Saturday, 15 March 2025

Tariff-wielding trade warrior Trump is taking on the world, and the world is fighting back.

Extract from ABC News 

Analysis

Donald Trump gestures with his hands as he speaks from a chair in the Oval Office.

Donald Trump argues his tariffs will help him right the world's wrongs and create fairer trade conditions. (Reuters: Evelyn Hockstein)

In the countdown to last year's American election, those of us tasked with taking the pulse of voters repeatedly heard the same two words.

"The economy."

It's a catch-all term, meaning different things to different people. But as we straw-polled Donald Trump supporters on our travels, it was frequently cited as their top vote motivator.

National surveys reflected the sentiment.

Now, eight weeks into Trump's presidency, talk about "the economy" is dominated by words like "chaos", "uncertainty" and a possible "recession".

Team Trump prefers euphemisms like "transition", "disturbance" and "detox", and argue any short-term pain will lead to long-term gain.

But the indices that measure business certainty, investor confidence and market stability are flying off the charts in the wrong directions.

This is the direct result of Trump's backwards-and-forwards tariffs policy.

As the US president slams hefty taxes on imports and constantly threatens more, goading long-time partners and allies into ugly fights, a global trade war is erupting.

It's America versus the world.

Two types of tariffs

Trump is using tariffs for two different purposes.

The first type of tariff is designed to advance his "America First" trade policy.

These tariffs are fiscal levers. Traditional protectionist measures to disadvantage foreign producers and stimulate local manufacturing.

The tariffs placed on aluminium and steel, which angered Australia this week, fit into this category.

Australia is facing a new America (Sarah Ferguson)

The second type of tariff is designed to pressure world leaders to bend to Trump's will.

Rather than fiscal levers, these tariffs are bargaining chips — or, in some cases, bludgeoning clubs.

An example is Trump's snap decision to slap tariffs on Colombia.

When that country's president refused to accept military plane-loads of handcuffed deportees, Trump said he was immediately imposing 25 per cent tariffs on Colombian imports, with more to come.

Colombia's president talked tough, but up against the threat of a crippled national economy, he ultimately relented.

Trade power plays

Some of the tariffs appear to straddle both categories. It's not always clear what is protectionism, and what is power playing.

That could be said of the tariffs placed on America's biggest trading partners — China, Canada and Mexico.

Trump has complained about uneven trade relationships with those countries, and talked about tariffs as a way to reverse the deficits.

But most of his rhetoric, and the official White House orders, say he's using those tariffs to force the three countries to do more about fentanyl smuggling and illegal immigration.

When they were imposed, China responded with retaliatory tariffs. But Canada and Mexico played ball, announcing measures to toughen up border controls.

So Trump postponed their tariffs — then implemented them (with some exclusions) a month later, and told both countries to expect more.

Canada's now accusing him of using the tariffs to cripple its economy to a point where the US could take over the country.

Indeed, Trump posted this week: "The only thing that makes sense is for Canada to become our cherished fifty-first state."

US tariffs on Australian steel and aluminium to begin (Laura Tingle)

His treatment of Canada has led to sweeping retaliatory tariffs that will hurt American exporters.

China's revenge tariffs on meat, grains and fruit won't be good for stateside farmers.

Mexico says it will retaliate too, but its plans aren't yet clear.

A bruising battle

In this America-versus-the-world trade war, much of the world is aggressively fighting back.

And in the US, the bruises are becoming visible.

In response to widespread investor uncertainty and tariff-fuelled fears of recession, American stocks have tanked (dragging Australia's down with them).

For American consumers, the cost-of-living impacts are coming into view too.

Some breweries, for example, are talking about having to increase their prices to cover costlier cans made from imported aluminium.

A bottleshop is shown with a sign saying 'we are no longer selling liquor from the USA' on a shelf of red wine bottles

Stores across Canada have halted selling US liquor in response to tariffs imposed on Canadian goods. (Reuters: Ed White)

That's small beer, though, compared to the price increases on European alcohol if Trump follows through on his threat of 200 per cent tariffs on drinks from the European Union (EU) — a response to the EU's retaliatory tariffs on American whiskey.

Of course, the cost increases caused by tariffs will be felt well beyond bars and bottle shops.

The metal tariffs alone have prompted warnings of price increases from industries ranging from car-making to construction.

Confidence crashes

After Trump won the White House in November last year, there were celebrations among those Americans who told us they were worried about the economy.

The University of Michigan's consumer sentiment survey — which measures how Americans feel about their personal finances and broader economic conditions — showed bumps in optimism in the couple of months after the election.

At the beginning of the year, though, the sentiment started to turn.

Then on Friday, it crashed.

The fall to a score of 57.9 represents an 11 per cent drop in a month, to a level significantly lower than even the darkest days of COVID (but still higher than during points of rampant inflation in 2022 and 2023).

On this measure, a sizeable chunk of Americans look to be losing faith in the president they trusted to bring them boomtimes.

Will Trump's tariffs make America expensive again?

Polls had already been reflecting widespread worries about hip-pocket hits.

In a Reuters/Ipsos poll, released on Wednesday, local time, 70 per cent of Americans said they expected tariffs would push up grocery costs and other consumer prices. Fifty-seven per cent felt his moves to shake up the economy were too erratic. Only 32 per cent approved of the job he was doing on cost-of-living issues.

For now though, Trump is unfazed. He sees his tariffs fight as a longer-term project to right the world's wrongs and make things fairer for America.

His administration continues to argue — against the views of many economists — that the pros will outweigh the cons.

"We've been ripped off for years, and we're not going to be ripped off anymore," Trump said earlier this week.

"I'm not going to bend at all."

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