Trump trade plan intensifies
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The Trump trade war has blown past the realm of tariffs. The White House plans to hit back at any measure undertaken by trading partners that it believes disadvantages U.S. exporters.
Why it matters: The Trump administration is ushering in a new era in which trade policy is managed country by country, using sweeping tariffs as the tool to address what officials call unfair trade dynamics.
- It will factor in trading partners' behavior that is outside the traditional confines of trade policy, including whether they fund their government with a value-added tax and how they manage their currency.
- It risks blowback on the U.S. if the nation is seen around the world as meddling in other countries' domestic policies.
- With such widespread tariffs, higher U.S. inflation is a risk.
What they're saying: "This really was an expansion of what has been seen as an unfair trade barrier, particularly related to taxes," Everett Eissenstat, a former official in the U.S. Trade Representative Office during Trump's first term, tells Axios.
- "You have tariffs being used to offset discriminatory tax policy — that's a pretty big shift," Eissenstat adds.
Yes, but: It comes with economic and strategic risks.
- "Take a country like India, where they have very high tariffs and we have very low tariffs: Are we going to raise all of our tariffs for India to those levels, even if that means we're going to be paying higher prices?" Wendy Cutler, a vice president at the Asia Society Policy Institute, tells Axios.
- "I don't think that's good policy," she says.
How it works: The tariffs won't take effect until early April, assuming they move forward at all.
- Over the next 100 days, the Commerce Department and the U.S. Trade Representative Office will calculate custom tariff plans for all trading partners with "non-reciprocal trade relationships," according to a memo President Trump signed Thursday.
Between the lines: There is a wide scope for how the White House defines such a relationship, which includes all tariff and non-tariff measures.
- The White House calls out nations with higher tariffs on U.S. products. It includes any nations that have devalued their currency or subsidized goods and any other practice that officials say "imposes any unfair limitation on market access," the memo says.
The intrigue: Speaking in the Oval Office, Trump called out the value-added tax (VAT) as "more punitive" than tariffs — opening the possibility for a trade war with Europe, where such taxes are common.
- The VAT applies to all goods (domestic or imported) across the trade bloc — a tax many economists don't assess as being particularly harmful to U.S. exporters.
The big picture: No country — ally or adversary — is immune.
- A White House fact sheet calls out motorcycles: India has a 100% tariff on U.S. motorcycles, while there is a 2.4% tariff on Indian-made motorcycles.
- The fact sheet mentions a "digital service tax" imposed by Canada and France, plus higher tariffs on cars imported from Europe.
What to watch: The planned tariffs might spur a series of bilateral talks that pull back the tariff threats — an outcome Trump suggested while he met with Indian Prime Minister Narendra Modi on Thursday.
- But there is a possibility the tariffs could linger — a risk for the economy with inflation that looks harder to beat.
- "The challenge is that this stuff is inflationary and it is disruptive. I think this economy is more jittery than the one we had in 2017," says Evercore's Sarah Bianchi, a former trade official under President Biden.
