Peter E. Harrell
President-elect Donald Trump campaigned on a promise of a trade war more extensive than anything Americans have seen in decades. His proposals include a new 20 percent “universal” tariff on all foreign imports and hiking tariffs on China to 60 percent. In the six weeks since he won a second term, he has used social media to threaten tariffs against Canada, Mexico, the BRICS—a nine-member bloc of countries founded by Brazil, Russia, India, China, and South Africa—and other targets.
Yet the ultimate contours of Trump’s trade war remain opaque. In a recent television interview, Trump suggested that he sees tariffs as both a tool to expand manufacturing in the United States and as leverage for negotiations with foreign governments. And as Trump moves to turn his trade instincts into policy, he will hear conflicting advice. Fortune 100 CEOs will urge him to use the threat of tariffs to force foreign governments to give their companies better access to markets abroad. Domestic manufacturers and labor leaders will push Trump to follow through on implementing new tariffs to boost U.S. production. National security types will press Trump to strengthen trade with allies as a counterweight to China. Markets, meanwhile, may drop if Wall Street traders think Trump’s tariffs or other trade policies will drive inflation or hurt corporate profits.
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