A large part of President Trump's campaign platform was his emphasis on reshoring American manufacturing, including the promise of a 10 to 20% charge on imported goods. However, as he entered office, aggressive as many of his first actions were, he took a surprisingly slow approach to tariffs. Instead of the broad and universal tariffs of the caimpaigns, he has been using them as "negotiation tools" or threats, aiming to get other countries in line with his own foreign policy and trade goals. He has threatened Russia in order to secure a ceasefire with Ukraine, and planned tarrifs for Canada and Mexico, whihc can be used as leverage to ensure Trump's border goals. There are signs, such as feaseability assessments, which point to the Trump administration exercising previosuly unseen caution in pursing their economic agenda (at least in this area). This caution may be due to internal skepticism of the viability and harm of tarrifs by senior officials, as well as corporate executives in Trump's circle.
According to Trump's nominee for Secreatry of the Treasury, Scott Bessent, one of the other goals of tarrifs- besides acting as an effective threat- is still to bring manufacturing back to America. The simple and repeated economic arguement is that making foreign goods more expensive would encourage state side production, and bring back American jobs. Trump in the past had critized other efforts to bring American manufacturing to the forefront again, such as the CHIPS act of the Biden administration, believing that tarriffs were cheaper and more effective. However it seems that in office, Trump will likely keep funding rolling for the act, which has broad bipartisan support.
There is hope that these actions point to Trump pursuing a less aggressive tarriff policy and perhaps continuing to use tarrifs mostly as threats. The article in the Times predicts that if enacted tarrifs start to encurr the negative effects economics predict, such as higher prices and inflation, this means he will likely pull back. If this is the case however, the administration will have to find other ways to fund its massive tax cuts, and may mean proposing cuts to massively popular programs like Medicaid.
NYT "Why Tarrifs Are Different"
TSMC is confident its CHIPS Act funding will continue under Trump, says CFO Wendell Huang
1 comment:
I seem to question the effectiveness of using tariffs as a negotiation tool to get other countries to fall in line with US foreign policy. Especially given the concerns of inflationary effects to items such as coffee from Columbia or avocados from Mexico, I wonder if these countries are in a position to call the bluff of the administration and not "bend the knee" as easily as Trump would like them to.
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