When I used the phrase "reciprocal tariff" I was specifically referring to actions such as imposing a 25% tariff on the import of US produced cars in response to the US government imposing 25% tariffs on cars imported into the US.
I was contrasting it to the abuse of the English language when the current US President uses that phrase.
The problem with reciprocating tariffs is that a) they fuel a trade war (which, as in any war, no one can win) and b) they impose additional taxes on your own consumers or, possibly worse, raise prices without earning additional taxes that can be used to offset the cost to consumers (not that it appears the US Gov plans to use revenue from tariffs to do that, through, for example, cutting taxes for the poorest or increasing aid for medical bills etc). I can see the temptation of reciprocal tariffs, but I hope most nations think carefully before acting.
What is the point of reciprocal tariffs? They are a revenue-raising tool for government, I suppose, but I can see no other advantage.
If you believe you have the capacity to make widgets more cheaply and efficiently than other countries, but your country has no industrial capacity currently so you have to develop your industry, then putting tariffs on widgets that are being imported to you until your widget industry is established makes sense.
Another reason would be if you have environmental and worker protection that you want to keep and you don't want your industries undercut by foreign industries that are cutting corners.
I think those are the main positive reasons.
If you want to protect domestic widget manufacturing, or create a domestic widget manufacturing capacity, then logically you would start by looking at why so many widgets are imported before taking action (and, of course, tariffs aren't the only action you can take).
It may be that widgets are protected by patents or other IP and the single global manufacturer is seeking to get a return on their investment in developing widgets before cheap knock-offs squeeze their market. In which case tariffs won't have any effect at all, but investing in research to develop the next generation of widget that isn't covered by the existing IP might enable your industry to be the global manufacturer instead.
Probably the biggest reason would be that overseas manufacturers out compete your domestic industry on price, quality or both, or simple capacity to deliver the demand for widgets. If it's just price, then providing domestic industry has spare capacity or can rapidly increase capacity tariffs may balance the field a bit, but if domestic supply can't possibly meet demand then that's only going to put up prices. And, if the large imports of widgets is because those produced elsewhere are better then you need someone to invest in your domestic industry to make better widgets, and tariffs are an inappropriate economic tool.
It may be appropriate to launch advertising campaigns to encourage consumers to buy your domestically produced widgets. It's also possible to use the machinery of government, and require government agencies to purchase domestically produced widgets - though that may be at odds with drives to increase efficiency if that's seen purely in narrow terms that doesn't account for the impact on the wider economy of government expenditure.
The problem with reciprocating tariffs is that a) they fuel a trade war (which, as in any war, no one can win) and b) they impose additional taxes on your own consumers or, possibly worse, raise prices without earning additional taxes that can be used to offset the cost to consumers (not that it appears the US Gov plans to use revenue from tariffs to do that, through, for example, cutting taxes for the poorest or increasing aid for medical bills etc). I can see the temptation of reciprocal tariffs, but I hope most nations think carefully before acting.
But neither can you just put up with the kind of thing Trump is doing. That is why the likes of Canada and the EU are not going for general tariffs but hitting where it hurts. Being selective.
If you want to protect domestic widget manufacturing, or create a domestic widget manufacturing capacity, then logically you would start by looking at why so many widgets are imported before taking action (and, of course, tariffs aren't the only action you can take).
I wasn't clear: I was talking about a situation like in a newly independent country or a country recovering from war, in which industrial capacity has either been destroyed or was inhibited because the Imperial power wanted to concentrate manufacturing at home.
South Korea managed to start up its industrial economy by using selective tariffs to protect its newly developing industries. A country that has already industrialised doesn't benefit in the same way.
So, as I understand it: imagine a situation where a developing nation produces a lot of raw cotton but can't turn it into fabric because the imperial power that ruled it has deliberately stifled any attempt at creating a fabric industry of their own. At independence, imperial fabrics will still be flooding the market making it difficult for any new developing industry to become profitable in time for investors to be interested. But if there are tariffs on imperial fabrics for just long enough then the developing industry to establish itself and get to the point where it can compete on level terms.
Basically new companies have an inherent disadvantage competing against established companies in any settings. Tariffs are a tool governments can use to offset that.
Interesting question about trans-shipment. If Ireland has a tariff of 20% (because it's in the EU) and the tariff on the UK is 10%, can an Irish exporter cut their tariff in half by shipping to the U.S. via Belfast? Given the slapdash way these tariffs were put together I can almost guarantee that no one involved in their creation has even bothered to think about questions like trans-shipment.
