By Paul Wiseman and Christopher Rugaber, Associated Press
Washington (AP) – President Donald Trump brings a bloodstream in the rules that govern world trade for decades. The “reciprocal” prices he should announce on Wednesday should create chaos for global companies and in conflict with American allies and opponents.
Since the 1960s, prices – or import taxes – have emerged negotiations between dozens of countries. Trump wants to grasp the process.
“Obviously, this disrupts the way things have been done for a very long time,” said Richard Mojica, a business lawyer by Miller & Chevalier. “Trump throws this through the window … Clearly, it tears up trade. He will have to be adjustments everywhere. ”
Point towards massive and persistent commercial deficits in America – not since 1975, the United States has not sold the rest of the world more than it is bought – Trump invoices that the playground is tilted against American companies. A great reason for this, according to his advisers, is because other countries generally tax US exports at a higher rate than America tax theirs.
Trump has a solution: he increases American rates to correspond to what other countries are charging.
The president is a supporter of the shameless prices. He used them generously during his first mandate and deploys them even more aggressively in his second. Since his return to the White House, he has slapped 20% of prices on China, unveiled a 25% tax on imported cars and trucks which should take effect Thursday, has effectively increased American taxes on foreign steel and aluminum and imposed withdrawals on certain goods from Canada and Mexico, which it could develop this week.
Economists do not share Trump’s enthusiasm for prices. They are a tax on importers who are generally transmitted to consumers. But it is possible that Trump’s reciprocal tariff threat can bring other countries to the table and lead them to lower their own import taxes.
“It could be a winner-win,” said Christine McDaniel, former US trade manager now at the George Mason University. “It is in the interests of other countries to reduce these prices.”
She noted that India has already reduced prices on motorcycle articles to luxury cars and has agreed to progress American energy purchases.
What are the reciprocal rates and how do they work?
They seem simple: the United States would increase its price on foreign products to correspond to what other countries impose on American products.
“If they charge us, we invoice them,” said the president in February. “If they are at 25, we are at 25. If they are 10 years old, we are at 10 years old. And if they are much higher than 25 years, that’s what we are too.”
But the White House has not revealed a lot of details. He ordered the commercial secretary, Howard Lungick, to publish a report this week on the operation of new prices.
Among the outstanding questions, noted Antonio Rivera, a partner of Arentfox Schiff and a former customs lawyer and the protection of American border, is whether the United States will examine the thousands of articles in the tariff code – from Mangos motorcycles – and try to level the rate rates one by one, a country by country. Or if he will more broadly examine the average rate of each country and how he compared to America. Or something else entirely.
“It’s just a very, very chaotic environment,” said Stephen Lamar, president and chief executive officer of the American Apparel & Footwear Association. “It is difficult to plan a long -term and lasting way.”
How did the prices become so unbalanced?
American prices are generally lower than those of its business partners. After the Second World War, the United States pushed other countries to reduce barriers and trade rates, considering free trade as a means of promoting American peace, prosperity and exports worldwide. And he mainly practiced what he preached, generally keeping his own low prices and giving American consumers access to cheap foreign goods.
Trump broke with the former free trade consensus, saying that unfair foreign competition has injured American manufacturers and devastated factory cities in the American heart. During his first mandate, he slapped prices on foreign steel, aluminum, washing machines, solar panels and almost everything from China. Democratic President Joe Bid was largely pursuing Trump’s protectionist policies.
The White House has cited several examples of particularly unbalanced prices: Brazilian taxes imports of ethanol, including America, at 18%, but the American price on ethanol is only 2.5%. Likewise, India imposes 100%foreign motorcycles, America only 2.4%.
Does this mean that the United States has been enjoyed?
The superior foreign rates to which Trump complains was not adopted sneaky by foreign countries. The United States has agreed to them after years of complex negotiations known as Round Uruguay, which ended with a commercial pact involving 123 countries.
As part of the agreement, countries could define their own prices on different products – but in the “most favored” approach, they could not charge one country more than another.
Trump’s grievances against American trade partners also occur at a strange moment. The United States, operating on strong consumption expenditure and healthy productivity improvements, surpass other advanced economies in the world. The US economy increased by almost 9% compared to the end of COVVI -19 in the middle of last year – against only 5.5% for Canada and only 1.9% for the European Union. The German economy decreased by 2% during this period.
Trump’s plan goes beyond the prices of foreign countries
Not satisfied to blur the pricing code, Trump also goes to other foreign practices which he considers unjust obstacles to American exports. These include subsidies that offer local producers an advantage over American exports; Ostensible health rules used to prevent foreign products; and loose regulations that encourage the theft of commercial secrets and other intellectual properties.
The determination of an import tax that compensates for damage to these practices will add another level of complexity to the reciprocal tariff diet of Trump.
The Trump team also chooses a fight with the European Union and other business partners on so -called value added taxes. Known as tank, these direct debits are essentially a sales tax on products consumed within the borders of a country. Trump and his advisers consider VAT as a price because they apply to American exports.
However, most economists do not agree, for a simple reason: the tanks are applied to national and imported products, they therefore do not specifically target foreign goods and have not been traditionally considered as a commercial barrier.
And there is a more important problem: the tanks are enormous increases in income for European governments. “There is no way that most countries can negotiate their VAT … because it is an essential element of their income base,” published an element of income, Brad Setser, main member of the Council on Foreign Relations, published on X.
Paul Ashworth, chief economist in North America for the capital economy, says that the first 15 countries exporting to the United States have average VATs exceeding 14%, as well as 6%tasks. This would mean that American reprisal rates could reach 20% – much higher than Trump’s campaign proposal for universal tasks of 10%.
Trade prices and deficit
Trump and some of his advisers argue that higher prices would help reverse long-standing trade deficits in the United States.
But the prices failed to reduce the commercial gap: despite the import taxes of Trump-Biden, the deficit increased last year to $ 918 billion, the second higher ever recorded.
The deficit, according to economists, is the result of the unique characteristics of the American economy. Because the federal government manages a huge deficit and American consumers like to spend so much, American consumption and investment far exceed economies. Consequently, part of this request goes to goods and services abroad.
The United States covers the cost of the commercial difference by borrowing mainly abroad, partly by selling cash titles and other assets.
“The trade deficit is really a macroeconomic imbalance,” said Kimberly Clausing, UCLA economist and former treasury manager. “It comes from this lack of desire to save and this lack of desire for taxes. Until you repair these things, we will direct a commercial imbalance. ”
The retail writer AP Anne of Nnocenzio in New York contributed to this story.
Originally published:
California Daily Newspapers
