The world flatters the tariff king
COURTING THE tariff king is a tricky business. There are no rules, no obvious channels through which to reach him and no guarantee that anyone, apart from the man himself, can make a deal. Maros Sefcovic, the EU trade commissioner, spent hours talking with Jamieson Greer and Howard Lutnick, two of the president’s advisers, yet came away empty-handed. Neither has the authority to cut a deal. “We have offered to negotiate,” says an EU official, “but Greer and Lutnick don’t have a mandate yet. It’s all up to POTUS.”
Donald Trump has positioned himself as the sole gatekeeper of trade with America. Since he unveiled a sweeping set of tariffs on April 2nd, some 70 countries have contacted the White House, hoping to win relief. As Mr Trump’s tariffs were due to be implemented on April 9th, their efforts were intensifying. Although united by a common aim, they are employing a wide variety of strategies, ranging from gifts to threats. So far, few have had much luck.
Even if governments manage to win an audience, the terms of engagement keep shifting. Mr Trump has railed against everything from bilateral trade deficits and food-safety rules to value-added taxes, defence spending and tech regulation. Many of the accusations are entirely baseless. “We must ask: what era do those figures come from?” said Ishiba Shigeru, Japan’s prime minister, after Mr Trump claimed that Japan imposes a 700% tariff on American rice. Officials in South Korea were similarly stunned when he declared that their average tariff is four times higher than America’s. “It is based in fiction,” says Yeo Han-koo, a former South Korean trade minister. The two countries already have a free-trade agreement; tariffs on most American goods are close to zero. South Korea has tried to correct the record through official channels, to little avail.
Some governments have tried to take Mr Trump at his word. If his goal is reciprocity, why not remove tariffs entirely? “Europe is always ready for a good deal,” declared Ursula von der Leyen, the European Commission’s president, as she proposed zero-for-zero tariffs on all industrial goods, including cars, chemicals and machinery. Taiwan has offered a broad package of zero duties, non-retaliation pledges and expanded investment in America, as it rushes to prepare the ground for talks. Vietnam’s leader has also proposed mutual tariff elimination.
The White House has not been impressed. Mr Trump declared the EU offer insufficient, and repeated his line that the bloc “was formed to really do damage to the United States in trade”, before veering into complaints about America’s unduly large contributions to NATO. Peter Navarro, Mr Trump’s trade adviser, dismissed Vietnam’s proposal, accusing the country of subsidising exports, re-routing Chinese goods and acting as a “colony” for Chinese manufacturers. Even if tariffs are eliminated, he argued, the trade deficit would still remain because of “all the non-tariff cheating that they do”.
A handful of countries have found a way through the chaos by appealing to Mr Trump directly. A recent phone call between Mr Ishiba, Japan’s prime minister, and America’s president appears to have paid off. Japan was promptly bumped to the front of the queue, and Mr Trump has indicated that he will be directly involved in the trade talks. Japanese officials are now assembling a package designed to appeal to America’s president. On the table is not just trade, but investment and military spending. Japan’s offer is likely to include more purchases of American liquefied natural gas, investment in an Alaskan pipeline Mr Trump favours, additional arms imports and looser restrictions on American farm goods and cars—most of which are already covered by a bilateral agreement Mr Trump signed during his first term. Mr Trump has since boasted of a similar suite of concessions from South Korea, following a call with Han Duck-soo, its acting president.
There is a deep weirdness to the whole affair. Even if some countries flatter their way to the front of the queue, it is unclear what, if anything, America stands to gain. The concessions on offer—cuts to tariffs that are already at or near zero, as well as other token gestures—will do little to shift trade flows or reduce deficits. Trade balances, after all, are driven by savings and investment patterns rather than by tariff rates. America’s high demand will continue to drive its trade deficits, regardless of any symbolic victories.
And while some governments come bearing gifts, others are preparing to strike back. On the day that Mr Trump unveiled his tariffs, Brazil’s congress passed a Reciprocity Tariff Bill, enabling it to suspend trade and investment concessions, as well as to revisit intellectual-property rules that could affect American firms. China has slapped a 34% tariff on all American imports and vowed to “fight to the end” in a trade war. And despite Mrs von der Leyen’s talk of a deal, the European Union has unveiled retaliatory measures that target cosmetics, orange juice, soyabeans and vehicles. This is merely its first volley. A second round is expected soon, in response to America’s additional 20% “reciprocal” tariff. All options are on the table, including the use of the bloc’s “anti-coercion instrument”—restrictions aimed squarely at American services, which have so far escaped any retaliation.
If all else fails, there is always reorientation. On April 7th Mrs von der Leyen suggested that the EU was already taking steps in this direction. The bloc, she said, would now “focus like a laser beam on the 83% of global trade that is beyond the US”. Although the EU still hopes to strike a deal with Mr Trump, Mr Sefcovic, the trade commissioner, has warned that it will not wait for ever. In trying to do a thousand different things at once, Mr Trump may end up doing one big thing: harming America. ■