What is the point of reciprocal tariffs? They are a revenue-raising tool for government, I suppose, but I can see no other advantage.
Sometime yes, sometimes no revenue is generated. For example, if you put a 3% tariff on Canadian steel that will raise revenue for the government. If you put a 300% tariff on Canadian steel that won't raise any money because Canadian steel will be priced out the market so no one will be importing it. (Quick math lesson: 300% of $0 is $0.) So it's important to distinguish between tariffs for revenue and tariffs meant to protect local businesses from foreign competitors.
Unless there is such a high demand for steel that users are faced with a) no steel and their construction project/cars etc not being built or b) paying the much higher price for Canadian steel with a 300% tariff and passing that cost onto the consumers (who then need to make the decision of buying a more expensive new car or keep driving the old one, or move into the great new office building they'd commissioned which is now much more expensive or stay in the old building which isn't fit for purpose). In which case you may get some revenue from the very high tariff, but quite possibly a lot less than would have been the case with a much lower tariff.
Interesting question about trans-shipment. If Ireland has a tariff of 20% (because it's in the EU) and the tariff on the UK is 10%, can an Irish exporter cut their tariff in half by shipping to the U.S. via Belfast? Given the slapdash way these tariffs were put together I can almost guarantee that no one involved in their creation has even bothered to think about questions like trans-shipment.
I think no because the Northern Ireland Protocol treats Northern Ireland as de facto part of the EU customs area. But I am not sure because most of the explanations of this I've found illustrate it with examples involving goods moving from GB to the EU via NI which is not what we're talking about here.
Interesting question about trans-shipment. If Ireland has a tariff of 20% (because it's in the EU) and the tariff on the UK is 10%, can an Irish exporter cut their tariff in half by shipping to the U.S. via Belfast? Given the slapdash way these tariffs were put together I can almost guarantee that no one involved in their creation has even bothered to think about questions like trans-shipment.
I think no because the Northern Ireland Protocol treats Northern Ireland as de facto part of the EU customs area. But I am not sure because most of the explanations of this I've found illustrate it with examples involving goods moving from GB to the EU via NI which is not what we're talking about here.
Wait, no, I'm wrong, but I still don't understand the situation... here's what they're saying about Bushmills whiskey...
Interesting question about trans-shipment. If Ireland has a tariff of 20% (because it's in the EU) and the tariff on the UK is 10%, can an Irish exporter cut their tariff in half by shipping to the U.S. via Belfast? Given the slapdash way these tariffs were put together I can almost guarantee that no one involved in their creation has even bothered to think about questions like trans-shipment.
I think no because the Northern Ireland Protocol treats Northern Ireland as de facto part of the EU customs area. But I am not sure because most of the explanations of this I've found illustrate it with examples involving goods moving from GB to the EU via NI which is not what we're talking about here.
Indeed. To the best of my knowledge the U.S. is not a party to that agreement and is under no obligation to follow that protocol.
My understanding (and sometimes/quite often I am wrong) is that all goods crossing international borders have a country of origin on the paperwork and it is this that duty rates are set according to. My (UK) company imports stainless steel from a Taiwan supplier but when they once put some packs in the container with a Chinese origin the duty rate was different for those. So moving goods from the EU to the UK and then to the USA won't make a difference. If a UK customer uses our material to make something the country of origin becomes the UK.
Having said that we have some customers who use our material to manufacture widgets that go to the USA and they think they need to identify which bits came from which country and what the cost to manufacture those bits was. If they really need to do that it becomes a nightmare.
Given the tariffs are purely calculated on trade deficit, I'm not sure why Labour ministers are out there claiming that the 10% level was a result of government action.
Given the tariffs are purely calculated on trade deficit, I'm not sure why Labour ministers are out there claiming that the 10% level was a result of government action.
Given the tariffs are purely calculated on trade deficit, I'm not sure why Labour ministers are out there claiming that the 10% level was a result of government action.
have you ever met a politician?
It was somewhat rhetorical. But it’s certainly something to have in the back pocket the next time anyone claims that the press is uniquely hostile to this government, especially as polling shows it’s an opinion held the majority of the public.
Given the tariffs are purely calculated on trade deficit, I'm not sure why Labour ministers are out there claiming that the 10% level was a result of government action.
Given the tariffs are purely calculated on trade deficit, I'm not sure why Labour ministers are out there claiming that the 10% level was a result of government action.
