The Pledge of President Rejoinder: “Liberation Day” will see tariffs in the U.S. Treasury and Trade
It is being called “Liberation Day,” he claims it will bring in foreign tariffs and put them towards the U.S.’s tax cuts and deficit reduction.
Economists think the pledge will hurt U.S. consumers by making them pay higher prices and that it will hurt US farmers and exporters by making them pay higher prices.
The administration is acknowledging some of the economic logic of tariffs for the first time. Tariffs do raise prices. And higher prices do cause people to buy less stuff. The trade deficit with other countries will decrease if Americans buy less foreign stuff.
The president put a sign on the White House lawn that said 34% tax on imports from China and 20% on imports from the EU. Vietnam got 46%; India, 26%. What about Nigeria? 15 percent is not very high. “These tariffs reflect how other countries tax American products,” said Trump. He said that this means that they did it to us. “Very simple.”
Demystifying Trump’s “Target Threat”: Implications for Trade and the Uncertainty over the Economic Policy
The uncertainty over the policy has roiled the economy. The S&P 500 stock index just closed out its worst quarter since 2022, and consumer confidence recently hit a 12-year low.
“They took advantage of us,” Trump told reporters on Monday. “And we are going to be very nice by comparison to what they were. The numbers will be lower than what they’ve been charging us and, in some cases, maybe substantially lower.”
Trump’s economic policy has been unique, in part, because of the vagueness and unpredictability surrounding his policy announcements.
The reciprocal tariffs are an example. Cabinet members were instructed to study how non-recilateral trade relationships could hurt the U.S. economy, then submit reports about possible ways to make trade with any given country.
Commerce Secretary Howard Lutnick said the studies would be done by April 1. “We will hand the president the opportunity to start on April 2, if he wants,” Lutnick said.
That still leaves flexibility in the timing of imposing the tariffs. While it is not certain when specific tariffs will come into effect, the White House press secretary said they would be imposed immediately.
This is contrary to Trump’s previous public statements, where he has variously denied that tariffs would raise prices or has said that he “couldn’t care less.”
“In fact, I’ll probably be more lenient than reciprocal because if I was reciprocal, that would be — that would be very tough for people,” Trump said in an interview last week with Newsmax.
A more conventional approach to pressuring other countries to lower their tariffs would be to specifically target a country or a good according to Doug Irwin, professor of economics at the college.
He explained that when you have a broad-brush approach to many countries, many possibilities, it is less normal. “Things are unfair in different ways with different countries. It’s difficult to have a uniform approach to all of that.
“There are some unfair trade practices out there. So to the extent that you threaten tariffs … that would call for a very surgical approach,” Veroneau said. “These tariffs presumably will far exceed the number of U.S. exporters that are complaining to this administration or previous administrations about very specific trade barriers.”
This is indicative of the bigger problem with how Trump talks about tariffs as a solution to a wide range of policy problems, some of which conflict with each other.
According to Trump’s math the tariffs are supposed to raise prices. The trade deficit will be closed because of higher prices.
Take China for instance. The US imported over $500 billion of goods from China last year, while exporting less than $150 billion. The formula suggests that a tax on Chinese products should correct the trade imbalance. On Wednesday the president said the actual tariffs would only be 34%.
Behind these Greek letters there’s a blunt but understandable approach. The equation is trying to answer a question: How high should tariffs be to get Americans to buy fewer foreign products and close the trade deficit? The higher that tariffs should be on products from another country, the more a trade deficit with that country is.
President Trump’s tariffs sparked an economic mystery when they were announced on Wednesday. Just where in the world did those numbers come from?
That is not true. These are not the same as the ones that apply to others. They do not correspond to the tariff rates in other countries. The true location of these tariffs is much more interesting.