Latest news with #Smoot-Hawley
RNZ News
14 hours ago
- Business
- RNZ News
Trump's trade war victory is already under siege
By David Goldman , CNN US President Donald Trump holds up a chart while speaking during a 'Make America Wealthy Again' trade announcement event at the White House on 2 April, 2025 in Washington, DC. Photo: CHIP SOMODEVILLA / Getty Images via AFP Analysis: The economy was supposed to crumble. The trade war was expected to escalate out of control. Markets were forecast to plunge. None of that happened - at least, not yet. President Donald Trump has pulled off what few outside the White House predicted: A trade war victory of sorts that sets America's taxes on imported goods higher than the infamous Smoot-Hawley era, without any of the damaging fallout so far. Customs revenue has increased sharply while inflation remains reasonably low. And America's trading partners, for the most part, have been willing to accept the higher tariffs without significant retaliation. Multiple framework agreements between the United States and other trading partners have jacked up tariffs on foreign goods imported to America while setting levies on US exports at or near zero. Overseas trading partners have agreed to open previously closed markets to some US goods, pledged increased investments in the United States and dropped some of what the Trump administration has lambasted as non-trade barriers, like taxes on digital services. But Trump's early trade victory may be short-lived. In fact, it is already showing signs that it may not last. The European Union, fresh off its 11th-hour compromise to get a trade agreement done before Trump's self-imposed August 1 deadline, is already in revolt. French Prime Minister François Bayrou called Sunday a "dark day." Hungarian Prime Minister and Trump ally Viktor Orban said Trump steamrolled the EU. Belgium's Prime Minister Bart De Wever lambasted the Trump administration's "delusion of protectionism." And Bernd Lange, chair of the European Parliament's trade committee, said the deal is "not satisfactory." The 27-member bloc has to hammer out key aspects of its framework, and the fragile trade truce between two of the world's largest economies could quickly break apart if sentiment turns against the arrangement. The Trump administration's trade talks with its northern neighbor and one of its largest trading partners have been effectively shut down. Despite Canada relenting on its digital services tax that the president has lambasted, Trump continued to threaten higher tariffs on some Canadian goods, including lumber. Although many goods imported from Canada continue to be tariff-free because of the US-Mexico-Canada free trade agreement, the USMCA only covers just about half of Canadian goods. So higher tariffs on Canada could raise some costs for American consumers down the road. And the fact that America is even embroiled in a trade spat with Canada in the first place is a sign that the recent cooling off in the trade war may not last: Trump negotiated and signed the United States' current trade agreement with Canada during his first term. At any time, even after an agreement is inked, Trump could turn around and decide to raise tariffs again. A third round of talks between China and the United States' trade negotiators is expected to result in a continued pause of their historically high tariffs on one another. But it's unclear what else might come from the discussions, and the Trump administration has grown frustrated by what it has described as China's slow-walking of its previous agreements. Both sides have aimed to reduce more regulatory barriers on shipments of key technologies. China has sought more access to critical semiconductors, and the United States wants the flow of rare earth magnets to increase further. But the Trump administration has tried repeatedly to speed up China's slow progress, claiming the country has failed to live up to its agreement to approve the critical materials for crucial electronics. Trump has also said he wants China to open up its market to more US goods - a desire that Chinese Premier Xi Jinping is unlikely to give in to significantly. Trump's rhetoric against China has cooled in recent months, but the truce appears to be on a knife's edge. A crucial appeals court hearing Thursday could determine whether most of Trump's tariffs are legal at all. For most of his tariffs, Trump has cited powers listed in the International Emergency Economic Powers Act. But a federal court in May ruled that Trump overstepped his authority to levy tariffs on that basis. An