Elizabeth Morgan | Are more unilateral Trump tariffs on the horizon?

With recent announcements, tariffs continue to be on the minds of all the USA’s trading partners, including those in CARICOM. Let us be clear on what is a tariff, as there still seems to be a lack of clarity in the USA, though the reality seems to be coming home.

A tariff, as defined by the World Customs Organization (WCO) and the World Trade Organization (WTO) is the same as a customs or import duty, which is a tax collected by the government or customs authority on goods imported into a country or customs territory. This tax is levied on the imported goods and, more often than not, is passed on by the importer to the consumer in the importing country. Tariffs or customs duties are mainly applied by governments to generate revenue or to protect a specific domestic industry by giving it a price advantage. So the tariff is paid by the importers and consumers in the country imposing the tariff.

Walmart, a chain of US retail hypermarkets, recently announced its intention to increase prices to offset the effect of increased tariffs in the US market. This decision was not well received by the Trump administration which is now calling on Walmart to absorb the tariffs, as tariffs are not supposed to generate inflation. For Walmart, tariffs would reduce their profitability. You may recall that in April, Amazon had wanted to reflect the added tariff cost for various products on its website. The founder, Jeff Bezos, was persuaded to have a change of mind. Let’s see where this goes.

Note that in the 1960s and 70s, developing countries used tariffs in their import substitution policies to promote industrial development. Such import substitution policies were not viewed favourably by the developed, industrialised countries. For them, free trade was then the favoured policy.

CURRENT US TARIFFS STATUS

Trading partners and US importers, like Walmart, are still looking at how to deal with the current tariffs imposed by the Trump administration since January, which are as follows:

· A 10 per cent was imposed on all trading partners;

· 145 per cent on China, which following consultations with China, is now temporarily at 30 per cent;

· Some tariffs for cars and steel from the United Kingdom have been reduced resulting from consultations;

· There are some exceptions for Canada and Mexico;

·There is a 25 per cent tariff on steel imports from all other countries;

· A 25 per cent levy on cars and parts from all other countries;

· An exemption for smartphones and computers.

Recall that the higher reciprocal tariffs were paused for 90 days.

There are also sanctions on Chinese shipping and tariffs could be applied on those importing oil from Venezuela. There might still be a 20 per cent tariff for fentanyl. There could possibly be a 100 per cent duty imposed on imported films in order to protect the US film industry. There could also be tariffs on pharmaceuticals.

The Trump administration has reported that it had consultations/negotiations with Japan, Vietnam, South Korea, the United Kingdom, China, India and possibly other countries. It does not appear that negotiations are concluded and the other countries are not confirmed. It is also not clear that whatever is negotiated with the Trump USA are permanent and legally binding. Recall that President Trump is acting under an Executive Order invoking the National Emergencies Act. It is Congress that approves tariffs and trade agreements for them to be permanent and legally binding.

Note that in retaliation, Canada and China have imposed increased tariffs on goods imported from the USA, and have notified the WTO.

Again, the Trump reasons for imposing tariffs remain unclear – are they to return manufacturing to the USA; to encourage investments, to generate revenue, or a negotiating leverage?

RECENT TRUMP TARIFF ANNOUNCEMENT

At the end of his trip to the Middle East last week, President Trump announced that in coming weeks, Treasury Secretary Scott Bessent and Commerce Secretary Howard Lutnick, the tariff guru, will be sending letters to about 150 trading partners to inform them of the tariffs which the US will be unilaterally imposing on goods imported from their countries. President Trump indicated that while countries were in line to negotiate, it was not possible for the US to negotiate with 150 countries at once. It is assumed that the US Trade Representative, Jamieson Greer, responsible for formulating trade policy, negotiating trade agreements and settling trade disputes, is leading these negotiations.

So, here is another twist in the US tariff saga. Does this mean that the reciprocal tariffs announced in April on about 60 countries are now gone and are to be replaced by new unilateral tariffs? This would mean also that 90 countries having the 10 per cent could be seeing further tariff adjustments, supposedly quite fair, as the US determined. Apparently, the Administration will first be focusing on the 18 most important trading partners and those negotiating in good faith, again, as determined by the USA.

Maybe after countries get their letters informing of their unilateral tariff, then they can engage in negotiations either at the bilateral or regional levels. The timeframe for all of this is not given.

The WTO was established to facilitate multilateral, plurilateral, and bilateral negotiations. It also had a functioning dispute settlement mechanism. Even though some people are prematurely declaring the WTO dead, it might be in the USA’s interest to revive the Dispute Settlement Mechanism to a fully functioning state and use it to address its issues. It could also engage WTO members in tariff negotiations within the organisation. Negotiations would then be conducted properly, even if informally, and the outcomes would have certainty. The US-China Trade and Economic Meeting, it was noted, was held in Geneva, even if not at the WTO.

But first, the US has to be clear on what it is trying to achieve with this chaotic tariffs strategy.

Elizabeth Morgan is a specialist in international trade policy and international politics. Send feedback to columns@gleanerjm.com.