All Trade is Reciprocal. Trump’s Tariffs Interfere With That Reciprocity.
President Donald Trump’s “Liberation Day” massive tax hikes—err, tariffs—are here, and the effects are already apparent in stock market selloffs, layoffs, and plant closures. We’re also being asked to tolerate a little pain for the duration of the trade war with the entire planet until “reciprocal” tariffs close American trade deficits with other countries. But all this talk of allegedly fine-tuned tariffs intended to counter other countries’ trading barriers is based on faulty assumptions: that every imbalance in commerce with other nations can be attributed to trade barriers, and that trade deficits are necessarily bad.
A Lack of Reciprocity
“I, DONALD J. TRUMP, President of the United States of America, find that underlying conditions, including a lack of reciprocity in our bilateral trade relationships, disparate tariff rates and non-tariff barriers, and U.S. trading partners’ economic policies that suppress domestic wages and consumption, as indicated by large and persistent annual U.S. goods trade deficits, constitute an unusual and extraordinary threat to the national security and economy of the United States,” began the president’s April 2 executive order invoking questionable unilateral executive authority to hike tariffs.
The recent report from the Office of the United States Trade Representative assessing international trade barriers looks not only at formal tariffs, but also at such impediments as weak intellectual property protection, “buy local” policies, discriminatory licensing requirements, subsidies, “sanitary” standards that exclude American goods, and much more. Many of these are easily recognizable as efforts to reduce competition to local companies. But they also seem very difficult to assess in terms of their impact. So, how did the White House come up with such specific numbers to assign to other countries’ trade barriers so that it could “reciprocate” with fine-tuned tariffs of its own?
Well, according to the Office of the United States Trade Representative, “reciprocal tariffs are calculated as the tariff rate necessary to balance bilateral trade deficits between the U.S. and each of our trading partners. This calculation assumes that persistent trade deficits are due to a combination of tariff and non-tariff factors that prevent trade from balancing. Tariffs work through direct reductions of imports.”
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