appeals court paused that ruling from taking effect and will hear oral arguments Thursday. It's not clear when the court will rule, and the White House would likely appeal to the Supreme Court if it loses. If Trump ultimately loses his ability to levy tariffs using emergency powers, he has plenty of other options - but legal experts have said those alternatives could limit his ability to set tariffs without Congress. For example, Trump may be able to impose some tariffs as high as just 15 percent but only for 150 days, potentially taking some of the bite out of his tariff regime. Although the US economy remains strong, with rebounding retail sales, a still-robust labor market and rising consumer confidence, there is some evidence that inflation in key areas is starting to creep higher - slowly - because of tariffs. That's a potential warning sign as the tariffs take full effect. The Bureau of Labor Statistics' Consumer Price Index earlier this month showed that some tariff-affected goods have started to gain in price. Clothing, appliances, computers, sporting goods, toys, video equipment, hardware and tools prices have been on the rise. And it's starting to become a trend - in many of those categories, the rise has been happening for a few months. Many major retailers, including Walmart, have said they will raise prices because of tariffs. Procter & Gamble, which makes Tide and a host of consumer goods, said Tuesday it will raise prices in part because of tariffs. And GM, Volkswagen and Stellantis all reported tariff charges of $1 billion or more over the past quarter. Economists widely expect inflation to pick up in the late summer and throughout the rest of the year as retailers work through the inventories of goods they had stockpiled before tariffs went into effect. No one expects anything close to the inflation crisis of a few years ago. But with consumers still dealing with price-hike PTSD, that won't be a welcome change from the return to healthy inflation levels over the past year. David Goldman is the executive editor of CNN Business. - CNN
CNN
a day ago
- Business
- CNN
Trump's trade war victory is already under siege
The economy was supposed to crumble. The trade war was expected to escalate out of control. Markets were forecast to plunge. None of that happened – at least, not yet. President Donald Trump has pulled off what few outside the White House predicted: A trade war victory of sorts that sets America's taxes on imported goods higher than the infamous Smoot-Hawley era, without any of the damaging fallout so far. Customs revenue has increased sharply while inflation remains reasonably low. And America's trading partners, for the most part, have been willing to accept the higher tariffs without significant retaliation. Multiple framework agreements between the United States and other trading partners have jacked up tariffs on foreign goods imported to America while setting levies on US exports at or near zero. Overseas trading partners have agreed to open previously closed markets to some US goods, pledged increased investments in the United States and dropped some of what the Trump administration has lambasted as non-trade barriers, like taxes on digital services. But Trump's early trade victory may be short-lived. In fact, it is already showing signs that it may not last. The European Union, fresh off its 11th-hour compromise to get a trade agreement done before Trump's self-imposed August 1 deadline, is already in revolt. French Prime Minister François Bayrou called Sunday a 'dark day.' Hungarian Prime Minister and Trump ally Viktor Orban said Trump steamrolled the EU. Belgium's Prime Minister Bart De Wever lambasted the Trump administration's 'delusion of protectionism.' And Bernd Lange, chair of the European Parliament's trade committee, said the deal is 'not satisfactory.' The 27-member bloc has to hammer out key aspects of its framework, and the fragile trade truce between two of the world's largest economies could quickly break apart if sentiment turns against the arrangement. The Trump administration's trade talks with its northern neighbor and one of its largest trading partners have been effectively shut down. Despite Canada relenting on its digital services tax that the president has lambasted, Trump continued to threaten higher tariffs on some Canadian goods, including lumber. Although many goods imported from Canada continue to be tariff-free because of the US-Mexico-Canada free trade agreement, the USMCA only covers just about half of Canadian goods. So higher tariffs on Canada could raise some costs for