Trump's Tariffs Will Change Rules of Trade

Trump's 'reciprocal' tariffs are likely to create chaos for global businesses

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WASHINGTON: President Donald Trump is taking a blowtorch to the rules that have governed world trade for decades. The "reciprocal" tariffs that he announced Thursday are likely to create chaos for global businesses and conflict with America's allies and adversaries alike.

Since the 1960s, tariffs—or import taxes—have emerged from negotiations between dozens of countries. Trump wants to seize the process.

"Obviously, it disrupts the way that things have been done for a very long time," said Richard Mojica, a trade attorney at Miller & Chevalier. "Trump is throwing that out the window...Clearly this is ripping up trade. There are going to have to be adjustments all over the place."

Pointing to America's massive and persistent trade deficits—not since 1975 has the US sold the rest of the world more than it's bought—Trump charges that the playing field is tilted against US companies. A big reason for that, he and his advisers say, is because other countries usually tax American exports at a higher rate than America taxes theirs.

Trump has a fix: He's raising US tariffs to match what other countries charge. The president is an unabashed tariff supporter. He used them in his first term, and three weeks into his second he has already slapped 10 percent tariffs on China; effectively raised U.S. taxes on foreign steel and aluminum; and threatened, then delayed for 30 days, 25 percent taxes on goods from Canada and Mexico.

Economists don't share Trump's enthusiasm for tariffs. They're a tax on importers that usually get passed on to consumers. But it's possible that Trump's reciprocal tariff threat could bring other countries to the table and get them to lower their own import taxes.

"It could be win-win," said Christine McDaniel, a former US trade official now at George Mason University's Mercatus Center. "It's in other countries' interests to reduce those tariffs."

What are reciprocal tariffs and how do they work?