Last week, President Trump issued it Note They are seeking research into ways to implement a “fair and mutual planning” of tariffs. It's scheduled for within 180 days, but Trump already knows the idea of what it says.
That's because he entrusted it to me. Similar studies In 2019, it claimed that matching higher foreign tariffs could show that trade deficits could be reduced. This conclusion was pure fiction.
There were several issues with the 2019 survey. One of the most noticeable of these was its lack of consideration for the prospect of eliminating tariffs in new trade transactions with foreign countries.
It dropped members of the US Free Trade Agreement from its analysis, turning a blind eye to the benefits of future ones. This clears the way in which the 2019 survey focuses on major complaints. In other words, it is unconditional to the World Trade Organization. Most preferred country framework It's unfair to the US
This means that in a 2019 survey, a review of the most favorable countries' tariffs of around 700,000 people, these 67% have a higher rate than the US than the foreign countries, 20% lower, and 13% have a higher equality rate. I understand that. In some cases, the differences were quite large. For example, in automobiles, the most preferred country tariffs in the US are 2.5%, 10% in the European Union, 15% in China and 35% in Brazil.
This led to the question that Trump wanted to answer in a new study. If foreign countries match US tariffs or the US match theirs, will the US trade deficit decrease more of the trade deficit? Using simulations, the 2019 survey stated that the second scenario reduced the trade deficit by 10.2% and reduced the first scenario by 9.4%. This is the result of Trump hopes to support new research.
However, the results of the 2019 survey cannot be carried out at face value.
First, the trade deficit It is mainly reflected Finance and monetary policy, not trade policy. A 2019 study suggested this concern as a passing one, but did not model macroeconomic variables.
Secondly, there are temporary customs duties. Damping prevention and counterbalancing operationsUS companies can each deal with foreign goods sold under “normal value” or petition because they are each receiving subsidies. Neither of these “trade relief” are restricted by the tariffs of the most favorable countries, but they are not included in the 2019 survey.
Third, due to construction, the 2019 survey simulations isolated each market and industry, so it is not possible to talk about the harm that tariffs cause other industries, let alone the impact on employment, for example. This “partial equilibrium” view may make sense for investigations into preventing dumping obligations, but Trump's question called for a “general equilibrium” approach.
Fourth, the 2019 study did not model the effects of foreign retaliation. This is shocking as it sets up a scenario that will return and travel to higher foreign tariffs by assuming “our trading partners refuse to lower theirs.” Could they retaliate again?
Finally, even if we took a 2019 survey at face value, we couldn't take into account the obvious. Third Scenario: That is, the United States and Foreign countries will zero tariffs in new trade transactions.
To see why, consider the 2019 survey list running trade surplus with the US. Most major countries would have eliminated tariffs as part of two trade deals that the US had long thought was difficult to participate.
The first is the rebranding of the oral partnership of the brand, now known as the comprehensive and progressive agreement of the Trans-Pacific Partnership. This will provide the US with tax-free market access to Japan, Malaysia, the UK and Vietnam. India has Cheating After years of participating, the US may also tend to sign up as well. Trump has retreated From the 2017 TPP.
The second one is in the EU and is modeled on it Transatlantic Trade and Investment Partnership Since the mid-2010s. A 2019 survey pointed out that the EU as a BLOC and several individual member states, such as France, Germany and Ireland, have trade surpluses with the US, which should have asked about the benefits of similar trade contracts. I'm doing it.
The council showed little appetite Transpacific Partnership or Transatlantic Trade and Investment Partnership. No one has said that negotiating these trade transactions is politically easy. But as Trump's tariff tsunami reveals, the mere threat of the trade war is alienating American allies and encouraging their enemies. Certainly, this is a wake-up call for “trade skeptics” in the House and Senate.
Finally, the Trump administration should not dismiss the WTO as a negotiation forum to cut tariffs.
2002, USA suggestion All WTO members have eliminated all non-agricultural import obligations by 2015, but there was a pushback. This time, the US was able to submit a modeled version of the WTO. Zero-zero contracts for drug tariffs To eliminate the tariffs selected within the “coalition of will” based on the most favorable tariffs conditional, a concept that Trump's 2019 study loved very much.
Trump's mutual tariff planning is bad economics. It's also a bad politics. Trump vows to implement it by executive order to avoid Congress, but by matching it with higher charges in foreign countries, he has delegated us the power to set tariffs in their Congress. Masu.
Mark L. Bush is Professor Carl F. Landgar of International Business Diplomacy at the Walsh Ministry of Foreign Affairs at Georgetown University.
