Trump unleashes tariff war, sparks worry

United States President Donald Trump had imposed 25 per cent tariff on all imports from Mexico and Canada, and 10 per cent more on Chinese imports through executive orders by declaring national emergency to curb fentanyl and illegal immigration.

Trump has invoked the 1977 International Emergency Economic Powers Act (IEEPA). The last president to have used the power under a similar law was Richard Nixon, another Republican president. It remains to be tested whether Trump is enabled to impose broad import curbs for specific causes like fentanyl and illegal immigration. The issue can be challenged in the courts. But experts feel that the courts have generally justified the use of emergency powers by the president.

“The courts have historically upheld the president’s power to take emergency actions, especially when they are related to national security,” according to international trade practice expert Tim Brightbill of the law firm Wiley Rein.

He has however raised the question, “The question is, does that include tariffs, since IEEPA has only been used for sanctions?” The issue of tariffs should have been legislated by the US Congress comprising the two Houses, the House of Representatives and the Senate. It is also a curious fact that Trump should have raised tariffs against China on the grounds of illegal immigration. Most of the illegal immigrants have used the Mexican border, and some of them have used the Canadian route. But China and illegal immigration comes as a surprise.

It is clear that President Trump is not much concerned about the details or accuracy of causes. His complaint against Canada, Mexico were the import concessions that they enjoyed with the US. The president feels that it is weakening the American economy on various counts, especially in manufacturing. This is also his complaint against China. But it is a pure question of trade laws. Was there a need to invoke illegal immigration?

The fentanyl crisis and its use in the opioids in drug formulations by ordinary Americans is serious and dangerous. This would have needed laws to punish American pharmaceuticals and doctors and druggists. But Trump is not focusing on the menace of fentanyl. He is looking at the broader issue of America’s economic weakness and how he wants to revive the lost strengths of American manufacturing. It would require improving the manufacturing quality of the American industry, the labour skills, and most importantly competitive pricing.

But Trump has no patience with complexities of issues. He wants to be seen as the simple American looking for simple solutions to make America great again. It has been pointed out that the raising tariff walls is likely to hurt America as much, if not more, because trade is a two-way business.

Jennifer Hillman, a trade law professor at Georgetown University said, “At least for me, I don’t think there is such a connection [between illegal immigration and fentanyl and tariffs on all goods]. The tariffs would not be applied only to fentanyl, so there is not a clear reason why tariffs on all goods are ‘necessary’ to deal with a problem of fentanyl and immigration.”

Trump wants manufacturers to shift back to the US from Mexico, as also from China. The problem with Canada is slightly different, Canadians enjoy the privileges of a welfare state on the lines of the European Union (EU). Trump seems to feel that the cushioning enjoyed by the Canadians is coming at the expense of the American economy.

The question that is being asked is whether raising tariffs across the board is an effective way of restoring the trade balance. It would have been if the Americans had export clout of their own. The Americans have no advantages except in the manufacture of military hardware.