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U.S. President Donald Trump delivers the State of the Union address to a joint session of Congress in the House chamber at the U.S. Capitol on Tuesday.Kenny Holston/The Associated Press
John Rapley is a contributing columnist for The Globe and Mail. He is an author and academic whose books include Why Empires Fall and Twilight of the Money Gods.
“All countries and corporations want to keep the deal that they already made,” U.S. President Donald Trump said in this week’s State of the Union address. Insisting that last week’s Supreme Court ruling wouldn’t alter his trade-negotiation strategy, he declared confidently that while the new tariffs he’d be imposing were “a little more complex, but probably actually better,” countries would continue kowtowing to the United States because they knew “the legal power that I as President have to make a new deal could be far worse for them.”
Well, no it isn’t, and other countries know it. As a result, governments which did trade deals with Mr. Trump last year are already starting to revisit them. India, which was about to send a delegation to Washington to conclude its deal, kept them back in Delhi while it considers how the court ruling might alter its position. The European Parliament postponed its ratification of the trade deal Brussels and Washington had agreed to.
Britain, which had raced to get an early deal so as to secure a lower tariff rate than other countries, now faces the higher uniform rate Mr. Trump has imposed using different legislation – the “little more complex” provision to which he referred in his speech. In response, the British government now says it’s prepared to consider retaliation if Mr. Trump doesn’t find a way to reinstate their preferential agreement.
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And, well, they might harden their positions. The biggest beneficiaries of the Supreme Court ruling are countries which held out last year and didn’t do a trade deal with the U.S. They gave up nothing in negotiations, unlike countries which rushed into agreements, and now end up no worse off than them. In effect, their tariff rates have dropped. The biggest net gainer is Brazil, followed by China, India, Canada and Mexico.
And just as India no longer needs to rush into a deal and can start asking Mr. Trump what more he’ll do for them, so will most everyone else. That is the uncomfortable truth for the President in last week’s court judgment.
The trade war continues. The President will keep imposing tariffs, likely for the rest of his term, simply because he has staked his presidency on them. But the strategy Mr. Trump had employed in his trade war was dealt a fatal blow. That was evident from the moment of his postruling press conference last week, when he vented his fury at the justices. Mr. Trump’s raging that he had all the power he needed and the ruling meant nothing smacked of Hamlet’s mother noting, “the lady doth protest too much.”
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Mr. Trump’s approach as “deal-maker-in-chief” rested on him enjoying maximum discretion to impose tariffs at rates he chose so as to force concessions, both from trade partners and from American companies (from which he could extract concessions with promises of carve-outs). Now that he’s bound by procedure, he can no longer wield threats as he once did.
Not only will the tariffs he’s now imposing continue to face legal challenges – the resulting uncertainty won’t do any good for the economy or the markets he continually references – but if he’s to extend them, he’ll need the backing of Congress at the very time his grip on it is weakening. Several congressional Republicans have recently broken ranks to support Democratic motions against his tariffs. With polls showing strong public opposition to tariffs and the President’s approval rating tanking, their ranks will probably thin further in November. As a result, their willingness to do Mr. Trump’s bidding will likely wane.
Those sitting across the table from Mr. Trump in trade talks have been quick to spot his domestic weakness. He’ll probably only get weaker, too. Congressional Republicans were looking for an easing of tariffs prior to the elections, and Mr. Trump was planning concessions. But now that he feels humiliated by the justices, he’ll probably double down on them, which will only remind Americans of what they dislike about his economic policy.
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Further compounding Republican woes are that the tariffs are landing especially hard on small and mid-sized companies. While this constituency is a key pillar of Republican support, such businesses lack the means to manage extensive paperwork and the access to the administration which bigger companies have used to secure carve-outs.
The landscape for Canada hasn’t suddenly turned positive. Tariffs will remain, the trade war will continue and the country will need to continue looking for other markets. Still, the Supreme Court ruling arguably vindicates the government’s approach of going slowly on negotiations. Because even if Canada doesn’t end up with a good deal, it will probably end up with a less bad one than if it had rushed into an agreement.
And while time doesn’t exactly favour Canada, it’s smiling even less warmly on Donald Trump and his faltering trade strategy.
