President Donald Trump has escalated trade tensions across the globe by imposing tariffs on foreign steel, threatening tariffs on allies like the European Union and engaging in a tit-for-tat trade war with China that has hurt American farmers.
The President has made striking new trade deals that protect US industries a top priority, but two of his key agreements haven’t been settled. Negotiations with China are ongoing and, about a year after Trump signed his replacement for the North American Free Trade Agreement, Congress still hasn’t voted to ratify the deal.
And his longstanding pledge to revive American manufacturing through a muscular trade policy took another hit Monday with new data showing that the sector continued to slow for a fourth straight month.
US manufacturing “is stuck in a mild recession with little prospect of a real near-term revival,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics, in a note Monday.
While job growth and consumer spending remain strong, keeping the US economy moving, trade uncertainty has been a drag on business growth. It’s challenging for those business owners engaged in trade to make investments and pricing decisions when they don’t know how long tariffs will last. Plus, the tariffs make some manufacturing inputs more expensive. New orders are the lowest they’ve been since April 2009, noted Shepherdson.
Trump is continuing to escalate trade tensions. On Monday, the President also announced tariffs on steel and aluminum coming from Brazil and Argentina. He said the duties would help manufacturers and farmers, which are two of his key political demographics.
“I gave them a big break on tariffs, but now I’m taking that break off,” Trump said. “Because it’s very unfair to our manufacturers and very unfair to our farmers.”
His administration said it would consider putting additional tariffs on the European Union for subsidies it provides to aircraft manufacturer Airbus, which competes against American jet maker Boeing. It already hit $7.5 billion worth of European goods like French wine and Italian cheeses with tariffs in October. The administration also proposed tariffs Monday on $2.4 billion of French products, after releasing a report that said a new French tax on digital services represents a barrier to trade.
Trump’s steel tariffs provided an immediate boost to the US steel industry in 2018. It enjoyed a bump in prices, production increased and some companies announced plans to restart mills or build new ones. Manufacturing job growth accelerated but employment is still well off its 1990s peak. The tariffs can also raise the price of goods made with steel, including equipment for farmers.
American farmers have been particularly hard hit by the trade war with China. Beijing slapped tariffs on products including soybeans, corn and wheat. To help mitigate the pain, the Trump administration has offered aid money, totaling $28 billion — about double the cost of the 2009 auto bailout.
Farm lobby groups are also pressuring Congress to finalize the US-Mexico-Canada Agreement. US Democrats have been negotiating for months behind closed doors with the Trump administration on changes to the deal, especially on labor enforcement provisions. House Speaker Nancy Pelosi has said she wants to hold a vote on the deal by the end of the year, though that time line could slip given Congress’s busy to-do list in December.
Trump recently came to a new trade agreement with Japan, opening up market access for American ranchers and farmers. But some said the deal didn’t offer anything more than what was included in the Trans-Pacific Partnership, which Trump withdrew from early in his administration.
It’s unclear when a deal might be reached with China. Negotiations with Beijing have been ongoing for well over a year. In October, Trump suggested they were close to reaching a “phase one” agreement that could ease trade tensions, but would fall short of a comprehensive deal.
But presidential adviser Kellyanne Conway said Monday that it’s “up to China” whether an agreement is reached before the 2020 election.
“It happens when it happens,” she told reporters. “And it’s going to take a while because this is new for China, they weren’t expecting President Trump to get elected and they weren’t expecting President Trump to make good on the promises he had made and said for 20 years as a business leader.”
The new tariff threat on Brazil and Argentina could impact Trump’s ability to finalize a broad deal with China, argued Phil Levy, the chief economist at freight forwarder Flexport who served as a senior economist for trade under President George W. Bush.
“This sends a signal that it is very difficult to trust this President to do a trade deal. The deal only lasts until he has another concern,” Levy said.
Last year, Trump exempted Brazil an Argentina from a round of tariffs on steel and aluminum that he imposed for national security reasons. Instead, the two countries agreed to limit their exports under a quota, but on Monday, Trump reversed course. He said that they’ve devalued their currencies, making it harder for American exporters to compete.
Trump also repeatedly called on the Federal Reserve to take action to weaken the US dollar, a favorite target.
“Manufacturers are being held back by the strong Dollar, which is being propped up by the ridiculous policies of the Federal Reserve,” Trump tweeted Monday.