No doubt Trump will keep tariffs on the EU until Denmark agrees to sell him Greenland. Similar tactics for Canada, methinks.
Maybe. It's hard to know what Trump's actual priorities will be if forced to choose between them. His desire to be seen as the great dealmaker may see him drop any talk of Greenland as quickly as he picked it up, or he may genuinely be intent on extorting or conquering his way to territorial expansion.
The latest in the Trump tariff saga. https://www.bbc.com/news/live/cp8vyy35g3mt
A cynic would think this rollercoaster is designed to help some individuals buy low, sell high, repeat as required.
Bessent is claiming it was the plan all along :rolleyes:
"He and I had a long talk on Sunday, and this was his strategy all along. And you might even say that he goaded China into a bad position. They responded. They have shown themselves to the world to be the bad actor," Bessent said."
AIUI, the vast majority of Japanese, Korean and European cars sold in North America are manufactured in North America (US, Mexico or Canada) simply because the costs of shipping cars across the ocean are too high to make it worthwhile for anything except high-end and prestige vehicles (shipping costs are approximately the same regardless of the make and model of a car, and so are a smaller fraction of the cost of more expensive cars). The same works the other way round as well, the vast majority of US cars (eg: Fords) sold in Europe are manufactured here. The big car manufacturers will have factories in all three nations, and they're probably constantly adjusting the balance of production between the three nations to reflect changing demand (or, more likely expected changes in demand given the time required to ramp production up or down) to minimise costs of transporting new cars even without the addition of tariffs.
Interesting. The BBC was saying they would be moving. I’m sure it wasn’t from Canada though.
I assume the BBC was picking up the Nikkei story:
"In a statement Tuesday, Honda Canada said it “cannot comment on the specifics of this morning’s headlines” after Japanese newspaper Nikkei reported that the automaker was considering switching some car production from Canada and Mexico to the U.S., aiming for 90 per cent of cars sold in the country to be made locally in response to new U.S. auto tariffs."
Car manufacturers usually think years down the line, not just what seems good for the next 6 months. An article from DeutscheWelle discusses restrained responses to Trump's policies. But specifically with regard to relocating operations in the US, it observes:
And what about relocating German operations across the Atlantic — a primary goal of Donald Trump's trade policy?
"During the final years of the Biden administration and the Inflation Reduction Act, many European companies were already considering that," said Brzeski, as deregulation, lower energy prices, and tax cuts made the US "even more appealing."
But at the moment, the US president's "erratic" economic policies and tariff chaos have created "major doubts about legal certainty, and few business leaders are in a hurry to move there."
So, yeah, Honda might announce that they plan to shift production to the US to appear to mollify Trump, but if so it likely had been in their plans to do that all along. I find it far less believable that Honda suddenly changed their plans in response to the Trump nonsense because such a kneejerk reaction is not what responsible businesses do.
How long before other countries get really tough on Trump? He is hurting the world economy.
If Congress doesn’t intervene and Trump is willing to ignore court orders, as well as taking people off the street, and arresting people for virtually nothing how long can the world standby? Is no action tacit approval?
How long before other countries get really tough on Trump? He is hurting the world economy.
If Congress doesn’t intervene and Trump is willing to ignore court orders, as well as taking people off the street, and arresting people for virtually nothing how long can the world standby? Is no action tacit approval?
How tough have other countries got with Turkey or Saudi Arabia, or Hungary for that matter? The internal policies of allies are ignored, and it will take a lot more before there is a general consensus that the US is no longer an ally. Trade wars may continue but no-one is going to say shit about internal repression.
IMO other countries better figure out fast that Trump has no interest in being an ally. He wants client states. He's all about leverage and power and being on top. He has no notion of cooperation among equals.
IMO other countries better figure out fast that Trump has no interest in being an ally. He wants client states. He's all about leverage and power and being on top. He has no notion of cooperation among equals.
In that latter part the difference with previous presidents is degree and tone rather than kind - we well remember Bush's poodle.
IMO other countries better figure out fast that Trump has no interest in being an ally.
Right, but equally being on the outs with Trump isn't a binary state, as the last few weeks have proved, especially if he has a bigger beef with someone else. So given that international agreements unroll over a period longer than four years do you:
Dissemble for four years, assuming that the regime changes in tone after that point.
Or, assume the US is an unreliable partner going forwards because its political order allows for Trump-like breaks.
I think for the most part what you see is a kind of hedging between the two options.
I remember that too, and I never understood it. Was the "special relationship" ever really worth it?
