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TWN
Info Service on WTO and Trade Issues (Feb25/06) Geneva, 14 Feb (D. Ravi Kanth) — US President Donald Trump on 13 February said his “Fair and Reciprocal Plan” on trade will target countries that currently enjoy a trade surplus with the US while imposing a range of other restrictions on American goods and services, a move that seeks to change the terms of trade in favour of the US. President Trump’s announcement from the Oval Office late evening on 13 February signals what could be a new phase in a trade war that harks back to the “beggar-thy-neighbour” policies of the early 20th century, analysts said. After signing an Executive Order on reciprocal tariffs, President Trump said the new policy would bring several industries back to the US, particularly in sectors such as pharmaceuticals, chip-manufacturing and even in the steel sector. “The jobs will go up tremendously, we’re going to have great jobs, jobs for everybody,” he claimed, adding that it “should have been done many years ago.” “China did it at a level that probably nobody has ever seen before,” President Trump maintained, alleging that if an American car is sent to China, it will be charged a high tariff. He said that prices could go up somewhat in the short-term, but “prices will also go down.” “And I think the farmers are going to be helped by this very much because product(s) are being dumped into our country and our farmers are getting hurt very badly by the [policies of the] last administration.” Earlier, President Trump admitted that his tariff plan will entail “short-term disturbance, but (in the) long-term, it’s going to make our country a fortune.” However, during his replies to questions, he denied having made that comment. When asked about the earliest date for the tariffs to be implemented, his commerce secretary nominee Howard Lutnick said that “we will hand the President the opportunity to start it on April 2, if he wants.” The reciprocal tariff plan intends to attack even the domestic VAT (value-added tax) and currency manipulation, President Trump said, pointing out that “the European Union has been very tough on our companies”. He complained that the EU sued Apple, Google, and Facebook, with heavy penalties running into tens of billions of dollars. “They haven’t treated us good,” he repeatedly said. “The European Union has been absolutely brutal on trade,” he said, adding that “Canada has been very bad to us on trade, but now Canada is going to start paying up.” He said, “I spoke to Governor Trudeau on numerous occasions, and we will see what happens, but it just sets up so good for them.” Asked how soon he expects countries to respond to his proposed plan, President Trump said “the EU has been very nasty.” He said there will be no exemptions or waivers, emphasizing that “this is a simple system, and there won’t be any exemptions.” RECIPROCAL TARIFF PLAN Prior to President Trump’s press meeting with reporters, a senior White House official said that tariffs would be imposed on a “country-by-country” framework after a thorough study of the countries that currently have a high trade surplus in their exports to the US. India is the highest tariff country among the list of countries, said President Trump. “India is very, very high” in the list, he said, insisting that “they charge tremendous tariffs”. He gave the example of Harley-Davidson motorbikes manufactured by a US company, saying that the company “could not sell their motorbikes in India because of high tariffs imposed by India.” President Trump also insisted that Taiwan exports most of its chips to the US, adversely affecting American companies. As previously reported in the SUNS, the tariffs are likely to be imposed through Section 301 of the US Trade Act of 1974, as well as the US International Emergency Economic Powers Act (IEEPA). The new tariffs are not expected to be directly applied immediately, with President Trump suggesting that his team will make a detailed plan for the reciprocal tariffs. Significantly, the plan does not suggest a universal tariff rate as echoed by senior US officials last week. Instead, it is going to focus on what tariffs countries have applied to imports from America. The United States Census Bureau’s latest data until 2024 suggest that countries that currently enjoy a trade surplus with the US include: (1) China (trade surplus of $270.4 billion until November 2024); (2) Mexico ($157.2 billion); (3) Vietnam ($113.1 billion); (4) Ireland ($80.5 billion); (5) Germany ($76.4 billion); (6) Taiwan ($67.4 billion); (7) Japan ($62.6 billion); (8) South Korea ($60.2 billion); (9) Canada ($54.8 billion); (10) Thailand ($41.5 billion); and (11) India (approximately over $30 billion). A day before announcing the reciprocal tariff plan on 13 February, President Trump told reporters that “whatever they charge, we charge”, implying that Washington will match the tariff rate product-by-product of every country. He said, “Countries, both friend and foe, are taking advantage” of the US, adding that there would not be any exemptions. Some countries such as India are likely to reduce tariffs on several products and provide more market access for