To be fair to Trump, sometimes economic pressure takes time to kick in. The administration has been slogging through a variety of trade conflicts. It has been trying to get the rest of the world to change its approach to steel. It has pressured security allies to treat Huawei’s role in 5G as a national security issue. And it has tried to tell everyone that the World Trade Organization needs to be reformed. Given Trump’s repeated assertions that the U.S. economy is outperforming all others, surely these trade conflicts will yield some movement, right?
This past week, there was movement. Just not in the direction the administration wanted.
On steel, the president announced that the failure of existing steel tariffs to appreciably boost steel production left him no choice but to … impose more tariffs! The New York Times’ Ana Swanson explains:
In a proclamation on Friday night, the president accused foreign companies of trying to “circumvent” the 25 percent tariff he placed on foreign steel and the 10 percent tariff he placed on foreign aluminum in 2018. Imports of steel and aluminum into the United States have declined since the tariffs went into place, he said, but imports of products made with those metals had “significantly increased.”The net effect “has been to erode the customer base for U.S. producers of aluminum and steel and undermine” the effect of original tariffs, Mr. Trump said.As a result, he said, the United States will expand its tariffs to cover products made of steel and aluminum — like nails, tacks, staples, cables, certain types of wire, and bumpers and other parts for cars and tractors — as of Feb. 8.
I’m sure these tariffs will finally turn the tide in the trade wars! Or not. As Chad Bown told Swanson: “Trump’s steel and aluminum tariffs have raised the cost of key inputs, making American companies that rely on those metals less competitive worldwide. Now Trump is expanding his tariffs to shield their products from competition as well. Where will it end?” Probably with more tariffs and even more uncompetitive U.S. sectors.
Meanwhile, on the 5G front, the Trump administration received bad news Tuesday. The United States had been browbeating its NATO allies not to let Huawei participate in the construction of their 5G networks. Secretary of State Mike Pompeo had threatened to disrupt intelligence cooperation if they failed to bow to U.S. pressure.
Britain announced Tuesday that it was not going to bow. Adam Santarino of the New York Times reports: “Despite more than a year of intense lobbying by the Trump administration, which has accused Huawei of having ties to China’s Communist Party that pose a national security threat, the British government announced it would allow the company to provide equipment in some portions of a next-generation network to be built in the coming years.”
My Washington Post colleagues William Booth, Jeanne Whalen and Ellen Nakashima explain: “The American pressure has not won Britain over, largely because of concerns that pulling Huawei out of existing 4G networks would be cumbersome and costly. Major providers such as British Telecom are heavily invested in Huawei technology, and Britain does not want to fall behind in the 5G world.”
Trump administration officials were “disappointed.” Sen. Chris Murphy (D-Conn.) was more blunt, tweeting, “America has never been weaker. We have never had less influence. Not even our closest ally Britain, with a Trump soulmate in Downing Street, listens to us anymore.” That is hyperbole, but Murphy’s larger point stands. If Britain, which is uniquely vulnerable to U.S. pressure at present, won’t accede to the United States on this, E.U. members are even less likely to acquiesce.
Indeed, the European Union is demonstrating that there are limits to American economic power. In response to the Trump administration’s obduracy in ending the WTO’s Appellate Body, last week the European Union, China and 15 other countries announced a stopgap replacement. According to Reuters, “The European Commission said the WTO members involved had agreed to preserve the WTO’s two-step dispute system until the WTO’s own Appellate Body became operational again.” The signatories include more than half of the Group of 20 nations.
This obviously reduces the pressure on these countries to accede to U.S. demands to change the WTO as Washington wants it. According to Bloomberg’s Shawn Donnan, Trump adviser Peter Navarro thinks he can replicate his success with the Universal Postal Union to force the WTO to change. But this is as absurd as, say, confusing Mexico with China. The WTO is a different organization from the UPU; the same kinds of pressures are unlikely to work now after not working for the past three years.
Instead, the Trump administration is encountering the “Brussels effect,” in which the market size and regulatory capacity of the E.U. pressures other countries more effectively than Trump administration sanctions. Indeed, one has to savor the irony of Commerce Secretary Wilbur Ross, heretofore a pretty big fan of tariffs to pressure China, being outraged at being the possible target of such pressure from Brussels. As the Gillian Tett, Chris Giles, and James Politi of the Financial Times explain:
The EU’s plans for a carbon tax have emerged as a potential new flash point in transatlantic trade ties, after the Trump administration warned that it would “react” with possible punitive measures against Brussels.Wilbur Ross, the US commerce secretary, compared the EU’s proposals to recent moves by several European countries to impose a digital services tax, which has angered US officials and caused Washington to threaten tariffs on EU products.“Depending on what form the carbon tax takes, we will react to it — but if it is in its essence protectionist, like the digital taxes, we will react,” Mr Ross told the Financial Times.
Ross getting outraged by protectionism is as crazy as, oh, I don’t know, a former independent counsel decrying the Age of Impeachment or something.
With the renegotiated KORUS, USMCA, and “phase one” China deal, the Trump administration has produced more managed trade. What it has not done is produce anything resembling victory in the unending trade wars.