American consumers down the road. And the fact that America is even embroiled in a trade spat with Canada in the first place is a sign that the recent cooling off in the trade war may not last: Trump negotiated and signed the United States' current trade agreement with Canada during his first term. At any time, even after an agreement is inked, Trump could turn around and decide to raise tariffs again. A third round of talks between China and the United States' trade negotiators is expected to result in a continued pause of their historically high tariffs on one another. But it's unclear what else might come from the discussions, and the Trump administration has grown frustrated by what it has described as China's slow-walking of its previous agreements. Both sides have aimed to reduce more regulatory barriers on shipments of key technologies. China has sought more access to critical semiconductors, and the United States wants the flow of rare earth magnets to increase further. But the Trump administration has tried repeatedly to speed up China's slow progress, claiming the country has failed to live up to its agreement to approve the critical materials for crucial electronics. Trump has also said he wants China to open up its market to more US goods – a desire that Chinese Premier Xi Jinping is unlikely to give in to significantly. Trump's rhetoric against China has cooled in recent months, but the truce appears to be on a knife's edge. A crucial appeals court hearing Thursday could determine whether most of Trump's tariffs are legal at all. For most of his tariffs, Trump has cited powers listed in the International Emergency Economic Powers Act. But a federal court in May ruled that Trump overstepped his authority to levy tariffs on that basis. An appeals court paused that ruling from taking effect and will hear oral arguments Thursday. It's not clear when the court will rule, and the White House would likely appeal to the Supreme Court if it loses. If Trump ultimately loses his ability to levy tariffs using emergency powers, he has plenty of other options – but legal experts have said those alternatives could limit his ability to set tariffs without Congress. For example, Trump may be able to impose some tariffs as high as just 15% but only for 150 days, potentially taking some of the bite out of his tariff regime. Although the US economy remains strong, with rebounding retail sales, a still-robust labor market and rising consumer confidence, there is some evidence that inflation in key areas is starting to creep higher – slowly – because of tariffs. That's a potential warning sign as the tariffs take full effect. The Bureau of Labor Statistics' Consumer Price Index earlier this month showed that some tariff-affected goods have started to gain in price. Clothing, appliances, computers, sporting goods, toys, video equipment, hardware and tools prices have been on the rise. And it's starting to become a trend – in many of those categories, the rise has been happening for a few months. Many major retailers, including Walmart, have said they will raise prices because of tariffs. And GM, Volkswagen and Stellantis all reported tariff charges of $1 billion or more over the past quarter. Economists widely expect inflation to pick up in the late summer and throughout the rest of the year as retailers work through the inventories of goods they had stockpiled before tariffs went into effect. No one expects anything close to the inflation crisis of a few years ago. But with consumers still dealing with price-hike PTSD, that won't be a welcome change from the return to healthy inflation levels over the past year.
Hindustan Times
a day ago
- Business
- Hindustan Times
If Trump's Tariffs Are So Bad, Where's the Recession?
Donald Trump's trade policy is in danger of demonstrating the truth about one of those old definitions of an economist: someone who sees something working in practice and explains why it will never work in theory. We have been told, by adherents of diverse creeds of the dismal pseudoscience, that the president's sweeping tariff plans would be a short route to economic disaster: Smoot-Hawley, the Sequel. Set aside that the infamous 1930 legislation was probably only a mere contributor to the calamity that followed rather than its author, the history and received wisdom are clear, premised on basic economic principles: Tariffs are a tax that have especially adverse consequences—increasing prices paid by importers and, ultimately, consumers; and, because of the income effect of a tax rise, at the same time depressing demand. But