Trade wars: Snatching confusion from the jaws of clarity

By Kenin Spivak
Real Clear Wire

Donald Trump can create chaos even when he’s completely right. Trump is the Mr. Bean of presidents. It’s like “good people on both sides,” or ruminating about bleach. He means well. He just jumbles it up on the way from Point A to success.

There is no doubt that America is being taken advantage of by its trading partners. Last week, the U.S. Trade Representative updated its report on Foreign Trade Barriers. The 380-page report lists thousands of tariff and non-tariff barriers imposed by 59 trading blocs, ranging from individual countries to the Gulf Cooperation Council and the European Union.

Before those with Trump Derangement Syndrome jump to the conclusion that the administration has exaggerated the problem, the overwhelming majority of the barriers were also in the 2022 report published by the Biden administration. Additional measures designed to harm Americans are posted in the Country Commercial Guides on the Commerce Department’s International Trade Administration website. Attention anti-Trumpers: Most of the guides were written during the Biden administration.

The breadth and sophistication of protectionist measures is troubling and costly to the American economy. While the U.S. generally welcomes goods, services, and investments from around the world, our friends are stabbing us in our economic hearts; stealing our intellectual property; assessing taxes, fees, and duties they don’t charge others; and setting standards, labeling requirements, and licensing regimes that are designed to exclude U.S. imports. They force our corporations to enter into joint ventures with local partners to siphon off profitability and propel domestic manufacturing, or they simply bar specified goods from being imported.

Protectionist measures also include tax credits, subsidies, and loans available only to domestic companies or citizens; unequal enforcement of antitrust laws; labor practices that create extremely low wages; tariffs; and, particularly in the EU, the extraterritorial enforcement of antitrust, DEI, censorship, and other laws and regulations intended to dictate throughout the supply chain how American companies operate.

The U.S. has an almost $30 trillion GDP. In 2024, imports of goods totaled about $3.3 trillion, and exports about $2.1 trillion, creating a $1.2 trillion deficit, somewhat offset by a $300 billion surplus in services. The United States had a goods trade deficit with 92 countries and a surplus with 111 countries. The largest deficits were with China ($295 billion) and Mexico ($172 billion), and the biggest surpluses were with the Netherlands ($56 billion) and Hong Kong ($22 billion).

Just a few examples of trade barriers imposed by our friends:

• Canada imposes tariffs of up to 300% on certain U.S. agricultural products, excludes U.S.-owned programming channels, and imposes a discriminatory tax on online purchases from the U.S.

• EU tariffs on U.S. agricultural products reach 10.8%. The EU effectively bars certain U.S.-produced chemicals and medical devices, limits the license of U.S.-produced film and television programming, prohibits Americans from performing certain professional services, and limits U.S. investments in numerous sectors.

• GCC countries impose excise taxes of up to 50% on imported products, such as carbonated drinks, and prohibit the importation of numerous goods, including medical equipment, many used automobiles, and certain plastic products.

• Japanese tariffs on U.S. agriculture and seafood reach 12.2%, and 130% on footwear. Japan restricts the import of U.S. automobiles, medical devices, rice, wheat, pork, and potatoes. It restricts U.S. express delivery services and insurance companies, and subsidizes domestic lumber.

Trump promised to protect U.S. manufacturing and farmers, and to reduce foreign trade barriers. From the time he took office, however, his message has been garbled. Are tariffs intended to raise revenues? Stop fentanyl? Protect American business?

White House Press Secretary Karoline Leavitt claimed that the tariffs are a “tax cut.”

“You have to remember this is a drug-related issue,” Commerce Secretary Howard Lutnick told NBC’s Meet the Press.

On February 13, Trump announced a “Fair and Reciprocal Plan” to correct “longstanding imbalances in international trade and ensure fairness across the board.” On March 3, he implemented tariffs on Canada and Mexico for their “extraordinary threat” to American health.

Then, on April 2, Trump announced “Liberation Day” and imposed tariffs ranging from 10% to 54% for China. He explained that the tariffs were “reciprocal” tariffs.

But they aren’t. Reciprocal tariffs are computed by adding to the tariff rate charged by a country a tariff-equivalent calculation of the burden of non-tariff barriers. Instead, the administration divided the trade deficit by imports and cut that in half to determine the tariff for countries with a U.S. trade deficit, and imposed 10% on nearly all other countries.

Some trade deficits are caused by trade barriers. Others are due to high consumption in the U.S., a strong dollar, and the comparative advantages of the two countries. For example, Israel is a technology powerhouse with a tiny population. Small, poor countries can’t afford U.S. goods.

Starting a trade war based on retaliatory tariffs is counterproductive. While some countries will do whatever the U.S. demands, many will reconsider the U.S. dollar and trade alliances. U.S. inflation will rise and growth will slow.

While all wars require sacrifices, it is better to be smart, focused, and on mission. Trump claims to be seeking fairness through reciprocal tariffs, but his Liberation Day sortie is untethered to the objective. Let’s fight the war on foreign protectionism with a threat of true reciprocal tariffs for countries that refuse to surrender. The pre-emptive attack Trump launched on April 2 was premature and off course.

Kenin M. Spivak is founder and chairman of SMI Group LLC, an international consulting firm and investment bank. He is the author of fiction and non-fiction books and a frequent speaker and contributor to media, including The American Mind, National Review, the National Association of Scholars, television, radio, and podcasts.

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