American agricultural products in an attempt to minimize the effect of the US reciprocal tariff plan, according to media reports. The countries with a massive trade surplus with the US like China and the European Union are likely to retaliate against President Trump’s plan as and when it comes into effect. Meanwhile, in his remarks on some other issues, President Trump threatened members of the BRICS (Brazil, Russia, India, China, and South Africa) that they could face severe consequences should they go ahead with trading arrangements in their respective currencies to avoid US dollar payments. He said that the US will stop trading with them if they move away from US dollar payments. In an interview with CNN, President Trump’s former United States Trade Representative, Ambassador Robert Lighthizer, said he thinks “certain tariffs are to change the economic relationship between the United States and our trading parties/partners, so as to help our working people and to help the United States”. “So that’s one group of tariffs,” he added. “The other group of tariffs”, said Ambassador Lighthizer, “are ones that [we] are doing for national security reasons”, namely relating to fentanyl and illegal immigrants. For national security reasons, “he’s (President Trump) going to use every tool he can, including economic tools and including tariffs.” Last week, President Trump imposed a 25% tariff on all goods from Canada and Mexico, which was later paused for one month, and a 10% tariff on goods from China that came into effect on 4 February. China immediately retaliated against the tariff imposed by Washington with tariffs on American goods worth $10 billion. Subsequently, President Trump announced a 25% tariff on imports of steel and aluminum from all countries. The European Union has decided to retaliate against the US tariff. Ambassador Lighthizer justified the reciprocal tariff plan to address the US trade deficit, saying that “this is a step in that direction.” As regards the tariff hikes causing inflation in the US, Ambassador Lighthizer conceded that “there’s gonna be a downstream effect. But I think what you’re ultimately gonna see is more US production, better prices, and more downstream products.” “Free trade hasn’t failed because it doesn’t work,” said Ambassador Lighthizer, adding that, “It’s failed because it doesn’t exist.” Further, “what we really have is a number of countries that have very aggressive industrial policies, and those are not just tariffs,” Ambassador Lighthizer said. Accusing countries with large trade surpluses with the US, Ambassador Lighthizer pointed out that “there are banking systems, labour laws, environmental laws, taxation, currency manipulation.” “And as a result of those policies, they’re taking advantage of the US market, hurting our economy and hurting our workers,” the former USTR said, insisting that “I think that the notion of free trade might be nice in a test tube, [but] it has not worked in real life.” According to Ambassador Lighthizer, China, Germany and a number of other countries “have policies that in the 19th century would have been called beggar-thy-neighbour policies.” He said such policies are “designed really to increase exports, to decrease imports, and to shift really resources within their own community away from consumers and towards producers” so as to “accumulate wealth that way at the expense of other countries and other workers.” “ECONOMIC NATIONALISM” Several developing countries have likened President Trump’s unilateral tariffs and his proposed reciprocal tariff plan to a naked form of economic nationalism, “transforming tariffs into instruments of political and economic coercion.” “His administration’s four-phase strategy – setting policy objectives, conducting strategic reviews, imposing pre- emptive tariffs, and unpredictable brinkmanship – signals a shift towards unilateralism that bypasses traditional legal frameworks and undermines multilateral trade governance,” said Ms Vahini Naidu, a former South African trade official, now with the Geneva-based South Centre. “The recent tariffs on Mexico, Canada, and China, imposed under the International Emergency Economic Powers Act (IEEPA) on security grounds, represent an unprecedented expansion of executive power in trade policy,” she said. “As the US weakens the WTO and prioritises economic nationalism, the Global South faces a decisive moment,” Ms Naidu said, adding that the “increasing use of trade measures for geopolitical leverage threatens to further marginalise developing countries.” The former South African trade official said that, “In response, the Global South must take a proactive role in shaping the global trade landscape – deepening South-South cooperation, enhancing regional trade frameworks, and advancing structural reforms to promote resilience and economic sovereignty in an era of growing trade uncertainty.” In conclusion, unless countries join ranks to oppose this forced change by the US in the global terms of trade, there could be more chaos and turmoil, with the developing countries, particularly the most vulnerable among them, being hit the hardest, analysts said. +
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