Deal or No Deal, Trump Wins on Trade

“President Trump has said that tariffs will rise sharply on key trading partners on Aug. 1, absent new deals.

 

Markets and foreign negotiators have responded with a shrug. After all, Trump paused the bulk of his tariffs in early April, and his team promised as many as 90 deals in 90 days.

 

The 90-day mark came and went a week ago and there's been just one deal, with Britain, and concepts of deals, with Vietnam and Indonesia.

 

The dearth of deals to date has fed the narrative that "Trump Always Chickens Out," (the so-called TACO trade), that he overplays his hand and his trade war is going badly.

 

This narrative misconstrues Trump's goals, overstates the importance of deals and breeds complacency about his willingness to raise tariffs.

 

Going into his second term, many of Trump's own advisers liked to portray tariffs as a negotiating chip to get other countries to lower their own trade barriers and buy more American stuff.

 

Trump himself never subscribed to this. He has been clear and single-minded that he wants tariffs, the higher the better. Whether that is achieved unilaterally or via deals is secondary.

 

Trump advisers argue only tariffs can effectively address trade deficits which, they say, reflect a plethora of non-tariff barriers such as regulations and taxes that suppress consumption and imports. Yet since the 1980s, Trump has advanced a simpler rationale: Others should pay for access to the U.S. market or the protection of the U.S. military.

 

And despite the absence of deals, he's succeeded. In June alone, Treasury collected $27 billion in customs revenue, up $20 billion from a year earlier, a pace that would imply $240 billion more per year. That's not enough to eliminate most families' income tax, as Trump once promised, but it can pay for plenty of other priorities.

 

The idea that Trump backs down dates to April, when he announced steep "reciprocal" tariffs on almost everyone, and 145% on China. Markets cratered, and he walked the tariffs back.

 

But he never relinquished his 10% "baseline" tariff on almost all imports. When he floated such a tariff in the campaign, it seemed like a worst-case scenario. Today, many trading partners see that as a best-case scenario.

 

Including his tariffs on steel, aluminum and autos, the average effective tariff on all U.S. imports as of July 2 was 13.4%, according to JPMorgan Chase. That's below the April 9 peak, but well above the 2.3% last year, and the highest since the 1940s, before the U.S. and its allies set up the mechanisms to bring down world trade barriers.

 

So even without deals, Trump has, by his own definition of success, already won his trade war.

 

Trump's ambivalence to trade deals seems out of character for someone who prides himself on the art of the deal. Yet as a private developer, Trump understood that deals generally required everyone to give something up. Trump couldn't dictate terms to bankers or investors when he needed them more than they needed him.

 

Today, he leads the world's largest economy with the largest military. Everyone else needs the U.S. more than vice versa, and Trump assumes he can thus dictate terms, and others have to live with them.

 

This is a departure from Trump's first term, when he negotiated many actual deals: an amended trade agreement with South Korea, a new pact with Japan and the U.S.-Mexico-Canada Agreement. None entailed a big increase in tariffs. Some even included small U.S. concessions.

 

Back then, Trump had leverage, but it was constrained by checks, balances and norms. He generally raised tariffs using established laws, such as the "Section 301" investigation used to penalize China's unfair trading practices or the "Section 201" safeguard tariffs on solar panels and washing machines.

 

In negotiations, U.S. officials were careful about going too far, knowing the other side had to sell any deal to their own public.

 

Republican leaders of Congress disliked tariffs, especially on allies, and pressured Trump to renegotiate rather than scrap existing deals. And opponents were more determined: Canada, Mexico, the European Union and China retaliated, and many businesses forced to pay the tariffs sued.

 

Many of those norms, checks and balances are now gone. Trump claims the authority to raise tariffs on anyone and anything indefinitely for virtually any reason under the International Emergency Economic Powers Act. One court has declared his use of it illegal; that decision has been stayed.

 

As for trade partners, none except China and Canada have retaliated. Many took Trump seriously when he said retaliation would mean worse treatment. It hasn't turned out that way. Trump has threatened the EU and Mexico, which didn't retaliate, with tariffs comparable to those on China, which did.

 

The absence of retaliation gives Republicans in Congress, who don't share Trump's fondness for tariffs on allies, less ability to oppose him.

 

For Trump, another disadvantage of deals is that in theory both sides are expected to abide by them. But Trump disdains such constraints and enjoys moving the goal posts. He hit Canada and Mexico with 25% tariffs to make them crack down on fentanyl and illegal migration. They did, and Trump has threatened to raise tariffs further. He may consider new deals no more binding than his first-term pacts.

 

So Trump, at long last, has his tariffs, a free hand to raise them and little pressure to roll them back. But is that necessarily good?

 

Tariffs haven't caused the feared recession, but nor have they sparked a manufacturing renaissance. Much of the tariff money pouring into Treasury comes out of the pockets of American companies and consumers.

 

The risk with Trump's unilateralism is that he pushes tariffs beyond what the markets or trading partners can tolerate. Markets weakened Tuesday on signs tariffs are starting to show up in consumer prices.

 

Previous presidents pursued freer trade not because they were bad at deals but because for all its flaws, it made U.S. companies and workers more productive, consumers better off, and other countries (except China) more invested in U.S. leadership. Trump may emerge a winner from his trade wars; it remains to be seen if the U.S. will as well.” [1]

 

1. U.S. News -- Capital Account: Deal or No Deal, Trump Wins on Trade. Ip, Greg.  Wall Street Journal, Eastern edition; New York, N.Y.. 16 July 2025: A2.