even as the U.S. has been transformed in just six months into a high-tariff economy, there is scant sign of the economic disaster we were promised. Deals signed in the past week with two of our largest trading partners indicate that a 15% tariff is now the likely new floor for most U.S. imports, with higher duties still in place on some goods. Yet economists surveyed by the Journal this month estimate the economy grew by about 2% in the second quarter, accelerating out of the first three months of the year. They think the odds of a recession in the next year are just 1 in 3. Core inflation remains below 3%, down from 3.5% at the end of last year. Equity markets are reaching new highs as investors have recovered from their panic attack of April. Having broken most of the rules of politics, has Mr. Trump really smashed one of the supposedly iron laws of economics too? There are three possible answers: First, it's too early to tell. Most of the tariffs announced haven't been in place long. Strangely enough, the uncertainty from Mr. Trump's dizzying policy changes that was expected to have been especially destabilizing may be helping soften the blow. If importers aren't sure whether announced duties will stay or change, they may be holding off on big price increases until they have clarity. And as we saw with the outcome of the U.S.-Japan deal last week, when the actual tariff levels come in lower than the worst fears, the psychological effect can be positive; that odd feeling of contentment you get when you discover that the $100 bill you thought you had dropped on the sidewalk was only a $20. But still, for all the unclarity, the average tariff paid by importers has indeed risen sharply—to more than 15%, up from less than 3% a year ago, so far with limited adverse consequences. Which leads us to the second possibility—the tariffs thus far have just not been big enough to cause the harm economists warned us about from full-on protectionism. The U.S. is a relatively closed economy, with imports accounting for less than 15% of gross domestic product. Perhaps the U.S. economy is simply resilient enough to withstand even bad policy, more capable of withstanding a moderate tariff shock. But this is incomplete. The average 15% tariff rate now is historically large; five times the level that prevailed previously, it is close to the average rate of around 20% on all imports under Smoot-Hawley. If the economy were simply to shrug off that level of protection, could it be that we are missing something? So third, and tantalizingly, perhaps the conventional wisdom is wrong. Or, more precisely, since no one can deny the effect of taxes are real, perhaps, in their rush to emphasize the negatives, economists have overlooked the countervailing forces at work with tariffs: The redistribution of the burden of duties between foreign exporters, U.S. importers and consumers may be reordering the balance of benefit between domestic and foreign businesses and between companies and consumers. Federal tariff revenue up to $300 billion a year will produce gains for Americans. The relative advantage of doing business in the U.S. may, as promised, start to be reflected in stronger inward investment flows. The strikingly one-sided deal Mr. Trump just inked with the European Union certainly suggests the sheer economic muscle of the U.S. has been previously under-utilized in opening up markets overseas. At this point, only the first answer can be given in confidence: It is too early to tell. But if the second or third turns out to be true, if the U.S. shrugs off or even gains from its embrace of protectionism, it will represent another blow to the already battered reputation of what was recently the West's so-called economic consensus. The 2007-08 global financial crisis and its aftermath shattered faith in the post-Cold War economic certainties, the idea that human history had reached some ideological endpoint of progress. Collapsing faith in the democratic institutions of the West in the years since has shattered similar faith in the enduring supremacy of Western liberalism. If the world's largest economy can run supposedly discredited economic policies and still thrive, the policy orthodoxies of most of the past half century will have been shattered too. The rising voices of those who argue for a nationalist, statist, corporatist governing program will be able to add a dose of empirical evidence to their ideological arguments, as theory once again races to catch up with practice.
Mint
a day ago
- Business
- Mint
If Trump's tariffs are so bad, where's the recession?
