Trump's Global Tariff War Appears to be Backfiring

Strategic Insights -

As the US president's protectionist agenda continues, his trading partners, including Canada and the European Union, are refusing to back down from retaliatory tariffs and resisting US pressure to negotiate. The White House's initial expectation of signing 90 deals in 90 days has not materialized, with only a tentative trade agreement of limited scope with the UK being reached. Meanwhile, the US economy is experiencing a slowdown, and many experts are forecasting a significant increase in inflation due to Trump's tariffs.

Key Takeaways:

  • The US has no deals to show for its assault on global trade, despite launching a trade war against about 100 countries, starting with Canada and Mexico on March 4.
  • The only US "deal" so far is a tentative trade agreement of limited scope with the UK, which is unlikely to make up for the losses incurred due to Trump's tariffs.
  • China's average tariff on US imports is 32.6 per cent, and the country continues to restrict exports of rare earth elements and antimony, crucial for US manufacturers and defence contractors.
  • Canada has fought back with retaliatory tariffs on $125-billion worth of US imports, and the European Union has approved an initial set of retaliatory tariffs on $45-billion worth of US goods.
  • World leaders have realized that Trump is an unreliable dealmaker, and many countries are simply waiting him out, resisting US pressure to negotiate.
  • The US economy is forecast to grow by only 1.4 per cent this year, down from 2.8 per cent in 2023, and the US Federal Reserve Board is reluctant to lower interest rates due to fears of tariff-induced inflation.
  • Trump's approval rating has dropped to 38 per cent, and his Republican party is at risk of losing control of Congress in midterm elections next year.

Statistics:

  • The US has imposed estimated tariffs of $127.5 billion on Chinese imports.
  • China has imposed estimated tariffs of $46.3 billion on US imports.
  • Canada has imposed retaliatory tariffs on $125-billion worth of US imports.
  • The European Union has approved an initial set of retaliatory tariffs on $45-billion worth of US goods.
  • The US economy is forecast to grow by only 1.4 per cent this year.
  • The US Federal Reserve Board's key lending rate is in a range of 4.25 per cent to 4.5 per cent.
  • The Bank of Canada's key rate is 2.75 per cent.

Sources:

  • David Olive, Toronto Star OPINION
  • Bloomberg, interview with Harvard Business School professor Deepak Malhotra
  • RBC Economics, report on Canada's economic outlook (June 13)
  • Trump's speech on May 30, 2019
  • Trump's statement on April 13, 2019
  • Jerome Powell, Federal Reserve Board chair, statement on June 19
  • Bank of Canada, interest rate information