Why it's still a Trump trade world
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Photo illustration: Brendan Lynch/Axios. Photo: Kamil Krzaczynski/AFP via Getty Images
President Trump lost an economic tool that destroyed the norms of global trade. But the new era that he had launched with it is likely here to stay.
Why it matters: The U.S. can no longer credibly wield a threat of instant, triple-digit tariffs to get the world to do what it wants.
- But Trump — and perhaps future administrations — are expected to use trade more as a go-to tool, even if the means to do so are slower and more blunted than before. The rest of the world has already started to adjust accordingly.
What they're saying: "For EU nations and trading partners such as India and Canada, single, punitive rates are no longer an option for the Trump administration," Rystad Energy chief economist Claudio Galimberti wrote.
- "The stick is now the same size for everyone, and it is a little smaller."
- It is not a reversal of protectionism, "but a narrower, more legally constrained U.S. tariff regime," he added.
The intrigue: The shift from open-ended emergency trade powers to temporary, capped authorities eases the "shock-and-awe" effect of tariffs that has defined the Trump era so far.
- Trump seemed emboldened by the Supreme Court decision that made the bulk of his tariffs illegal: On Friday, he promised to rely on "very powerful alternatives" to impose potentially more tariffs.
Between the lines: That would suggest that even if the legal underpinning looks different, the steep tariffs will stick.
- The rest of the world has already begun to adjust to this new, unpredictable reality. They are forging new trade partnerships and deals that are unlikely to be scaled back.
- "We know the old order is not coming back. We shouldn't mourn it," Canadian Prime Minister Mark Carney said at the World Economic Forum last month, urging so-called "middle powers" to build new coalitions as "big powers" like the U.S. turn inward.
Zoom in: "The administration has made very clear that it is going to pursue other ways of achieving its goals with trade policy and that's going to continue," Jeffry Frieden, a political science professor at Columbia University, told an economics conference in Washington, D.C., on Sunday.
- "Governments around the world formulate their policies and reactions on the basis of expected behavior," he added. "At this point, the U.S. has made very clear that they want to remake the international economic order."
The big picture: Consider what happened in the hours after the Supreme Court scrapped many of the tariffs at the heart of the Trump administration's economic agenda.
- Trump imposed 15% tariffs on all foreign goods, a fast pivot to reinstate the bulk of levies scrapped by the Supreme Court.
- The law that underpins the measure, Section 122, is limited in scope: there is a mandated ceiling (no more than 15%) and a time limit (up to 150 days).
- Trump promised to supplement that action with more permanent tariffs under separate authorities. But those require investigations that can take months to complete.
What to watch: The U.S. is still adjusting to the economic effects of protectionism that make foreign goods more expensive.
- Even with new limits around Trump's tariff power, that transition will continue to ripple across the global economy.
