Trump’s trade war: There will be pain. Can he make Americans grin and bear it?
WASHINGTON – No one is in any doubt that the trade war US President Donald Trump has just unleashed with three of America’s biggest trade partners will be painful.
Everyday items will cost more in the US as the tariffs get added to prices. Corporate profits will be put at risk and stock markets are bracing themselves for a rout. As inflation rises, rate cut expectations will fall, impacting housing prices too.
Pain is coming and the President himself is not shying away from saying so.
“Will there be some pain? Yes, maybe (and maybe not!). But we will Make America Great Again, and it will all be worth the price that must be paid,” Mr Trump wrote on Feb 2 in all-caps on his Truth Social media platform, one among several posts on the subject of tariffs.
Mr Trump’s tariffs would amount to an average tax increase of US$830 (S$1,140) per household, according to the Tax Foundation, a nonpartisan think-tank.
Canada, Mexico and China have responded in kind to Mr Trump’s decision to press ahead on Feb 4 with 25 per cent tariffs on most goods shipped in from the two neighbouring nations, and an additional 10 per cent to levies already in place on imports from the world’s second-largest economy.
Canada will match the 25 per cent levy on US$155 billion worth of imports from the US.
Mexico announced that it would retaliate too, but has not specified in what way.
China threatened “counter-measures”, and asked the World Trade Organisation to ascertain if these tariffs were legal at all.
Mr Trump has said the tariffs were necessary to stop the inflow of illegal immigrants and drugs, such as fentanyl, from Canada and Mexico.
China was penalised for being the source of chemicals used in making the drug. It is said to be made in illegal “factories” in Canada and Mexico, to then be smuggled across mainly the southern border with Mexico.
Analysts have pointed out the shaky rationale for tariffs on Canada: Seizures of fentanyl at the Canadian border were just 0.08 per cent of all fentanyl seized last fiscal year. Far fewer illegal immigrants enter from Canada than Mexico.
Mr Trump also objects to surpluses racked up by these nations, which sell more goods to American consumers than they buy from US companies. He sees America’s trade deficits as a losing proposition and tantamount to subsidising the trading partners’ economies.
“Make your product in the USA and there are no tariffs! Why should the United States lose trillions of dollars in subsidising other countries?” he said in another post.
The largest deficit the US has is with China at more than US$270 billion in 2023, accounting for over a third of its total trade deficit.
The second-largest is with Mexico, at around US$157 billion, while Canada ranks much lower at US$55 billion.
With Singapore, on the other hand, the US runs a trade surplus. “This means we buy more from America than we sell to America… we are less affected by tariffs nor should we be a target,” said Ms Jacqueline Poh, Managing Director at the Economic Development Board, in a social media post a week ago.
The US goods and services trade surplus with Singapore reached US$38.3 billion in 2022, according to the Office of the United States Trade Representative, making Singapore the second-largest trade surplus partner of the US that year, after the Netherlands.
‘Timing matters’
Much will depend on how long the tariff wars will go on. While Americans may be willing to pay higher prices at the grocery store or the petrol pump for a while, voters’ patience has historically been thin.
Inflation was a significant factor in then President Jimmy Carter’s loss to Ronald Reagan in the 1980 US presidential election. And it was one of the main reasons for Mr Trump’s own victory against his predecessor Joe Biden.
Of course, Mr Trump is constitutionally forbidden to run again, but will have to face the voters in the 2026 midterm congressional elections, when the slender Republican majority in the House of Representatives will be at risk.
The President may gain some time by arguing that reversing historical economic trends will demand hard sacrifices and that his policy will show results.
“In some ways it depends on what the President is trying to achieve,” said Ms Andrea Christianson, partner at Penta, a Washington-based strategic communications firm.
If he is trying to claim a quick “win” – like with Colombia – this might be short-lived and Americans might not feel meaningful effects.
“However, if this drags out, Americans will almost certainly feel it in their pocketbooks. So the timing here matters,” she added.
Linking tariffs to an emotive issue like the smuggling of fentanyl, which causes the deaths of up to 300 Americans a day, also buys him time.
“Americans remain concerned about the border, including drugs, so the framing by the President may work in the near term,” said Ms Christianson, who has worked with key Republican leaders including Ms Kristi Noem, Mr Kevin McCarthy and Arnold Schwarzenegger.
“However, if it drags out and pushes prices higher, there will be serious questions about why we can’t solve the border and drug challenges with levers other than tariffs,” she said.
It is anybody’s guess how long the trade war may last, but Goldman Sachs, a top American investment bank, said the tariffs could be short-lived because of the possible economic damage and possible conditions for removal.
“We think it is more likely that the tariffs will be temporary but the outlook is unclear,” it said in a Feb 2 note.
‘Less trade and higher prices’
Mr Trump is also relying on his tested strategy to rally his supporters, including playing the anti-China card.
“Anybody that’s against Tariffs, including the Fake News Wall Street Journal, and Hedge Funds, is only against them because these people or entities are controlled by China, or other foreign or domestic companies,” he said.
Still, the tariff gambit remains a risky proposition. Trade, after all, is the beating heart of the US economy. According to the US Chamber of Commerce, more than 41 million American jobs depend on trade and more than 97 per cent of companies that export are small and medium-sized.
“The President is right to focus on major problems like our broken border and the scourge of fentanyl, but the imposition of tariffs… won’t solve these problems, and will only raise prices for American families and upend supply chains,” said Mr John Murphy, a top Chamber leader.
Thus far, Mr Trump’s party seems behind him, although at least one Republican has spoken out.
“Taxing trade will mean less trade and higher prices,” said Senator Rand Paul, a Republican from Kentucky.
But his allies like Senator Lindsey Graham backed the move. “These tariffs are designed to get these countries to change their behaviour,” he said.
If those changes are made, he added: “I think the tariffs will probably go away.”
- Bhagyashree Garekar is The Straits Times’ US bureau chief. Her previous key roles were as the newspaper’s foreign editor (2020-2023) and as its US correspondent during the Bush and Obama administrations.
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