WW2, I think, but that's about it. UK PMs often come off as the bully's sidekick, there to laugh at his unfunny jokes and hold the victim's arms while the bully beats them up.
The special relationship is primarily about an institutional system allowing the sharing of intelligence and military cooperation.
Why ? WW2, the Cold War, and the need to remain allied with the world’s primary superpower. People do not want to be on the wrong side of this. (Though that list is five years out of date now.)
But that's different. You do not have to be best friends, or even friends, to be allies. But you do need a certain level of trust. As far as I can see it is very difficult to trust Trump to do anything, not even to be a consistent enemy! So depending on the US for anything important, especially defence, becomes a lot less attractive.
A little foreign meddling on the day of the Canadian election.
"U.S. President Donald Trump injected himself into the federal election on Monday, appearing to suggest Canadians vote for him when they go to the polls.
"Good luck to the Great people of Canada,'" Trump wrote on his social media site Truth Social.
"Elect the man who has the strength and wisdom to cut your taxes in half, increase your military power, for free, to the highest level in the World, have your Car, Steel, Aluminum, Lumber, Energy, and all other businesses, QUADRUPLE in size, WITH ZERO TARIFFS OR TAXES, if Canada becomes the cherished 51st. State of the United States of America." "
Imagine the outrage and venom the orange menace would have spouted had Prime Minister Trudeau sent a message like that to the US suggesting that US citizens should vote for Kamala Harris last November??
He is an evil dictator with zero regard for anyone except himself. His billionaire supporters will find this out eventually. Everyone gets thrown under the bus.
Comments
I was contrasting it to the abuse of the English language when the current US President uses that phrase.
What is the point of reciprocal tariffs? They are a revenue-raising tool for government, I suppose, but I can see no other advantage.
Another reason would be if you have environmental and worker protection that you want to keep and you don't want your industries undercut by foreign industries that are cutting corners.
I think those are the main positive reasons.
It may be that widgets are protected by patents or other IP and the single global manufacturer is seeking to get a return on their investment in developing widgets before cheap knock-offs squeeze their market. In which case tariffs won't have any effect at all, but investing in research to develop the next generation of widget that isn't covered by the existing IP might enable your industry to be the global manufacturer instead.
Probably the biggest reason would be that overseas manufacturers out compete your domestic industry on price, quality or both, or simple capacity to deliver the demand for widgets. If it's just price, then providing domestic industry has spare capacity or can rapidly increase capacity tariffs may balance the field a bit, but if domestic supply can't possibly meet demand then that's only going to put up prices. And, if the large imports of widgets is because those produced elsewhere are better then you need someone to invest in your domestic industry to make better widgets, and tariffs are an inappropriate economic tool.
It may be appropriate to launch advertising campaigns to encourage consumers to buy your domestically produced widgets. It's also possible to use the machinery of government, and require government agencies to purchase domestically produced widgets - though that may be at odds with drives to increase efficiency if that's seen purely in narrow terms that doesn't account for the impact on the wider economy of government expenditure.
But neither can you just put up with the kind of thing Trump is doing. That is why the likes of Canada and the EU are not going for general tariffs but hitting where it hurts. Being selective.
South Korea managed to start up its industrial economy by using selective tariffs to protect its newly developing industries. A country that has already industrialised doesn't benefit in the same way.
Basically new companies have an inherent disadvantage competing against established companies in any settings. Tariffs are a tool governments can use to offset that.
Interesting question about trans-shipment. If Ireland has a tariff of 20% (because it's in the EU) and the tariff on the UK is 10%, can an Irish exporter cut their tariff in half by shipping to the U.S. via Belfast? Given the slapdash way these tariffs were put together I can almost guarantee that no one involved in their creation has even bothered to think about questions like trans-shipment.
Sometime yes, sometimes no revenue is generated. For example, if you put a 3% tariff on Canadian steel that will raise revenue for the government. If you put a 300% tariff on Canadian steel that won't raise any money because Canadian steel will be priced out the market so no one will be importing it. (Quick math lesson: 300% of $0 is $0.) So it's important to distinguish between tariffs for revenue and tariffs meant to protect local businesses from foreign competitors.
I think no because the Northern Ireland Protocol treats Northern Ireland as de facto part of the EU customs area. But I am not sure because most of the explanations of this I've found illustrate it with examples involving goods moving from GB to the EU via NI which is not what we're talking about here.
