Trump's use of tariffs as a bargaining tool is likely to erode other countries' faith in the US as a place to do business
SEATTLE – Donald Trump is obsessed with tariffs – “the most beautiful word in the dictionary”, according to the 47th president.
He imposed them on some countries in his first term, mainly to seek leverage. But they were relatively modest, and in the case of Canada and Mexico, the US’s closest neighbours and major trading partners, they were short-lived.
This time it is different.
The scale of Trump’s levies echo the US Smoot-Hawley Tariffs Act of 1930, enacted in response to pressure to protect against imports during the Great Depression (although the Act is now widely considered to have worsened its effects).
However, some experts believe Trump was most likely inspired by another Republican, William McKinley, a protectionist who served as America’s 25th president during the nation’s so-called Gilded Age.
“We were at our richest from 1870 to 1913,” Trump said shortly after returning to office in January. “And then they went to an income tax concept. It’s fine. It’s OK. But it would have been very much better.”
Yet outside of Trump and his top officials, there seems to be a widespread consensus is that the tariffs and the resulting trade war will create lasting economic harm – to nations targeted by the tariffs, but the US as well.
Trump’s use of tariffs as a bargaining tool – and flip-flopping over whether to impose them – is likely to erode other countries’ faith in the US as a place to do business.
‘I’m not going to bend at all’
The stock markets soared after Trump won a second term in November 2024, with the Dow Jones Industrial Average hitting a record high as CEOs and investors looked forward to tax cuts, fewer regulations and a president who had, when in office, always paid close attention to the markets, viewing them almost like a form of opinion polls.
This time, Trump does not seem to be as concerned about the plight of the stock markets, which have plunged by as much as 10 percent since last month. Trump, instead, has even talked about the possibility of a recession and said Americans might have to accept there could be some bumps ahead.
“I’m not going to bend at all,” Trump said last week, when pressed about his tariff plans during a White House meeting with Nato secretary-general Mark Rutte.
“We’ve been ripped off for years, and we’re not going to be ripped off anymore.”
He added: “There’ll be a little disruption, but it won’t be very long.”
NEW YORK, NEW YORK - DECEMBER 12: President-elect Donald Trump rings the opening bell on the trading floor of the New York Stock Exchange (NYSE) on December 12, 2024 in New York City. Trump was invited to the Exchange after being named TIME???s ???Person of the Year??? for the second time. (Photo by Spencer Platt/Getty Images)
Donald Trump, then president-elect, rings the opening bell on the trading floor of the New York Stock Exchange (NYSE) on Dec. 12, 2024 (Photo: Getty)
Surveys show that top CEOs – many of whom welcomed Trump’s re-election – are growing more and more concerned about the president’s economic agenda.
And polls also show that tariffs are becoming increasingly unpopular with the American public, which gave Trump a second shot in the White House in large part because they believed he would be better at lowering costs.
While his overall approval rating stands at 45 per cent, among Republicans that figure is 93 per cent.
“The markets have fallen so much they are in what is correction territory,” Gordon Gray, a former US Ambassador to Tunisia, and currently an academic at George Washington University, told The i Paper.
“One of the grave risks is to our credibility. The two neighbours Trump is imposing 25 per cent tariffs on, Mexico and Canada, are the two countries he negotiated a trade deal with in his first term.
“This is sending a message that Trump personally as president, and the United States, does not stand by its word.”
Spreading uncertainty
The on-again, off-again nature of Trump’s threats – with pauses for some countries and exemptions for some sectors – has created a sense of utter uncertainty. Canada has responded with tariffs of 25 per cent on $155 billion of American goods.
China, now facing a 20 per cent tariff on imports into the US, is hitting back in kind.
Mexico has also vowed to respond but its president, Claudia Sheinbaum, has decided to hold off until next month to see the full extent of Trump’s plans.
This is similar to the policy of the European Union, against which Trump has imposed levies on steel and aluminium.
After the EU announced to hit back and put tariffs on items such as US bourbon – produced in Republican states – the US president threatened to impose a 200 per cent levy on champagne and spirits.
Like Mexico, Britain, which faces a tariff on steel and aluminium, has decided to hold off retaliating for now.
This is perhaps in part because Prime Minister Keir Starmer hopes to negotiate an exemption as well as persuading Trump go continue to provide a security guarantee for Ukraine. “We will take a pragmatic approach,” he said.
Trump spread the uncertainty to every corner of the globe when he unveiled a “reciprocal tariff” plan to hit every country that has tariffs on Washington.
Among the nations that will be targeted are South Korea, which has already asked its ally for an exemption.
It is far from clear Trump will agree to one, as Trump prepares to tear up a Western trade and security alliance that has been in place since the end of World War II.
‘Sucker punch’ to Canada
Perhaps no place feels the pain more than Canada, which fought alongside the US during many wars and was among those Nato countries that invoked Article 5 after the attacks of 9/11, and formally declared that an attack on the US was attack on all of its members.
In addition to the pledges to boycott US goods, there have been several cases of Canadian fans booing the American national anthem played at sporting events, something previously unheard of for a people that pride themselves on their civility.
Shachi Kurl, President of the Angus Reid Institute, a Canadian polling company, said that the tariffs and Trump’s threat to make Canada America’s 51st state had united opinion across the country.
“This feels like a sucker punch. It feels like an unprovoked punch to the gut,” she said.
Pollster Nik Nanos, whose clients include the Globe and Mail newspaper, says he has found similar dismay and anger. When Trump imposed tariffs during the first term, Canadians were more likely to opt to try and negotiate a solution.
“Now Canadians are more likely to want retaliation,” he says. “Right now, 200 years of goodwill, economic goodwill, and friendships, has gone out the door with Donald Trump.”
Nanos said Canadians have a reputation for being mild mannered, adding: “If the United States cannot get along with Canada, which is among the most inoffensive and unthreatening countries in the world, it’s going to be a very lonely place for the US in the future.”