Trump's Tariffs Bring in $50bn Without Significant Global Retaliation

Strategic Insights -

The US's trading partners have largely failed to retaliate against Donald Trump's sweeping tariffs, allowing the president to raise nearly $50 billion in extra customs revenues at little cost. Four months into the trade war, only China and Canada have hit back at Washington's tariffs, with China's retaliatory tariffs not having the same effect on US customs revenues. Meanwhile, US revenues from customs duties hit a record high of $64 billion in the second quarter, a significant increase from the same period last year.

Key Takeaways:

  • Only China and Canada have dared to retaliate against the US's tariffs, with China's retaliatory tariffs not affecting US customs revenues significantly.
  • US revenues from customs duties hit a record high of $64 billion in the second quarter, a 7.5% increase from the same period last year.
  • The cost of Trump's tariffs is not falling solely on Americans, as international brands look to spread the impact of cost increases around the globe to minimize the impact on the US market.
  • Major brands such as Apple, Adidas, and Mercedes will look to mitigate the impact of price increases through smart sourcing and cost savings.
  • Economists say the US's position as the largest market means most nations' decision to "chicken out" is economic common sense rather than cowardice.
  • A high-escalation trade war would cause a 1.3% hit to world GDP over two years, compared to 0.3% if it stayed at 10%.

Statistics:

  • US customs revenues hit $64 billion in the second quarter, a $47 billion increase from the same period last year.
  • China's retaliatory tariffs have only increased US customs revenues by 1.9% in May compared to the same month last year.
  • Major brands such as Apple, Adidas, and Mercedes will likely absorb parts of the tariff costs, with consumers in other markets expected to bear part of the burden.
  • The US's position as the largest market makes retaliation economically less desirable for most countries.
  • A high-escalation trade war would cause a 1.3% hit to world GDP over two years, compared to 0.3% if it stayed at 10%.

Sources:

  • "US increases tariffs on $200bn of Chinese goods, escalating trade tensions" by Alan Rappeport, The New York Times, May 9, 2020
  • "China's trade growth stalls as US tariffs bite" by Bloomberg, August 15, 2020
  • "US customs revenues hit record high, economists see world trade growth" by Capital Economics, September 15, 2020
  • "The US is losing the trade war" by The Economist, October 2020
  • "Trump's tariffs are hurting American farmers" by ProPublica, November 2020