Donald Trump's trade policy is in danger of demonstrating the truth about one of those old definitions of an economist: someone who sees something working in practice and explains why it will never work in theory. We have been told, by adherents of diverse creeds of the dismal pseudoscience, that the president's sweeping tariff plans would be a short route to economic disaster: Smoot-Hawley, the Sequel. Set aside that the infamous 1930 legislation was probably only a mere contributor to the calamity that followed rather than its author, the history and received wisdom are clear, premised on basic economic principles: Tariffs are a tax that have especially adverse consequences—increasing prices paid by importers and, ultimately, consumers; and, because of the income effect of a tax rise, at the same time depressing demand. But even as the U.S. has been transformed in just six months into a high-tariff economy, there is scant sign of the economic disaster we were promised. Deals signed in the past week with two of our largest trading partners indicate that a 15% tariff is now the likely new floor for most U.S. imports, with higher duties still in place on some goods. Yet economists surveyed by the Journal this month estimate the economy grew by about 2% in the second quarter, accelerating out of the first three months of the year. They think the odds of a recession in the next year are just 1 in 3. Core inflation remains below 3%, down from 3.5% at the end of last year. Equity markets are reaching new highs as investors have recovered from their panic attack of April. Having broken most of the rules of politics, has Mr. Trump really smashed one of the supposedly iron laws of economics too? There are three possible answers: First, it's too early to tell. Most of the tariffs announced haven't been in place long. Strangely enough, the uncertainty from Mr. Trump's dizzying policy changes that was expected to have been especially destabilizing may be helping soften the blow. If importers aren't sure whether announced duties will stay or change, they may be holding off on big price increases until they have clarity. And as we saw with the outcome of the U.S.-Japan deal last week, when the actual tariff levels come in lower than the worst fears, the psychological effect can be positive; that odd feeling of contentment you get when you discover that the $100 bill you thought you had dropped on the sidewalk was only a $20. But still, for all the unclarity, the average tariff paid by importers has indeed risen sharply—to more than 15%, up from less than 3% a year ago, so far with limited adverse consequences. Which leads us to the second possibility—the tariffs thus far have just not been big enough to cause the harm economists warned us about from full-on protectionism. The U.S. is a relatively closed economy, with imports accounting for less than 15% of gross domestic product. Perhaps the U.S. economy is simply resilient enough to withstand even bad policy, more capable of withstanding a moderate tariff shock. But this is incomplete. The average 15% tariff rate now is historically large; five times the level that prevailed previously, it is close to the average rate of around 20% on all imports under Smoot-Hawley. If the economy were simply to shrug off that level of protection, could it be that we are missing something? So third, and tantalizingly, perhaps the conventional wisdom is wrong. Or, more precisely, since no one can deny the effect of taxes are real, perhaps, in their rush to emphasize the negatives, economists have overlooked the countervailing forces at work with tariffs: The redistribution of the burden of duties between foreign exporters, U.S. importers and consumers may be reordering the balance of benefit between domestic and foreign businesses and between companies and consumers. Federal tariff revenue up to $300 billion a year will produce gains for Americans. The relative advantage of doing business in the U.S. may, as promised, start to be reflected in stronger inward investment flows. The strikingly one-sided deal Mr. Trump just inked with the European Union certainly suggests the sheer economic muscle of the U.S. has been previously under-utilized in opening up markets overseas. At this point, only the first answer can be given in confidence: It is too early to tell. But if the second or third turns out to be true, if the U.S. shrugs off or even gains from its embrace of protectionism, it will represent another blow to the already battered reputation of what was recently the West's so-called economic consensus. The 2007-08 global financial crisis and its aftermath shattered faith in the post-Cold War economic certainties, the idea that human history had reached some ideological endpoint of progress. Collapsing faith in the democratic institutions of the West in the years since has shattered similar faith in the enduring supremacy of Western liberalism. If the world's largest economy can run supposedly discredited economic policies and still thrive, the policy orthodoxies of most of the past half century will have been shattered too. The rising voices of those who argue for a nationalist, statist, corporatist governing program will be able to add a dose of empirical evidence to their ideological arguments, as theory once again races to catch up with practice.
Wall Street Journal
2 days ago
- Business
- Wall Street Journal
If Trump's Tariffs Are So Bad, Where's the Recession?
Donald Trump's trade policy is in danger of demonstrating the truth about one of those old definitions of an economist: someone who sees something working in practice and explains why it will never work in theory. We have been told, by adherents of diverse creeds of the dismal pseudoscience, that the president's sweeping tariff plans would be a short route to economic disaster: Smoot-Hawley, the Sequel. Set aside that the infamous 1930 legislation was probably only a mere contributor to the calamity that followed rather than its author, the history and received wisdom are clear, premised on basic economic principles: Tariffs are a tax that have especially adverse consequences—increasing prices paid by importers and, ultimately, consumers; and, because of the income effect of a tax rise, at the same time depressing demand.
