Tariffs, History, and China
Some thoughts on three of the most pressing issues of the day which are intertwined.
Yesterday President Donald Trump paused the increased Liberation Day tariffs on the 75+ nations that have indicated that they would like to negotiate a much lower rate and possibly a zero-trade tariff agreement between the two nations. Just 10% tariff rates will be assessed in the interim on those nations which by itself represents for most a great raise in the tariffs that were previously placed on these nations before Liberation Day. And even though 90 days is in the long run a short time the amount of money that may be raised should not be dismissed out of hand as it seems to have been by many.
The 90 day pause does not include China which instead of admitting their existing unfair tariffs and coming to the negotiating table - slapped the US with a 84% tariff. Trump in turn increased the tariffs to be placed on all Chinese goods to 125%. He will also reportedly apply this rate to all nations not coming to the negotiating table. This denies China the ability to say they are being singled out (even though in reality they are).
The first thing I'd say about the 90 day pause is that its just good negotiating tactics. The first step in negotiations is the original ask which Trump made with his Liberation Day speech. The second step is for the nations of the world to react and then contact the White House that they want to negotiate a new rate - acceptable to both parties. The 90 day pause gives time for both parties - the US and the other nations - to come up with mutually agreeable terms. It may be the case that terms are being worked out but more than 90 days is needed, in which case do not be surprised if that 90 day window is extended on a case by case basis.
The second thing to note is pure logistics. There's 75+ nations we're taking about but normally only 22 business days in a month and we're taking just 3 months. You know the President or PM from each nation would want a photo opportunity of them smiling and shaking President Trump's hand when a deal is reached. It's good political PR for both parties. Unfortunately because of the 90 day window some countries may have have to share a day with another nation. Don't be surprised if countries that haven't come to the table yet are added and the 90-day window is thus extended then too.
Remember America is at it's core a nation of immigrants and there are political points to be scored here with a glowing photo with a representative of their country of origin combined with kind words from the President.
Each nation is different and their reasons for wanting a deal with the US is different too. Argentina's economist President Javier Milei thinks a zero trade tariff deal between the two nations makes perfect economic sense and who can argue with the results of what he's done for his country's economy. PM Benjamin Netanyahu of Israel understands his country has no bigger or more important friend in the world than the US and wants to show this not only with a zero trade tariff deal between the two countries but also with no net trade deficit to America. Vietnam, meanwhile, has become one of the destinations of choice for companies wishing to decouple with China and new tariffs could jeopardize that - so a zero trade tariff deal became a priority. Each nation's motivations and reasons are different - which again is why some negotiations may be more drawn out and require more than 90 days.
Which brings us back to China. Every major politician such as Chuck Schumer or Nancy Pelosi is on record saying tariffs on China are necessary but only Donald Trump has said he was going to do it and then actually did it. We are truly in uncharted waters. President Xi of China is used to US politicians talking tough but then not taking action. President Xi truly may be boxed into a political corner here because Donald Trump is not your normally politician, has no more campaigns to run, and is in full FAFO mode.
Much of the damage done to both countries cannot be undone at this point. The manufacturing damage and unfair trade practices by China over decades to the US or the damage done by Trump seeking a level playing field, companies like Apple looking to uncouple with China, or the American people taking a much poorer opinion of China for unleashing the Wuhan virus on the world and denying it - those situations are not going away. China's economy may be also growing worse by the day. These are the realities both nations may be dealing with.
I happen to feel that Donald Trump knows what he's doing and is just metaphorically preparing the negotiations battlefield. I would not be surprised if President Trump and President Xi come to a deal that includes them smiling and shaking each other's hand.
Of course I realize your opinion may be much different and the outcome may be much different. I don’t profess to know the future but this is how I read the situation.