that foreign governments pay for rates, economic research has shown that American consumers often suffer.
Other economic research has shown that rates generally lowered American production paths because some manufacturers were confronted with higher input costs and as other countries strive for retribution rates.
“People really underestimate the growth effect of rates,” said Tom Porcelli, head -American economist at PGIM Fixed Income. “Rates are a tax and you feel the effects of a load.”
Another environment
Mr. Trump has experience with trade wars. During his first term, he threatened to impose the rates for Mexican input and to close the border completely, and imposed rates for nearly $ 400 billion in imported metals, solar panels and goods from China.
American companies encouraged that uncertainty to put expansion plans and reduce the expenditure for large investments. Inflation was then less worrying for the Federal Reserve, since the growth of the consumer price was consistently under the objective of 2 percent of the central bank. The prospects of a weakening economy and scarce inflation problems threaten to reduce the FED in 2019 by 0.75 percentage points by 0.75 percentage points.
This time the American economy is in solid form, but there are signs that consumers are braced for a less benign outcome. A survey released this week by the Conference Board showed that consumer wisdom in February fell sharply as expectations about future inflation increased. A similar image takes shape in a closely viewed study by the University of Michigan.
The combination of higher prices and slower growth has a “touch of stagflation,” said Mr. Porcelli, warning that “the longer this uncertainty lingers, the greater the risk that you see this deterioration.”
Mr. Trump has criticized the economic impact of rates.
“Will there be some pain?” He wrote on social media at the beginning of February. “Yes, maybe (and maybe not!). But we will make America great again, and it will all be worth the price to be paid. “
