Trump's Trade Vision: A New Era of Higher Tariffs and Uncertainty

Strategic Insights -

The United States and European Union's trade deal, while avoiding the worst-case scenario of a trade war, sets a new precedent for trade agreements under Trumpenomics. The deal features higher tariffs, exceptions for select products, and a baseline tariff on everything, with the possibility of negotiating or imposing sectoral exemptions. This shift in trade policy raises concerns for Canada, which could face a favorable position compared to other US trading partners under the United States-Mexico-Canada Agreement, but may still be hit hard by sectoral tariffs.

Key Takeaways:

  • The US will impose a 15-per-cent tariff on most imports from the EU, a significant increase from the 2.2 per cent average tradeweight US tariff on imports last year.
  • Exceptions to the tariff include aircraft and aircraft parts, some chemicals, pharmaceuticals, and agricultural products, and semiconductors.
  • The EU and Japan deals include promises to buy a lot more from the US, with the EU agreeing to buy $750-billion of American energy products over the next three years, roughly triple the current level.
  • The White House claims Japan has agreed to invest $550-billion in the US, but Japan has indicated this was not agreed upon.
  • The trade agreements are broad frameworks with no fine print, and the commitments made are not binding.
  • The new uncertainty is the US demand for a "tribute" in the form of commitments to invest in and buy from the US, which could be an opportunity for Canada to make similar promises in exchange for lower tariffs.
  • The vagueness and unenforceability of these tributes may offer Canada an opportunity to make vague and unenforceable promises, but going down this road could be the start of endless troubles.

Statistics:

  • The US will impose a 15-per-cent tariff on most imports from the EU.
  • The average tradeweight US tariff on imports was 2.2 per cent last year.
  • The EU has agreed to buy $750-billion of American energy products over the next three years, roughly triple the current level.
  • Japan claims to invest $550-billion in the US, but this is unconfirmed.
  • The EU economy is 10 times larger than Canada's.
  • Canada exports $100-billion worth of goods and services to the US every year.

Sources:

  • World Trade Organization (no date)
  • The text also mentions other sources, but they are not included here as they do not follow the exact format of the original text.