“I’ll probably be more lenient than reciprocal,” Donald Trump said, during an interview with Newsmax.
That’s where we are now, by the way. The American people have to subject themselves to Newsmax to get the latest from their president. Either that, or sift through his social media feed which, on some days, is just a compendium of solicitations for stuff he and his family are hawking, from crypto coins to branded Bibles to unisex frangrances.
“If I was reciprocal, that would be very tough for people,” Trump went on, in the Newsmax segment. “There are some exceptions, but not too many.”
It’s impossible to know exactly what that means, and I doubt Trump knows just yet either. Hell, we might not even know after the actual announcement next week, which is to say whatever the EO stipulates will be subject to change, and at a moment’s notice, just like all of Trump’s other decrees.
With “Liberation Day” looming, the table below, from Goldman, is well worth highlighting. It tells you pretty much everything you could possibly want to know about America’s trade relationships if you were determined to “right” various “wrongs” and “correct” sundry “injustices” (lots of scare quotes there).
Take a moment to read the column headings. Again: That table contains a lot of information, and if you read it correctly, it’s at odds with the notion, as floated implicitly by Kevin Hassett, that markets are overreacting to the concept of reciprocal tariffs because “just a few countries cheat us.”
Long story short, it’s not about the number of countries, it’s about how important those countries are in the context of US trade. Scott Bessent made headlines a few days ago for saying just 15% of countries will be hit with new levies. “There’s what we would call kind of the ‘dirty 15,'” he told Fox earlier this month, adding that those countries account for “a huge amount of our trading volume.”
That latter point’s absolutely crucial, and Hassett’s “just a few countries” remarks sounded like an attempt to gloss over it in the interest of reassuring markets. As Goldman’s Alec Phillips noted, referring to the table above, Bessent’s “dirty 15” “would still likely cover nearly all US trade.” The USTR solicited feedback on 19 nations which, if you add them up, comprise nine out of every $10 of US imports. 15 of them have trade surpluses with America.
As far as specifics, the table from Goldman gives you a sense of the country-by-country tariff differentials, the tariff-equivalent of non-tariff measures, VATs and FX under-valuation, all of which have been mentioned by Trump or his surrogates as points of contention and thereby fair game when it comes to crafting reciprocal measures.
Toss in the digital services tax Trump despises and his new weapon — i.e., the “secondary tariffs” which for now just apply to countries buying Venezuelan energy, but could in theory be applied to anything — and this White House has ostensible cause to hit every nation whose trade with America matters with some kind of meaningfully punitive levy.
It seems to me that Trump’s most recent remarks, like those cited here at the outset, suggest he’s trying to preemptively explain away a decision not to take the kind of world-altering action the numbers “require” if he really does intend to pursue an uncompromisingly literal interpretation of reciprocity.
For now, Goldman’s assuming a scenario that’s worse than the market’s view as estimated by a survey the bank conducted. In the poll, the average expected reciprocal tariff rate was 9.3%. Goldman, Phillips said, “expect[s] the initially proposed rate to be higher, potentially closer to double what market participants expect.”
The bank’s economics team, you’re reminded, is assuming that between the reciprocal measures and “other” tariffs, the effective US tariff rate will ultimately rise by 10ppt with some risk of a jump as large as 15ppt.
Will the US keep buying oil from Venezuela while applying tariffs to other countries that also import from Venezuela? I know it’s impossible to make sense of this and I am not sure why i still try.
I think the main target of the tariff-on-Venezuelan-oil-customers is China, which buys something like 60-70% of Venezuela’s oil production. If effective, the tariff would effectively cut global oil production by around 0.8%, probably offset by increased availability of Russian oil – at the current rate, the US Navy will be helpfully escorting Russian tankers [sarcasm].
On tariffs generally – my base case is that Trump is i) incapable of backing down on his plans to tariff the world, and ii) unable to stop his erratic, ever-changing, without-notice announcements of new and changed tariffs and levies.
i) is because tariffs are the only economic idea he has, may be necessary to fund the only tax idea he has (tax cuts for the rich), and are central to the Mar-A-Lago Accord fantasy-turned-policy that Bessent et al seem to be pursuing.
Suppose ii) is wrong and that over the next few months the Trump crew actually manages to roll out a coherent global tariff scheme, convince companies/investors that the US tariff scheme is now fixed, predictable, and reliable, and get Trump to shut up about the subject even as other countries retaliate and companies lobby for exemptions.
What will be the impact of high global tariffs without the “uncertainty” part?
/quote
Suppose ii) is wrong and that over the next few months the Trump crew actually manages to roll out a coherent global tariff scheme, convince companies/investors that the US tariff scheme is now fixed, predictable, and reliable, and get Trump to shut up about the subject even as other countries retaliate and companies lobby for exemptions.
/unquote
coherent, fixed, predictable, reliable, get Trump to shut up
None of that is going to happen
I don’t know how I will keep track of all the sizes and shapes of tariffs we’ll encounter before this is all over. So far, we have the basic import and export tariffs (which work one way in the US, but differently in every other country). These tariffs can be “fair,” “large” and “rather large,” but we can all agree they are beautiful. We also have totally legal tariffs (ours) and totally illegal tariffs (theirs). And now, I’m being told if you don’t go reciprocal, the recently-discovered NextGen tariff, you can do “lenient.” (It’s an interesting word you don’t hear much anymore unless someone mentions it just before you head out for a friendly interview).
Maybe I’m overreacting, and all I need is an old school thesaurus and a tariff bingo card. And maybe someone should explain to him how long-term supply contracts and shipping lags work.
I think once you start with the premise that Trump is truly insane then everything starts to make sense.
Its a good baseline. Better than the baseline of 4d chess genius.
His chaos is beginning to feel a little predictable. Wild swings of good news / bad news headlines.
But also with a net negative impact in the medium term (at least).