Trump presses first-day tariffs

President Trump reined in his plan to impose broad tariffs as soon as he took office, slowing and watering down changes to the U.S. trade system that were the focus of his campaign.

Trump began his second term with a memorandum directing federal agencies to study US trade relations with China, Canada and Mexico, but he did not impose any new tariffs, which are taxes imposed on American individuals and companies that import goods from abroad.

The memo, first reported by the Wall Street Journal, also seeks progress on Trump’s 2020 US-China trade agreement and looks forward to a 2026 review of the updated NAFTA agreement with Canada and Mexico. But it stops short of imposing any new import taxes.

The memo summary says the agencies will evaluate the updated NAFTA agreement and “make recommendations” about U.S. participation in it, the newspaper reported.

This is a far cry from the trade-related rhetoric Trump used during his election campaign.

“On January 20, as one of my many Executive Orders, I will sign all necessary documents to impose 25% tariffs on Mexico and Canada on all products coming into the United States and its ridiculous open borders,” Trump wrote on social media. media in November after he won the election.

Trump has often criticized the establishment’s thinking on trade deals, suggesting that a comprehensive overhaul of US trade doctrine is underway by imposing a general tariff, something that has not been attempted on a large scale since the creation of the General Agreement on Tariffs and Trade in the wake of World War II.

Trump challenged Bloomberg Editor-in-Chief John Micklethwait during an interview in October, saying: “It must be hard for you to spend 25 years talking about tariffs as a negative and then have someone explain to you that you are completely wrong.” “.

Presidents can issue tariff orders without congressional approval, and there has been much speculation that Trump would single-handedly change the trade system overnight.

Mexican steel producers issued a statement on Friday, saying they do not pose a threat to American companies.

He added: “Steel exports from Mexico do not represent a threat to the United States. “On the contrary, the United States benefits greatly from steel trade flows,” said Mexican steel industry group Conacero.

Even the Federal Reserve indicated last December that uncertainty about the US trade situation cast a shadow over its economic outlook, saying it had to build multiple scenarios.

“The effects of changes in trade policy may be larger than staff assumed,” minutes of the Fed’s December meeting say.

Uncertainty appeared in foreign markets as well.

Participants at the Fed meeting noted that “pricing foreign financial markets reflects weaker-than-expected foreign data releases, expectations of further policy easing by foreign central banks, and potential changes in US trade policy.”

Markets and industry groups involved in international trade appeared reassured by the decision not to impose new tariffs immediately.

The Dow Jones Industrial Average of major U.S. stocks rose more than 300 points in afternoon trading. The Nasdaq Composite, dominated by technology stocks, rose more than 290 points, and the S&P 500 rose about 60 points.

The retail industry, which imports many of its products from countries with much lower labor costs than the United States, welcomed Trump’s new trade approach, saying they wanted to make sure it was “carefully targeted.”

“We look forward to working with the President to see that the resulting policy changes are carefully targeted and create an environment that attracts investment and protects critical industries,” the National Retail Federation said in a statement Monday.

The National Foreign Trade Council, a business advocacy group, said American companies want to retain access to foreign markets.

“American companies need to maintain a competitive advantage globally and access open markets,” the group said in a statement issued Monday. He added: “We are keen to work with the administration on the details of its economic strategy, including its trade, tax and tariff policies.”

Trump campaigned aggressively on tariffs, allowing him to tap into undercurrents of frustration about the globalized economy and deliver clear, repeated messages that are likely to make a difference in the election.

Trump, who made import taxes the backbone of his economic policy in his first term, described the word “tariffs” as “the most beautiful word in the dictionary.”

Tariffs are taxes imposed on US companies that import foreign products. The tax, which can reduce an importer’s profit margin, can be avoided by shifting to the local supply chain, or it can be passed on to the retailer in the form of a price increase.

The latter option adds to concerns that Trump’s tariffs could contribute to short-term inflation, which could be further stimulated by the stimulus tax cuts expected by the new Congress and increased labor costs resulting from the clampdown on immigration.

But Trump’s lack of immediate action on tariffs likely bodes well for the pace of price increases.

In his inaugural address, Trump said he wanted to bring manufacturing jobs back to America, which have been largely outsourced to foreign production centers, another point of economic frustration for many voters.

Manufacturing jobs have been in decline since the late 1970s, and then actually declined in the 2000s after a series of “free trade” deals passed. Although it rebounded slightly in the first decade of the twenty-first century to reach a recent high of about 13 million jobs, it is not yet close to its historical levels.

It is possible that the increase in construction investment in the manufacturing sector during the Biden administration will reverse this trend to some extent. From around $6 billion annually, the number rose to more than $21 billion in October, after the passage of a major infrastructure law, a climate technology law, and a bill to encourage semiconductor production.