Tariffs Open New Trade World
On the heels of his announcement of new tariffs on Mexico, Canada and China, President Donald Trump recently announced his plans for reciprocal tariffs across a whole range of countries and goods. That means, the president said, the U.S. will match any other country’s tariffs against our products, in the name of trade fairness.
Low tariffs and promotion of free trade have been the bedrock of U.S. trade policy ever since the Second World War—among both political parties. That’s a stance that The Waterways Journal has always shared, along with farmers. Bringing the whole world into a free-trade network was intended to increase everyone’s prosperity and thus demonstrate the superiority of freedom and market systems over Communism. Broad trade agreements covering whole regions kept tariffs low. The Bretton Woods agreements formed the World Trade Organization, an international body that is supposed to arbitrate and regulate trade disputes.
Despite the tariffs enacted during Trump’s first term, the U.S. still currently has one of the world’s lowest average tariff rates, between 2 and 3 percent. About 70 percent of goods enter the U.S. duty-free. Trump is not wrong when he points out that other countries maintain high tariffs against U.S. goods.
Free trade was supposed to be good for everyone–in theory. But as Yogi Berra supposedly said, “In theory, there is no difference between theory and practice. In practice, there is.”
In practice, global free trade created winners and losers in this country, as those who were disadvantaged were well aware. Global capital, free to roam, found its lowest cost level and moved jobs from the U.S. to low labor cost countries.
Trump and many interests he represents believe the previous global free trade order long since achieved its postwar purpose and is now damaging U.S. interests in a changed world.
How these new reciprocal tariffs will take shape is still being worked out. Trump has admitted there could be “some pain” involved. There is no doubt that prices of some imports will rise.
Trump has left the door open for some countries to negotiate new individual trade agreements. Experts differ on what the consequences might be of returning to a bilateral world in which every country negotiates trade separately with every other country. You can find a wide range of opinions depending on where their authors stand in the new, changed world.
Whether or not all the reciprocal tariffs will actually be imposed remains to be seen. If they are and the consequences prove harmful, the voters will make their judgment in the midterm votes.
