Expect more chaos in Donald Trump’s tariff policies

Donald trump has never been shy about expressing his fondness for tariffs. But prior to his return to the White House, many of his supporters thought it more of a negotiating ploy: an aggressive stance meant to prod other countries into concessions. This comforting story now looks like fantasy. Mr Trump has shown himself to be a true believer in trade protectionism. In the process he has raised the average effective tariff on goods entering America from 2.5% last year to about 20%, the highest since the Great Depression.

The policy process has been chaotic, to put it politely, and that disorder offers a forecast of how Mr Trump may swerve and improvise toward an outcome that preserves as much of his vision of a remade American trade regime as markets, courts and the Republican Party will allow. To judge where he may end up, it is useful to remember where he began. On the campaign trail Mr Trump spoke of a universal tariff of 10-20% and a China-specific levy of 60%. If only things had been that tidy. Instead, Mr Trump has thrown together a hotch-potch of product-focused and country-specific levies, only to roll back some, pause others and threaten still more.

In his first term Mr Trump relied on statutes that allow the White House to impose limited tariffs. This time, he has invoked the International Emergency Economic Powers Act (IEEPA), a law that grants the president far greater leeway. For Canada and Mexico he declared an emergency over fentanyl smuggling and illegal immigration. For “reciprocal” tariffs on all countries he said that trade deficits themselves constituted an emergency.

What might restrain Mr Trump in the months ahead? The courts are one potential brake. Previous presidents had used ieepa to justify targeted sanctions but never tariffs. The White House now faces multiple lawsuits alleging that Mr Trump has exceeded his authority. Yet courts have traditionally deferred to the president over claims of national security, so success for the plaintiffs is uncertain.

It is possible but unlikely that Congress could wake from its slumber and resist. Four Republican senators recently joined their Democratic colleagues to pass a resolution that would end the tariffs on Canada by revoking Mr Trump’s declaration of a national emergency. But that resolution fizzled out without Republican backing in the House of Representatives.

Republicans might become more assertive if it became clear that tariffs are hurting the economy and that popular support for Mr Trump is falling. Things could be moving in that direction. Consumer confidence has already plunged and businesses are reining in investments. Stocks, bonds and the dollar are all down since Mr Trump announced his widest-ranging tariffs on April 2nd, which he branded Liberation Day. That realisation could arrive before the year is out.

Mr Trump says he is willing to endure short-term pain but he is sensitive to market turmoil. His 90-day pause of his “reciprocal” tariffs, announced just a week after Liberation Day, is evidence of that. The official rationale was to hold bilateral trade talks. Mr Trump claims that countries are lining up to kiss his posterior. The reality is of slow progress. Negotiations are under way with a few dozen countries. Yet diplomats bemoan a lack of clarity about what they can offer to placate Mr Trump. Some still think he wants a grand bargain with China, but for now dialogue between the two powers is virtually non-existent.

Instead, smaller deals, light on details, look more likely in the coming months—perhaps starting with Japan or India. All going well, Mr Trump would probably like the next scene in his trade war to be a moment of vindication: a signing ceremony in the Rose Garden and a declaration that his coercive strategy has been a great success. But make no mistake. While Mr Trump is in the White House, there will be no going back to any semblance of America’s era as a champion and architect of free trade. ■

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