ECJ EUROPEAN Cleaning Journal

When will the Trump tariffs madness end and how much more economic pain will the world have to endure before it does? Hartley Milner probes the US president’s combative policymaking for answers.

TRUMP’S TARIFF STRATEGY looked set to come crashing down around him following a damning court ruling last month … and could still do so.

The president was found to have overstepped his authority by invoking emergency economic legislation to justify his rollout of import taxes around the world. Under the American constitution, only Congress has the power to regulate commercial relationships with other nations, the New York-based Court of International Trade determined.

The judgement – in a case brought by a group of businesses and US states – dealt a major blow to Trump’s economic plans but provided a welcome boost to long-suffering global markets. The Trump administration was given 10 days to halt the tariffs.

So could the world’s economies now heave a collective sigh of relief that the end was near for Trump’s punitive trade taxes? ‘Dream on’ was the message from the White House, which said it would immediately appeal the court’s decision, adding: “It is not for unelected judges
to decide how to properly address a national emergency.”

Just 24 hours later, a federal appeals court temporarily reinstated the president’s flagship tariffs policy, meaning it could remain in place while the case makes its way through the judicial process. The appeal could go all the way to the US Supreme Court.

“You can assume that even if we lose, we will do it another way,” Trump adviser Peter Navarro told the press. “I can assure the American people that the Trump tariff agenda is alive, well, healthy and will be implemented to protect you.”

Navarro said the administration would “continue to negotiate in good faith” on trade deals, adding: “We understand that the court decision is not going to stop you (trade partners) from doing what you need to do”. And he predicted “a cascade of new deals coming out in the near future”.

Chaos and uncertainty

The Trump regime’s defiance came as no surprise to Dr Bernard Fischer, professor of American studies at Leipzig University. “I think the US president will have seen the Court of International Trade’s decision as a setback but far from the endgame,” he told ECJ. “Trump does not like to concede ground once he has set events in motion and I expect him to defend his tariffs policy through every stage of the appeal process, as far as the ultimate court in the land if that’s what it takes.

“But all this could take months, which will only add to the chaos and uncertainty for businesses around the world that either buy from or sell to America, and for American companies themselves. How willing will entrepreneurs be to plan and invest for future growth if they do not have a vision of what the future will look like? The threat of further tariffs and other trade restrictions hasn’t gone away; President Trump will have other legal options available to help him achieve his goals.”

All had been relatively quiet on the tariffs front of late, in sharp contrast to the upheaval that followed Trump’s sweeping ‘liberation day’ imposition of levies on April 2. Trump signed off a minimum 10 per cent tariff on all imports into the US (including from uninhabited Antarctic islands populated only by penguins!). More swingeing duties, ranging from 11 to 50 per cent, were slapped on goods from 57 countries branded the “worst offenders” for charging higher tariffs on US goods.

Trump’s controversially termed “reciprocal tariffs” triggered retaliation by trade partners and sent global stock markets tumbling, including in the US which also saw a sharp sell-off of government bonds. Market observers feared that big banks, institutions and traders were losing faith in America as a stable, predictable and safe haven for their money.

Hard line on China

Then, just a week later and amid growing fears of global economic instability and recession, Trump abruptly paused his reciprocal tariffs for 90 days, pegging them at 10 per cent for all countries, except China. Trump adopted a visibly hard line when dealing with his Chinese counterpart, President Xi Jinping, whom he now took on in a high-stakes game of chicken.

In February, Trump slapped a 10 per cent tariff on goods from the world’s biggest exporter, followed by another 10 per cent a month later. Premier Xi retaliated with a 15 per cent import tax on the US. In the tit-for-tat exchange that ensued, the White House whacked a stonking 145 per cent levy on China. Xi responded with 125 per cent on America, but then put an end to the escalation, saying it had now become impossible for China to accept US imports at current tariff levels and that it would turn to its domestic market to offset its trade losses.

The outcome of all the to-ing and fro-ing was that Washington opted to row back on its trade-stopping conflict with Beijing. Trump announced that high tariffs on Chinese goods would “come down substantially, but it won’t be zero”. The two trade adversaries eventually made a temporary agreement to slash taxes on each other’s goods by 115 per cent.

Bilateral negotiations

China also agreed to halt or remove some hurtful non-tariff countermeasures, including export restrictions on some critical minerals and rare earths, imposed since April 2. Plus it removed dozens of American firms from its ‘unreliable entity’ and ‘export control’ lists and suspended an anti-monopoly probe into US chemical giant DuPont.

Speculation followed that Trump called the truce because China controlled much of the world’s strategically important raw materials and because he knew its willingness and ability to endure long periods of economic pain meant the US simply could not win a trade confrontation.

However, the ceasefire agreement did establish a platform for 90 days of bilateral negotiations on trade and other economic matters between the two global giants. Announcing the talks, US treasury secretary Scott Bessent said the consensus from both countries was that “neither side wants a decoupling”, while China’s commerce ministry said the agreement was a step to “lay the foundation to bridge differences and deepen co-operation”. The US buys much more from China ($440 billion) than it sells to it ($145 billion). The truce is due to expire on August 12.

It was around this time that Donald Trump started attracting the ‘Taco’ jibe – “Trump Always Chickens Out” – for the way he sets the tariff bar high, only to lower it later. Countries saw how the president had climbed down against China and were not so easily thrown into a panic by every new tariff announcement, or so easily intimidated by his threats, bullying and bluster during trade negotiations.

In fact, the Trump administration has made more than 50 changes to trade tariff policies since his inauguration on January 20, the Washington Post reported recently. Many of these were reversed within just days of being announced.

Presidential aides insist that going big on tariffs and then hitting the pause button was not a climbdown but “a brilliant strategic manoeuvre” by their boss to bring countries to the negotiating table. And it had been the plan all along.

Just recently, Trump threatened a 50 per cent tariff on European Union products starting in June, but then postponed its imposition to July 9, keeping the existing 10 per cent duty in place for now. The president said he raised the levy because he was frustrated with the pace of trade talks, complaining that EU negotiators had been “very difficult to deal with”. Taking goods, services and investment into account, the two are each other’s largest trading partner by far, notching up sales totalling €1.6 trillion in 2023.

EU trade chief Maroš Šef?ovi? said the European Commission was discussing with the US possible co-operation in sectors such as semiconductors, steel, aerospace and critical minerals and was hoping to strike a deal to limit tariffs. But at the same time he cautioned that “sticking points remain”. However, the EU agreed to speed up negotiations.

EU countermeasures

The difference between the value of EU exports to the US and vice versa is comparatively small … €48 billion in 2023, or the equivalent of just three per cent of total trade between the two countries. Yet earlier this year Trump lambasted the bloc, saying it was “formed in order to screw the United States”.

Trade talks between the two blocs will likely have become more problematic after Trump announced at the end of May that he planned to raise tariffs on all steel imports to 50 per cent to protect US producers. The EU said it was prepared to take countermeasures.

There was no indication of a ‘Taco’ reversal down the road as ECJ went to print, anymore than there appears to be any real prospect of the Trump trade madness ending anytime soon. But the world will likely be keeping an eye on the American courts, even if only in hope rather than expectation.