Beyond Tariffs: Trump's unfair trade practices

DAVID MCHUGH, YURI KAGEYAMA & CHRISTOPHER RUGABER

The Trump administration says the sweeping tariffs it unveiled on April 2, then postponed for 90 days, have a simple goal: Force other countries to drop their trade barriers to US goods.

Yet President Trump’s definition of trade barriers includes a slew of issues well beyond the tariffs other countries impose on the US, including some areas not normally associated with trade disputes. Those include agricultural safety requirements, tax systems, currency exchange rates, product standards, legal requirements, and red tape at the border.

He’s given countries three months to come up with concessions before tariffs ranging from 10% to more than 50% go into effect. Tariffs on China are already in effect.

On many issues, it will be difficult, or in some cases impossible, for many countries to make a deal and lower their tariff rates.

In addition, many trade officials from targeted countries say privately that it isn’t always clear what the Trump administration wants from them in the negotiations.

Vice President JD Vance announced that India has agreed to the terms of trade talks with the United States, but other countries are still trying to set the contours for any negotiations. The White House has highlighted conflicting goals for its import taxes: It’s seeking to raise revenues and bring manufacturing back to the US, but it also wants greater access to foreign markets and massive changes to other nations’ tax and regulatory policies.

Here are several non-tariff areas the administration is targeting:

EXCHANGE RATES: Trump has accused Germany, China and Japan of “global freeloading” by — in his view — devaluing their currencies to make their exports cheaper.

The European Central Bank has been cutting interest rates to support growth. That could also weaken the euro, which has strengthened sharply against the dollar since Trump took office. The ECB says it doesn’t target the exchange rate.

In Japan’s case, the Bank of Japan has been gradually raising rates anyway after keeping them at zero or in negative territory for years, which should drive the yen up against the dollar. The US dollar has fallen recently to 140 yen levels, down from about 160 yen last summer. Shrikant Kale, a strategist at Jefferies, believes the dollar will fall to 120 yen over the next 18 months.

FARM PRODUCTS: Agricultural safeguards against importing pests or health hazards have been a sticking point with US trade partners for years. They include Japan’s restrictions on rice and potato imports, the EU’s ban on hormone-treated beef or chlorine-disinfected chickens and Korea’s ban on beef from cows more than 30 months old.

Yet changes face stiff political resistance from voters and farm lobbies in those countries.

For years, US potato growers have sought access to Japan’s potential $150 million market for table potatoes. Japan has engaged in talks but taken years simply to supply a list of concerns to US negotiators. The delay is “pure politics,” intended to protect domestic growers, says National Potato Council CEO Kam Quarles.

Korea’s beef restrictions started as a measure to keep out bovine spongiform encephalopathy, or mad cow disease. The 30-month rule has been maintained in the wake of mass protests in 2008, even as the US has become the largest beef exporter to Korea.

TAXATION: Trump has railed against value-added tax as a burden to US companies, although economists say this kind of tax is trade-neutral because it applies equally to imports and exports. Value-added tax, or VAT, is paid by the end purchaser at the cash register but differs from sales taxes in that it is calculated at each stage of the production process.

Trump’s view could mean higher tariffs for Europe, where individual countries levy VAT of 20% or more depending on the type of good, and for the more than 170 countries that use this kind of tax system. There’s little chance countries will change their tax systems for Trump. The EU for one has said VAT is off the table.

PRODUCT STANDARDS: US officials have complained about Japan’s non-recognition of US vehicle safety standards and its different testing procedures for car equipment.

Japan also provides subsidies for the Japanese-designed ChaDeMo plug standard for electric cars, requiring foreign makers to use an outdated technology if they want the subsidy.

BUY AMERICAN: Analysts say that despite the long list of non-tariff issues, the administration’s main focus may lie elsewhere: on Trump’s desire to reduce trade deficits, cases where a country sells more to the US than it buys.

And the solution may be other countries buying more US products, from energy to soybeans, and building more plants in the US.

US energy is already a major export to Europe. Trump has mentioned a figure of $350 billion for potential EU gas imports. The EU does need imported gas. But Trump’s figure would be a stretch given that last year’s exports of liquefied natural gas to the EU were around $13 billion and that Europe is seeking to reduce its use of fossil fuels over the longer term.

AP