In the context of rising U.S. trade deficits, President Trump asserted that the main issue arises from the lack of fairness in trade relationships between the U.S. and partner countries. He argued that while the U.S. economy is very open, other countries keep their markets tightly closed to U.S. goods. Therefore, the imposition of tariffs is seen as the only way to force trading businesses to 'use' this relationship again.

President Trump's Perspective

Trump has cited the 'lack of responsiveness' from trading partners as the U.S. continuously records trade surpluses with most countries. He emphasized:

"We have trade surpluses with most countries – not all, but most – and we will change that."

To address this issue, Trump began applying tariffs on steel, aluminum, and goods from China. However, despite these efforts, the figures show that the U.S. chemical trade surplus still increased by 14% compared to the previous year, and after the tariffs were applied, the flame remained unchanged.

Arguments from Economists

Economists provide various perspectives on the current use of tariffs that also yield the expected effectiveness:

  • Scott Lincicome (Cato Institute):
    Lincicome argues that, with the USD always being favored globally, its value increases naturally. A strong USD leads to cheaper imports and more expensive exports, thus increasing trade deficits. According to him, trade wars are a symbol of a strong U.S. economy, and Trump's tariff solutions only serve to shift trade balances among campaigns without addressing the overall issue.

  • Steven Kamin (American Enterprise Institute):
    Kamin argues that the loss of manufacturing jobs is not due to competition from imports but primarily a result of technological advancement. He notes that while applying tariffs may help attract some manufacturing jobs back, the number will be very limited and insufficient to reverse the long-term trend.

  • Ryan Young (Competitive Enterprise Institute):
    Young emphasizes that trade deficits do not reflect any negative economic condition. American consumers buy goods from abroad because they perceive high value relative to the price paid. He notes that for over 50 years, the U.S. has maintained trade surpluses while the living standards of its citizens have continually improved across income, unemployment rates, life expectancy, and quality of life indicators.

Examples of Unfair Tariff Policies

Some studies and figures indicate that the trade activities under the U.S. tariff policy are uneven, leading to instability in the trade balance:

  • The case of Brazil:
    While there is only a 2.5% tax on the consumption of ethanol in the U.S., Brazil imposes an 18% tax on ethanol imports from the U.S. As a result, by 2024, the U.S. purchased over $200 million worth of ethanol from Brazil but only exported $52 million worth of ethanol to Brazil.

  • The Case of India:
    In the agricultural sector, the average MFN tax that the U.S. applies is 5%, while India applies an average of 39% on goods imported from the U.S. Along the coast, when it comes to major motorcycle companies, the U.S. applies a 100% tax on imported bicycles, while Indian motorcycles are only taxed at 2.4%.

  • The Case of the European Union (EU):
    In the seafood industry, the EU allows the U.S. to purchase seafood in large quantities but restricts seafood exports from 48 of the 50 U.S. states to the EU, despite improving the approval process since 2020. As a result, in 2023, the U.S. imported $274 million in value from the EU but only exported $38 in return. Additionally, for large cars, the EU applies a 10% tax on cars imported from the U.S., while the U.S. only applies 2.5% on cars from the EU.

Conclusion

Although President Trump asserts that tariff measures will force trading partners to 'use' and mitigate trade imbalances, economists point out that the U.S. trade surplus does not prove to be a sign of a weak economy but may be the natural system of a strong USD and an open economy. Legal tariff measures may shift balances among partners but do not necessarily lead to overall improvements in trade matches or restore significant domestic manufacturing jobs.

In the context of increasingly complex global trade, finding solutions to address trade imbalances requires careful consideration of short-term economic benefits and the long-term impacts on the economy. Trade policy needs to be built on a deep understanding of economic mechanisms rather than solely relying on targeted tariff measures aimed at creating 'fairness' on paper.