President Donald Trump takes a blow to the rules governing global trade for decades. the“Mutual definitions”It is expected that it will be announced on Wednesday, which is likely to create chaos for international companies and contradict both allies and opponents of America.
Since the 1960s, definitions –Or import taxes– It came out of negotiations between dozens of countries. Trump wants to seize the operation.
“It is clear that he disrupts the way things were done for a very long time,” said Richard Mogika, commercial lawyer in Miller and Shafali. Trump comes out of the window … this is clearly tearing trade. There will be adjustments everywhere. “
Pointing to the huge and continuous trade deficit in America – not since 1975, the United States has sold the rest of the world more than it has been purchased – Trump is concerned that the stadium stadium is inclined against American companies. He and his advisors, a great reason for this, says that other countries are usually taxes on American exports at a higher rate of America’s taxes.
Trump has a solution: He raises a tariff against us to suit what other countries receive.
The president is a supporter of the tariff without shame. He used them freely during his first term and spread them more strongly per second. Since his return to the White House, 20 % of the customs tariffs were slapped on China, a 25 % tax was unveiled on imported cars and trucks that will bear valid on Thursday, and effectively raised US taxes on foreign steel and aluminum and imposed on some goods from Canada and Mexico, which may expand this week.
Economists do not participate in Trump’s enthusiasm. It is a tax on importers who are usually transferred to consumers. But it is possible that Trump’s induction mutual threat can bring other countries to the table and make them to reduce their import taxes.
“It could be a victory,” said Christine McDanel, a former American business official at the Mercatos Center at George Mason University. “It is interests in other countries to reduce these definitions.”
She noted that India has already cut the customs tariff on elements of motorcycles to luxury cars and agreed to increase the purchase of US energy.
What are the mutual definitions and how do you work?
It looks simple: the United States will raise its tariff on foreign goods to suit what other countries impose on American products.
The president said in February: “If they accuse us, we impose them,” if they are twenty -five years old, we are twenty -five years old. If they are ten years old, we are ten years old. And if it is higher than 25 years, this is what we are too. “
But the White House did not reveal many details. Trade Minister Howard Lootnick has submitted this week’s report on how the new definitions already work.
Among the prominent questions, Antonio Rivera, a partner in ARNTFOX Schiff and a former lawyer with customs and American border protection, noted whether the United States will look at thousands of elements in the tariff law – from motorcycles to mangos – and try to settle customs tariffs one by one. Or if it will look wider in the average tariff in each country and how it compares it to America. Or something else.
“It is just a very messy environment,” said Stephen Lamar, President and CEO of the American Apparel & Footwear. “It is difficult to plan any kind of sustainable way in the long run.”
How did the definitions become very unbalanced?
America’s tariff in general is less than that of its commercial partners. After World War II, the United States prompted other countries to reduce barriers and trade definitions, and see free trade as a means of promoting peace, prosperity and American exports around the world. He often practiced what he preached, generally maintaining their own definitions and giving American consumers access to inexpensive foreign goods.
Trump has broken the consensus of the old free trade, saying that the unfair foreign competition has affected the American manufacturers and towns of destroyed factories in American Hartland. During his first term, definitions were slapped on foreign steel, aluminum, washing machines, solar paintings, almost everything from China. Democratic President Joe Biden has greatly continued Trump’s protectionist policies.
The White House cited many examples of unbalanced definitions in particular: Ethanol imports, including America, by 18 %, but the American tariff for ethanol is only 2.5 %. Likewise, India is 100 % foreign motorcycle taxes, and America only 2.4 %.
Does this mean that the United States has been used?
The highest foreign definitions that Trump complains about by foreign countries has not been adopted. The United States agreed to them after years of complex negotiations known as the Uruguay tour, which ended in a trade agreement that included 123 countries.
As part of the deal, countries can put their own tariffs on different products – but under the “most preferred nation” approach, they could not charge a country more than they were receiving another. Consequently, Trump’s high definitions are not aimed at the United States alone. They hit everyone.
Trump is grievance against American trading partners in a strange time. The United States, which is working on strong consumer spending and health improvements in productivity, is superior to other advanced economies in the world. The American economy grew nearly 9 % by Covid-19 directly during the middle of last year-compared to only 5.5 % in Canada and only 1.9 % for the European Union. Germany’s economy shrinks 2 % during that time.
Trump plans to go beyond the tariff of foreign countries
Not satisfied with the repercussions of the customs tariff law, Trump also follows other external practices he sees as unfair barriers in front of American exports. These benefits that give local producers include an advantage over American exports; The visible health rules that are used to preserve foreign products; And loose regulations that encourage the theft of commercial secrets and other intellectual property.
The discovery of the import tax that compensates for the damages caused by these practices will add another level of complexity to Trump’s mutual plan for Trump.
The Trump team also chooses to fight with the European Union and other commercial partners about the so -called value -added taxes. These fees, known as VATS, are known as sales tax on products that are consumed within the country’s borders. Trump and its advisers consider the display of customs tariffs because they apply to American exports.
However, most economists do not agree for a simple reason: VATS is applied to both local products and imports, so they do not specifically target foreign goods and are not traditionally seen as a commercial barrier.
“There is no way for most countries to negotiate value -added tax … because it is a decisive part of their revenue base.” x.
Paul Ashworth, chief economist in North America at Capital Economics, says that the 15 best countries to the United States have average average of up to 14 %, in addition to 6 % duties. This means that the US revenge tariff can reach 20 % – much higher than the Trump campaign’s proposal for global duties by 10 %.
Definitions and trade deficit
Trump and some of his advisers argue that sharp definitions will help in reversing the long -term trade deficit of the United States.
However, the customs tariff did not prove its success in narrowing the commercial gap: despite the taxes of Trump’s import with Biden, the deficit last year increased to 918 billion dollars, which is the second highest registrar.
Economists say the deficit is the result of the unique features of the American economy. Since the federal government is running a great deficit, American consumers love spending a lot, American consumption and investment exceeds great savings. As a result, a large part of this request goes to external goods and services.
The United States covers the cost of the commercial gap by borrowing mainly from abroad, partially by selling treasury leaves and other assets.
“The commercial deficit is in fact a macroeconomic defect,” said Kimberly Clating, an economist at the University of California, Los Angeles and former Treasury official. “It comes from this lack of desire to save, and this lack of desire for taxes. Until you fix these things, we will manage a commercial imbalance.”
This story was originally shown on Fortune.com
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