This month John Denslinger provides readers with a fascinating insight into tariffs, concluding with hope that common sense trade policies prevail and reciprocity is quickly achieved.
Mark the date 2 April 2025. It’s the day reciprocal tariffs kicked-in as foretold by President Trump in his first Congressional address of his second term. While this might be the President’s most consequential action to date, it’s just the third leg of his tariff stool.
The first leg was announced early in his campaign: ‘make your product in America’ and negate the threat of tariffs altogether. Evidence suggests this initiative continues to be remarkably successful with nearly two trillion dollars of new business investment by foreign and domestic based companies. Skipping the tariff uncertainty may be the headline, but gaining immediate regulatory relief and risk-free access to the world’s largest consumer market is the win-win.
The second and final leg was created by Executive Order on 1 February. Announced as a tariff, the target was not trade per se, but behavior. It levied substantial financial penalty on three of our top trading partners Mexico, Canada and China pressing each to: (1) control illegal migration, and (2) stem the flow of fentanyl into the US. To be fair, meaningful progress takes time and results to date are inconsistent. As a result, the administration’s on-again, off-again policy approach generates considerable uncertainty unnerving many domestic suppliers, buyers, traders and business owners.
Have you heard of the Fair and Reciprocal Plan? I for one, had not. It’s the administration’s comprehensive tariff assessment mapping current trade imbalances with each country, defining equivalent reciprocal tariffs for each trading partner, and assessing the impact of these measures on the US economy and specific at-risk industries. The trade imbalance map summarizes all the protectionist measures directly or indirectly applied to goods and services. The list is really amazing: import taxes and tariffs; VAT; non-tariff barriers; subsidies; burdensome regulations meant to restrain trade; exchange rate manipulation; and practices unfairly restricting access to certain markets. It’s the basis for the 2 April third leg.
For those in procurement with global suppliers, doing business via Canada, Mexico, China, Japan, Germany, South Korea, India, UK, Taiwan and Vietnam, Trump’s tariffs are proactively imposed so expect initial retaliation before some harmony is restored.
Can tariffs work? Tariffs are a ‘deal’ if they quickly result in fair trade reciprocity. Tariffs are ‘no deal’ if trading partners counter with retaliatory measures. Reciprocity offers predictability. Retaliation does not.
National Association of Manufacturers (NAM) president and CEO, Jay Timmons, released a statement worth noting: “…to mitigate the adverse effects of today’s tariffs, manufacturers call on President Trump and Congress to implement a comprehensive manufacturing strategy that creates predictability and certainty to invest, plan, and hire in America.”
NAM advocates the following actions: (1) make the 2017 tax reforms permanent and competitive; (2) restore regulatory certainty freeing manufacturers to shift billions of dollars from burdensome compliance to pro-growth investment; (3) expedite permitting reform to unleash American energy dominance; and (4) implement common sense trade policies that open global markets fairly and effectively.
World-class manufacturers continue lining up to invest huge sums in America. Avoiding tariffs could be one reason, but the long-term benefit of pro-growth, pro-energy and regulatory-lite policies is a business owner’s dream. Unwinding protectionist legacies country-by-country is a protracted process. Let’s hope common sense trade policies prevail and reciprocity is quickly achieved. That’s the deal.
