President Trump’s Tariffs Shake the World Economy—Once Again

The Trump administration went on offense again this month on a number of international trade disputes. On Dec. 2, the U.S. President tweeted his intention to impose new tariffs on steel and aluminum imports from Argentina and Brazil to retaliate against a “massive devaluation of their currencies, which is not good for our farmers.” The tariffs will hit both countries where it hurts since Brazil is one of the largest steel suppliers to the U.S. and Argentina’s economy was already so weak it turned a recent presidential election.

The Administration also threatened to slap tariffs of up to 100% on $2.4 billion of imported French products like champagne, cheese and handbags (zut alors!) in response to a new digital-services tax imposed by France that Trump says unfairly damages U.S. tech companies. That move would further roil already contentious trade relations with the E.U.

Then there’s the biggest current trade dispute of them all. On Dec. 3, Trump commented during a speech in London at the NATO summit that “in some ways, I like the idea of waiting until after the [2020 U.S.] election for the China deal, but they want to make a deal now, and we will see whether or not the deal is going to be right.” Commerce Secretary Wilbur Ross went further, saying that delaying a deal “takes off the table something that [China’s leaders] may think gives them some leverage.” That might be true–if Trump wins.

You might think the new aggressive posture on trade reflects Trump’s desire to punish leaders he doesn’t like. Argentina voted in October to replace Mauricio Macri, a Trump friend, with leftist Alberto Fernández, a Trump critic. French President Emmanuel Macron has angered Trump with critical comments about NATO and other perceived slights. The U.S. President has been careful to praise China’s Xi Jinping, even as he singles out his country’s trade practices for sharp criticism, but China remains a prime political punching bag for Americans of both parties.

But Brazil’s President Jair Bolsonaro is no Trump critic. In fact, he’s a Trump imitator, and the U.S. President has warmly accepted this highest of all forms of flattery in face-to-face meetings with the Brazilian leader. That’s why Bolsonaro was taken aback by Trump’s latest tariffs and seems confident their friendship will help him talk Trump out of these new penalties. “I’m going to call him so that he doesn’t penalize us,” Bolsonaro reportedly said on Dec. 2. We’ll see.

Why is Trump taking these actions and issuing these threats now? Maybe he is emboldened by the robust performance of U.S. stock markets in November and wants to use what he believes is undentable economic strength to drive harder bargains with countries he believes are taking advantage of the U.S. Perhaps he wants to throw punches to project strength at a time when he’s about to be impeached. Maybe his team feels a sense of urgency to get the best trade deals before the economy weakens and election-year pressures make Trump more risk-averse. Whatever the motives, markets have tumbled.

There is a lesson here for leaders who wish to avoid Trump’s wrath. Most leaders have tried some combination of friendship and flattery to build a predictable relationship. But Bolsonaro has now learned the lesson that Japan’s Shinzo Abe, Canada’s Justin Trudeau and others have learned before him: You can’t count on your personal relationship to spare your country trouble if Trump finds (even temporary) advantages in pushing you away.