DUTIES, STRATEGY OR MADNESS/ Trump's political weapon surrounds the US with "enemies" and does not make Americans rich
Many of the tariffs decided by Trump have come into force, even with a punitive logic, which do not seem to help the US
The tariffs imposed on the European Union are scheduled to take effect on Tuesday. It's pointless to downplay this radical shift in American trade policy, comparable to that of 1934, but even worse because back then, the world economy wasn't globalized; the manufacturing and value chains were still largely domestic. Before the protectionist shift, goods circulating around the world were taxed on average 2-3%; today, the average exceeds 20%, as it was in 1910. The magnitude of Trump's blow is clear.
The tariff map is a puzzle where the pieces don't fit together. The heaviest blows were suffered by goods from Brazil (50%), Laos (40%), Myanmar (40%), Switzerland (39%), Iraq (35%), and Serbia (35%). Another 21 countries are subject to duties exceeding 15%.
These include several countries on which the United States relies heavily for a variety of goods, such as Vietnam (20%), India (25%), Taiwan (20%), and Thailand (19%). Japan will pay 15%, like the European Union, but that's not a small amount. Toyota already estimates it will have to pay nearly $10 billion a year. Surprisingly, Switzerland was also hit, with 39%, and Trump seems to be particularly targeting watches and gold .
India is particularly punished, as Trump aims to penalize its oil purchases from Russia by doubling the tariff rate to 50% starting August 27. Moscow, however, thanks to crude oil sales, including to Europe, can continue to finance its war of aggression against Ukraine. China accepted 20% tariffs, but in exchange obtained a green light for the export of strategic minerals that are particularly important to Beijing.
India, the world's most populous country, had been considered by previous American presidents as a privileged interlocutor in the strategic competition with China, but is now considered an enemy. The cost of tariffs threatens to make exports to the US impossible, Indians argue. In response, they are drawing closer to China, with which they share a 3,380-kilometer border and which until now has been considered a rival power. Prime Minister Narendra Modi will visit Beijing, a clear message to Donald Trump.
Goods from Mexico and Canada are exempt from customs duties if they comply with the free trade agreement that replaced NAFTA. Otherwise, goods produced in Mexico are subject to duties of 25%, and those from Canada to 35%. The tariffs have already cost US automakers, all of whom have plants in Mexico and Canada, approximately $12 billion, the hardest blow to the sector since the pandemic, reports the Wall Street Journal . And while companies have only slightly increased prices to cover costs so far, they will soon be forced to do otherwise.
The American president has done whatever he wanted with the European Union, given Brussels's weak response. He has imposed a 15% tax, and more. The EU will have to invest €600 billion in the United States and spend a whopping €750 billion on American gas and oil. This figure seems completely unrealistic; it would mean doubling current imports at prices that are out of line with, for example, the natural gas arriving through pipelines from Norway, North Africa, and the Middle East.
The EU already buys 45% of US gas in liquefied form, for around $51 billion. Even if it were to reach 100%, it could reach $100 billion a year. As for US oil, it will already be $40 billion by 2024. How the overall figure of $750 billion was reached, even over several years, remains a mystery.
If we want to find economic logic, we must assume that Trump wants to bail out American oil companies, especially those in the shale gas and salt oil sectors (extracted from porous rock using hydraulic crushing), which are heavily indebted and for which only a price equivalent to $90 a barrel can be profitable. Today, West Texas is at $62 and Brent is at $66 a barrel.
And that's not all. A joint declaration is still missing, so it's unclear which goods will be exempt (aircraft and their components, some chemicals, raw materials, and some agricultural products, including wine, are being discussed), and whether a quota mechanism is planned to save steel and aluminum, which are taxed at 50%. Furthermore, there's the unknown factor of pharmaceuticals, with the threat of a tax of up to 250%.
The impact of the tariffs has so far been mitigated by several factors: stocks accumulated by companies, supplies ordered in advance, and companies' decisions to absorb the increases. However, the autumn price lists already published show a marked deterioration.
According to Yale's Budget Lab, Americans will see an average tax of 18.3% on imported goods, the highest rate since 1934. The independent policy research center estimates that prices will rise by 1.8% in the short term due to Trump's trade war, resulting in a loss of income of $2,400 per household in 2025 alone.
The President exulted, saying that a rain of dollars was pouring into America. In reality, it's a tax that importers pass on to the final price, impacting primarily inflation and consumer purchasing power. If domestic demand declines and international demand is compressed by American tariffs, the logical conclusion is that the economy as a whole is also destined to slow. Estimates, including those of the IMF, vary: in May, it was estimated at half a percentage point; today, this seems like misplaced optimism.
But there is also an aspect destined to make the whole picture more disturbing: the political use of tariffs which in Trump's hands becomes an often irrational use , based on the moods of the moment and on an unpredictable friend-enemy logic because today's friend can become tomorrow's enemy.
The massive tariffs against Brazil were a punishment for Lula and a show of support for Bolsonaro, who is under arrest on charges of attempting a coup. But due to pressure from large American corporations, airplanes, fuel, metals, and even orange juice were exempted. Consider Canada, which has always been closely integrated with the United States, and has now become an enemy to be fought and annexed, perhaps with a Russian-style invasion.
Is there really any method to this madness?
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