Wait, no, I'm wrong, but I still don't understand the situation... here's what they're saying about Bushmills whiskey...
Indeed. To the best of my knowledge the U.S. is not a party to that agreement and is under no obligation to follow that protocol.
Having said that we have some customers who use our material to manufacture widgets that go to the USA and they think they need to identify which bits came from which country and what the cost to manufacture those bits was. If they really need to do that it becomes a nightmare.
have you ever met a politician?
It was somewhat rhetorical. But it’s certainly something to have in the back pocket the next time anyone claims that the press is uniquely hostile to this government, especially as polling shows it’s an opinion held the majority of the public.
The US using its own figures is not unique to the assessment of the UK, but follows the practice they've adopted for every other country.
Maybe. It's hard to know what Trump's actual priorities will be if forced to choose between them. His desire to be seen as the great dealmaker may see him drop any talk of Greenland as quickly as he picked it up, or he may genuinely be intent on extorting or conquering his way to territorial expansion.
A cynic would think this rollercoaster is designed to help some individuals buy low, sell high, repeat as required.
"He and I had a long talk on Sunday, and this was his strategy all along. And you might even say that he goaded China into a bad position. They responded. They have shown themselves to the world to be the bad actor," Bessent said."
via FT (https://www.ft.com/content/f3e0ee58-47a0-41c4-b021-ed19d27da6e7 - paywalled)
Mr. Bessent is among those who think that irony is a bit like silvery or goldy, but cheaper, isn't he?
https://www.cbc.ca/news/canada/prince-edward-island/pei-avc-artist-in-residence-quits-controversial-painting-1.7506019
https://www.msn.com/en-us/politics/government/avoid-u-s-travel-if-possible-canadian-academics-are-being-urged/ar-AA1CYX7Z?ocid=BingNewsVerp
I am not surprised. Academia seems to be being punished for its free thinking.
Meanwhile Honda is moving production of one of its biggest selling cars in the US to the US. That will please Trump.
https://globalnews.ca/news/11132499/honda-donald-trump-tariffs-canada/
Interesting. The BBC was saying they would be moving. I’m sure it wasn’t from Canada though.
I assume the BBC was picking up the Nikkei story:
"In a statement Tuesday, Honda Canada said it “cannot comment on the specifics of this morning’s headlines” after Japanese newspaper Nikkei reported that the automaker was considering switching some car production from Canada and Mexico to the U.S., aiming for 90 per cent of cars sold in the country to be made locally in response to new U.S. auto tariffs."
If Congress doesn’t intervene and Trump is willing to ignore court orders, as well as taking people off the street, and arresting people for virtually nothing how long can the world standby? Is no action tacit approval?
How tough have other countries got with Turkey or Saudi Arabia, or Hungary for that matter? The internal policies of allies are ignored, and it will take a lot more before there is a general consensus that the US is no longer an ally. Trade wars may continue but no-one is going to say shit about internal repression.
In that latter part the difference with previous presidents is degree and tone rather than kind - we well remember Bush's poodle.
Right, but equally being on the outs with Trump isn't a binary state, as the last few weeks have proved, especially if he has a bigger beef with someone else. So given that international agreements unroll over a period longer than four years do you:
Dissemble for four years, assuming that the regime changes in tone after that point.
Or, assume the US is an unreliable partner going forwards because its political order allows for Trump-like breaks.
I think for the most part what you see is a kind of hedging between the two options.
WW2, I think, but that's about it. UK PMs often come off as the bully's sidekick, there to laugh at his unfunny jokes and hold the victim's arms while the bully beats them up.
Why ? WW2, the Cold War, and the need to remain allied with the world’s primary superpower. People do not want to be on the wrong side of this. (Though that list is five years out of date now.)
"U.S. President Donald Trump injected himself into the federal election on Monday, appearing to suggest Canadians vote for him when they go to the polls.
"Good luck to the Great people of Canada,'" Trump wrote on his social media site Truth Social.
"Elect the man who has the strength and wisdom to cut your taxes in half, increase your military power, for free, to the highest level in the World, have your Car, Steel, Aluminum, Lumber, Energy, and all other businesses, QUADRUPLE in size, WITH ZERO TARIFFS OR TAXES, if Canada becomes the cherished 51st. State of the United States of America." "
https://www.cbc.ca/news/politics/donald-trump-election-canada-truth-social-1.7520212
He is an evil dictator with zero regard for anyone except himself. His billionaire supporters will find this out eventually. Everyone gets thrown under the bus.