“With a series of short-sighted tariff maneuvers, the president has effectively told Toyota (and other Japanese carmakers) that it should do more of its manufacturing in Japan and stop trying to create jobs in America.
Earlier this week, President Donald Trump announced a new trade deal with Japan that will include a 15 percent tariff on Japanese goods, including imported cars. The details of the deal remain somewhat vague, but that’s a significant discount compared to the 25 percent tariff the administration has imposed on cars imported from everywhere else.
The reduced tariffs for Japanese cars are significant because of how that provision interacts with the Trump administration’s other trade policies that are aimed at making it more expensive to manufacture cars in the United States. The president has imposed a 50 percent tariff on steel and aluminum (both of which are essential for automakers) and has slapped a 25 percent tariff on imported cars and car parts. Those tariffs are already dinging the profits of American carmakers—General Motors reportedly lost more than $1 billion in the second quarter of the year—and auto industry experts say they will raise prices, reduce demand for new cars, and generally make American cars less globally competitive.
In short, the Trump administration is offering an incentive to import finished cars from Japan, while making it more expensive to buy the stuff you need to build cars in America.
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Ultimately, the problem here is not the specific tariff rates the Trump administration is seeking to charge on steel, car parts, or cars imported from Japan or Mexico. (Those rates are likely to change anyway, if the past few months of the trade war are any indication.)
No, the real problem here is the Trump administration’s belief that it can use tariffs to shape the global trading system toward contradicting goals with no tradeoffs or distortions. In reality, each new tariff move causes both. The market responds to incentives, and right now, the Trump administration is creating a set of incentives that will raise costs for American manufacturers while driving investors overseas.”
The Japanese trade deal is actually bad for U.S. car companies. Cars manufactured in Japan will have a 15% tariff on them, but cars made in Mexico by U.S. companies will have a 25% tariff, giving U.S. companies a disadvantage. They could move that back to the U.S., but the move itself is costly, and the cost to make the cars in the U.S. is even costlier.
Trump’s EU trade deal is only a win if a 15% tax on imports from Europe is a win. Things from Europe being more expensive, and importing companies making less money, are bad for the economy and the people in it.
“The European Union has admitted it doesn’t have the power to deliver on a promise to invest $600 billion in the United States economy, only hours after making the pledge at landmark trade talks in Scotland.
That’s because the cash would come entirely from private sector investment over which Brussels has no authority, two EU officials said.
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The EU officials said that the estimated $600 billion will add to the EU’s current $2.8 trillion private investments in the U.S. that accounts for approximately 3.4 million jobs.”
The U.S., being the more innovative and intellectual property driven country, gets more value in trade from many countries even when we have a trade deficit. Trump trying to mess with such relationships is foolish. China really was/is a bad actor and needs to be dealt with strategically.
Trump’s threatened tariffs on Brazil for them prosecuting a former president for crimes he appears to have committed have appeared to backfire as the current president is getting a polling bump from Trump’s unjustified threats.
“in fairness, tariff-free trade into Vietnam is good news for American farmers and manufacturers that export goods to that country, as Commerce Secretary Howard Lutnick has argued. And the reduction in tariffs may marginally increase our exports to Vietnam.
For the vast majority of Americans, however, trade with Vietnam matters on the buying side, not the selling side. For them, this deal accomplishes very little.
The deal also sends a clear signal to other countries that Trump’s promise of reciprocity was bullshit.
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Free trade between the U.S. and Vietnam would be a win-win for both countries. That’s not what Trump has delivered with this deal. Vietnamese businesses and consumers got free trade. Americans got more taxes.”
Trump’s tariffs have actually retarded U.S. manufacturing rather than bolstered it due to uncertainty and tariffs raising the cost of manufacturing inputs. From the Trump tariffs already put into effect, we haven’t seen huge price jumps as companies frontloaded their inputs to buy time and haven’t yet made pricing decisions.