“It is inconceivable that other countries won’t retaliate, even if some of the governments might not want to retaliate, their citizens will demand that you can’t allow yourself to be beaten up. When you make like a gorilla thumping on his chest, are countries just going to say, ‘Are we chopped liver?’ Their politics will demand that they do something.” Nobelist Joseph Stiglitz
The real tariff wars have now begun. Not only has Trump announced 25 percent tariffs on all steel and aluminum imports but will soon instigate so-called reciprocal tariffs on those that impose tariffs in response.
Such blanket tariffs do not make economic sense, and it counters the advice of Trump’s own chief tariff negotiator, Robert E. Lighthizer.
Lighthizer, just wrote in a NYTimes Op-ed that “Countries with Democratic governments and mostly free economies should come together and create a new trade regime.”
Yet the just announced tariffs fall on our most democratic and free economic allies—Canada, Brazil, Mexico, South Korea, Japan, and Germany with which we already have trade regimes.
He has justified his tariffs with an outright lie; that foreign governments or export entities pay the tariffs when it is in fact a tax on the importer, or consumers when it’s passed on to the users of said imports.
Then why the lie, that Trump has maintained since his first term that didn’t work out so well for Americans? U.S. farmers, for instance, had to be reimbursed with taxpayer funds for the lost soybean and wheat exports that China would no longer buy.
Lighthizer all but admitted in a recent 60 Minutes interview why Trump has maintained the lie. The import taxes collected will help to finance the tax cuts that Trump wants, which benefit his wealthiest supporters, already immensely wealthy oligarchs, many sitting behind him during his inauguration.
And he cannot finance those tax cuts without a new budget agreement, because even his Republican supporters won’t tolerate a larger budget deficit with total federal debt now 120 percent of Gross Domestic Product, the highest since World War Two.
Does Trump really listen to his chief tariff negotiator when he has essentially abandoned just such existing trade regimes as NAFTA, the EU’s, or Obama’s Transpacific Trade Agreement? The 11 Asian countries left in the PTT agreement; Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam; went ahead and created their own trade regime when Trump abandoned it to keep from taxing each other’s imports.
The financial markets are reacting as they did when Trump first announced tariffs on Mexico and Canada, then quickly rescinded for 30 days—all indexes are plunging and interest rates continuing to rise in the expectation of higher inflation due to the rising prices that will follow.
And this at a time when the Federal Reserve must decide whether the inflation bogey man is back. Why wouldn’t those countries affected by Trump tariffs raise their tariffs in response, less they look weak to their citizens when Trump’s gorilla is thumping on their chests?
There is also the fact that higher taxes will mean slower growth, and so in wanting to appear strong, Trump will in fact be weakening the economies and alliances that have kept the U.S. strong.
Harlan Green © 2025
Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen
No comments:
Post a Comment