Monday, June 30
You may have noticed some recent changes in U.S. trade policy.
Wall Street calmed down a bit after the U.S. and China agreed to temporarily reduce the astronomical tariff rates they imposed on each other, pending further negotiations. Same with Europe. Now we’re waiting to see what comes next.
The bigger question is whether the results of these negotiations will solve the problems that led us into this situation. I’m skeptical.
First, we’ve been here before and it was mostly loud fury, not real change.
Second, any agreement President Trump makes will be temporary. That doesn’t give businesses the stability they need to operate with confidence.
Another reason I’m not optimistic is the dynamic situation. Tariffs are manageable if businesses know what to expect.
But that’s not how this administration operates. Trump uses uncertainty as a negotiating tactic, thinking confused opposition gives him an advantage.
Unfortunately, it confuses innocent bystanders too.
If you are an import-dependent U.S. company, you need to know your input costs with reasonable certainty, not just now but also a year ahead. That certainty isn’t there. Plus, these early agreements could fall apart.
So, businesses remain reluctant. That reduces economic growth.
Finally, the trade battle will shift elsewhere. There’s an official pause, but the firing hasn’t ceased. It’s not a truce when warring partners just shoot smaller bullets.
Remember, we have other trading partners and a president who likes using his trade powers to accomplish other goals. Every industry must still wonder when it will get dragged into someone else’s fight.
Also, the tariffs are all being done under executive authority. That means any future president can change them. Nothing stops Trump from reneging on any deal he makes, and experience suggests he probably will.
There’s no reason for China or any other country to believe they have a permanent, enforceable deal with the U.S. unless Congress approves it. This is the same Congress that can’t even agree on a budget.
Passing hundreds of trade agreements while special interests fight over every detail just isn’t happening. This means U.S. businesses have no reason to make the long-range plans and investments needed to revive U.S. manufacturing and generate the economic growth everybody wants.
What we need is stability. Companies can handle a lot if they have stable trade, tax, and regulatory policies. When all those are constantly in flux, it’s best to wait. And waiting puts prosperity on hold.