Trump Retreats On Tariff Plan

This week, the economy adjusted its economic expectations after President Trump retreated on his tariff strategy with China.

The U.S. and China reached a deal on Tuesday to cut tariffs for 90 days while continuing negotiations on a long term trade pact.

Terrence Guay, Pennsylvania State University: “So it may be the case where tariffs are just a lot less than they were initially, which both countries can, can claim as a win. President Trump can say we have higher tariffs than we did before he came to office. China can say that we got President Trump and the United States to reduce tariffs significantly on Chinese goods sent to the United States.”

Even with the reduction of tariffs with China, the average duty rates for goods imported to the U.S. are higher than any time since 1934, just after the height of the Great Depression. 

Terrence Guay, Pennsylvania State University: “One of the new things that may develop as a result of this is that the trade policies that the Trump administration is imposing on many countries around the world, I think it's actually going to be counterproductive with respect to our relationship with China. A lot of countries now see China as a more reliable trade and investment partner than the United States is.”

While American importers have welcomed the drop in tariff rates, the 90-day window is too short to return to the shipping volumes seen before the restarted tariff conflict. Uncertainty has paused corners of the economy that are dependent on imports.

Terrence Guay, Pennsylvania State University: “China, if you looked at it, probably got the best deal on these in these negotiations in Switzerland, they got a lower tariff than had been imposed. And as a result of that, they now know how President Trump is willing to play this game and how far he might be willing to negotiate. So I think for China, this is probably more of a win for that country than for the United States.”

According to USDA data, more than 43% of the 2023 soybean crop was exported to China with an estimated value of $12.8 billion. American Soybean Association President Caleb Ragland told members of the Senate Finance Committee that American soybean farmers are under pressure. 

American Soybean Association President Caleb Ragland: “The Phase I deal with China had wonderful opportunities if compliance and enforcement had taken place, but it didn't. But we would like to see a minimum of those volumes return, and we need those desperately…Our prices are similar to what they were pre-trade war in 2018, but our cost of production are so much higher...”

The Trump Administration is facing at least seven lawsuits over its trade practices. Plaintiffs are arguing that Trump is asserting powers he does not have. 

Tariffs are paid by the companies that are importing goods, and the costs are usually passed on to consumers.

For Market to Market, I’m Peter Tubbs.