Trump is winning trade battles. The war? We'll see
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President Trump is winning what he sought in pursuing a global trade war: A series of deals that are resulting, so far, in big concessions by major partners, new revenue for the federal government, and minimal upset to the U.S. economy or markets.
The big picture: The question now is whether these victories in trade battles — high-level, roughly-sketched agreements among several major economies — will translate to winning the trade war.
- Everything's coming up Trump so far, but there are many unsettled questions around whether the president can achieve the broader goal of resetting the terms of global trade in America's favor without significant domestic pain.
- Many of the details of this round of trade deals appear flimsy, without the level of specificity and mutual commitment traditionally seen in any trade agreement.
State of play: Deals with the European Union and Japan involve 15% tariffs on U.S. imports, far higher than in recent decades — with no retaliation from overseas.
- The onset of this higher-tariff regime has, to date, not shown up in any big way in U.S. inflation data, and earlier fears of a U.S. recession look overblown.
- The stock market has hovered near new highs.
- Tariff revenue is rolling in, $27 billion last month alone, supporting the White House's contention that import taxes are on track to become a meaningful revenue source that lowers the budget deficit.
Zoom out: Economists "in the very beginning said, 'Oh, my God, the sky is falling — these Trump tariffs are going to destroy the economy,'" Wilbur Ross, Trump's first-term Commerce secretary, tells Axios. "Well, there's not much sign of that so far."
- "I think we're in a period where people are starting to focus more on what's really happening, not what they think may happen."
Yes, but: The deals so far have been far short of the kinds of carefully negotiated agreements that are the traditional deliverable of trade policy, including in Trump's first term.
- Evercore ISI analyst Sarah Bianchi notes that the Trump 1.0 renegotiation of NAFTA, known as the USMCA, came to 1,500 pages. The most expansive written agreement in this round, with the UK, comes to five pages. Others involve no written documentation at all.
- There are warnings that some key elements of these deals may be vaporware. Japanese officials seem to have a very different idea of what a promised $550 billion in investment will mean than American officials, per reports from Tokyo.
What they're saying: "We were going for complete deals that had all the bells and whistles," Ross tells Axios.
- "Now what they are doing is hitting key parts in partial deals and then moving on to the next," Ross adds. "You can do more deals, since you aren't going through every semi-colon and every comma."
What's next: In advance of the Friday deadline for trade deals before the U.S. imposes unilateral tariffs, the biggest looming question is what accord may be found with China, Canada, and Mexico.
- American automakers and other manufacturers face big risks if they cannot freely ship goods between suppliers in North America — potentially leaving them at a disadvantage to Japanese and European imports.
- There were mixed signals Tuesday on whether a Chinese accord is imminent, with officials offering calming messages but also ending talks (for now).
