Elizabeth Morgan | US elections: Implications of Trump’s tariff proposals

The US Republican Party’s presidential candidate, former President Donald Trump, has proposed that, if he becomes president, he will impose a 10-20 per cent tariff on all foreign imports and 60-100 per cent on all imports from China.

Those who support the former president seem to think that this is just campaign talk and US checks and balances will hold, preventing the actual implementation of such extreme proposals.

From what I have observed happening in the USA since 2016, I am not sure about that. It also seems that the US President can unilaterally impose tariffs, citing security concerns, without reference to the US Congress.

This is an extreme protectionist policy being proposed by a representative of the Republican Party. This is building a tariff wall around the USA to address its trade deficit and increase domestic production – the America First Policy.

US exports of goods in 2023 were valued at US$2.02 trillion and imports at US$3.17 trillion, and thus the US has a trade deficit in goods of US$1.15 trillion. The US has a trade surplus in services trade. However, in the total of trade in goods and services for 2023, the US has a trade deficit of US$773.4 billion.

REPUBLICAN TRADE POLICIES

I have written in a previous article about the Republican Party’s trade policy position pre-Donald Trump. The Republican Party was known as the party of big business and free trade, with its objective to meet the needs of US businesses which included cheaper imports, making US exports more competitive, and opening new markets. The Republicans promoted free trade, initiating many of the free trade agreements which the USA negotiated and signed since the 1990s, advocating for a new round of multilateral trade negotiations and supporting China’s entry into the World Trade Organization (WTO). The Democratic Party was the one promoting workers’ interests and advocating protectionist policies. The Republicans, it seems, contributed to the US trade deficit. Since 2016, Donald Trump’s Republican Party has been promoting protectionism to narrow the trade gap.

THE RISE OF PROTECTIONISM

Then President Trump, under his America First Policy, increased tariffs on specific goods from China, including solar panels, washing machines, and on steel and aluminium from all countries, including Canada, Mexico and the European Union (EU). It will be recalled that President Trump insisted on renegotiating the North American Free Trade Agreement (NAFTA) with Mexico and Canada. This is now the United States/Mexico/Canada Agreement. Tariffs were further raised on goods from China, initiating a trade war with that country.

The Biden administration has maintained tariffs on China, the US’s rival, especially with economic issues arising from COVID-19 supplies. They modified tariff arrangements on products from Canada, the EU and the UK.

With COVID-19, the Russia/Ukraine war, and supply chain issues, of course, the US began to look at bringing home production of goods of strategic importance. Interest has also arisen in near-shore production, thinking that the US would want to also look at moving production into this hemisphere, nearer home, from which many in the region could benefit, including CARICOM countries.

In this election cycle, however, Donald Trump is promising to impose higher tariffs on China and a 10-20 per cent tariff on goods from all other countries exporting to the USA, which includes all CARICOM countries. The Trump advisors and supporters are claiming that tariffs would not have a significant impact in the USA, as like or similar goods could be imported from other countries. The like and similar goods from other countries would also increase in price with higher tariffs.

A tariff is a customs duty which is a tax on imported goods. These taxes are usually paid by the importer and/or the consumer in the country, and they are usually likely to increase prices. Thus, US consumers would be impacted.

IMPLICATIONS FOR CARICOM COUNTRIES

To impose a 10-20 per cent tariff on all foreign imports would be a breach of the US’s commitments in the WTO, in non-reciprocal trade arrangements such as the Caribbean Basin Initiative (CBI), and all bilateral/plurilateral free trade agreements to which the US is a party.

The US is the primary trade partner of all CARICOM countries, and actually has a trade surplus with CARICOM – exporting goods valued at about US$17 billion and importing goods valued at about US$10 billion in 2023, giving a surplus of US$7 billion.

A 10-20 per cent rise in tariffs on goods from CARICOM, already high cost producers, would make their goods uncompetitive in the US market, even if the tariffs were applied across the board. A high percentage of goods from CARICOM are exported duty-free into the USA, using tariff concessions provided under the CBI.

Of course, such proposals would lead to further problems in the WTO, as they threaten the multilateral trading system in which the US has already weakened the dispute settlement mechanism. These tariffs would breach US WTO tariff commitments. There would be retaliation from other trading partners, thus escalating trade wars. Let us recall that the imposition of high tariffs under the 1930 US Smoot/Hawley Tariff Act led to the Great Depression, which was a global recession.

So, Jamaica and other countries in CARICOM should be looking at these proposals. The CARICOM countries cannot retaliate much. US goods are already attracting tariffs and domestic prices could further increase. The region cannot think that Donald Trump might not win or if he wins, these proposals will not be implemented, because they are not serious. Any game can be played here. We are in a time when crazy can triumph.

Elizabeth Morgan is a specialist in international trade policy and international politics. Email feedback to columns@gleanerjm.com