“For me, ‘customs duties’ are very pretty words,” Donald Trump declared during his campaign. And for good reason: the elected president of the United States wants to reintroduce them on all imports, at the risk of relaunching all-out trade wars.
Beyond an increase of 10 to 20% in duties on all products imported into the United States, the former president who will become one again intends to target China more specifically, this time with 60% duties. customs.
– Can he act as he wants?
American laws give the president the necessary tools to implement customs duties by decree, as Donald Trump was able to do several times during his first term, on Chinese and European steel and aluminum for example.
Joe Biden also did it with his targeted approach to certain Chinese products.
With possible additional room for maneuver for Donald Trump: he could benefit from the absolute majority in the House of Representatives, in addition to that already acquired in the Senate.
– How will other States react?
“If you apply tariffs in an indiscriminate way, targeting both allies and competitors, that could be a problem,” said Jeffrey Schott of the Peterson Institute for International Economics think tank.
Such a decision would go “against the obligations linked to the WTO (World Trade Organization) or free trade agreements and would lead, as in the past, to reprisals from foreign countries”, underlines he told AFP.
During his first mandate, customs duties applied to Chinese and European products led to retaliation from Beijing and Brussels. But on one side or the other, it was a response that was intended to be proportionate. It is difficult at the moment to imagine what the impact of a general increase in customs duties would be.
– What are the international remedies?
In principle, the WTO is there to ensure that market access conditions are equivalent between States and to gradually reduce obstacles to free trade. In this case, customs duties have always been considered a major obstacle.
The WTO has a dispute settlement body before which a State can lodge an appeal. But the system “is broken”, regrets Jeffrey Schott.
“In theory, a proceeding can be launched and move forward but will ultimately be blocked and rendered useless by a simple appeal process by the United States, but there is no appellate body to hear the case “, specifies the researcher.
– What risks for the American economy?
The simple application of customs duties to all products entering the United States will have a certain cost, warned the Tax Foundation, estimating the increase in taxes that the American consumer will have to pay at $525 billion annually.
Because companies rely heavily on imported products to “be able to offer their customers a variety of products at affordable prices,” Jonathan Gold, vice-president of the NRF, the national retail federation, told AFP. For him, “this tax will ultimately be taken from the pockets of consumers in the form of an increase in prices”.
According to the Tax Foundation, this would also result in 0.8 percentage points less GDP and 684,000 jobs destroyed.
– Unlimited commercial tensions?
During his first mandate, the implementation of customs duties was primarily intended to have an advantage to impose new negotiations with different trading partners. Donald Trump has always presented himself as an expert in agreements and his first objective was to obtain them.
In this regard, he welcomed a trade agreement with China which theoretically aimed to rebalance the trade balance between the world’s two leading economies in exchange for the gradual lifting of the duties put in place. In reality this rebalancing has not really materialized, even if the American trade deficit with China has generally stopped increasing.
This time, the customs duties are intended to be an alternative to the additional tax cuts that Donald Trump wishes to implement, which gives them a potentially more lasting character and risks accentuating the fragmentation of the global economy that the president fears. International Monetary Fund (IMF).
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