(The hill) – President Donald Trump put the brakes on his plan to impose sweeping tariffs as soon as he took office, slowing and weakening changes to the U.S. trade system that were a centerpiece of his campaign.
Trump began his second term with a memo directing federal agencies to investigate U.S. trade relationships with China, Canada and Mexico. However, he did not impose recent tariffs, which are taxes levied on U.S. individuals and companies that import goods from abroad.
The memo, first reported by The Wall Street Journal, also aims to make progress on Trump’s 2020 U.S.-China trade deal and calls for a review of the updated NAFTA agreement with Canada and Mexico in 2026 . However, the order is not sufficient to impose recent import duties.
A summary of the memo said authorities will evaluate the updated NAFTA agreement and make “recommendations” on U.S. participation in it, the Journal reported.
This is a far cry from the trade rhetoric Trump used during the campaign.
(*1*) Trump wrote on social media Media in November after the election victory.
Trump frequently criticized establishment views on trade agreements and suggested that an overhaul of U.S. trade doctrine was underway with the imposition of a general tariff, something not widely attempted since the introduction of the General Agreement on Tariffs and Trade after World War II.
“It must be hard for you to talk about tariffs as a negative thing for 25 years and then have someone tell you that you are completely wrong,” Trump challenged Bloomberg editor-in-chief John Micklethwait in an interview in October.
Presidents can issue tariff orders without congressional approval, and there has been intense speculation that Trump would single-handedly change the trading system overnight.
Mexican steel producers issued a statement Friday saying they pose no threat to U.S. companies.
“Steel exports from Mexico do not pose a threat to the United States. On the contrary, the United States benefits greatly from steel trade flows,” said Mexican steel industry group Conacero.
Even the Federal Reserve noted in December that uncertainty over the U.S. trade situation was clouding its economic forecasts and said it needed to develop multiple scenarios.
“The impact of trade policy changes could be greater than staff had anticipated,” the Fed’s December minutes said.
Uncertainties also emerged on the foreign markets.
“Pricing in foreign financial markets reflected weaker-than-expected foreign data releases, expectations of further monetary easing by foreign central banks and possible changes in U.S. trade policy,” Fed meeting participants noted.
Markets and industry groups working on international trade appeared reassured by the decision not to immediately impose recent tariffs.
The Dow Jones Industrial Average of major U.S. stocks rose more than 300 points in afternoon trading. The tech-heavy Nasdaq Composite rose more than 290 points and the S&P 500 rose nearly 60 points.
Retailers, which source many of their products from countries with significantly lower labor costs than the U.S., welcomed Trump’s recent approach to trade, saying they wanted to ensure it was “carefully targeted.”
“We look forward to working with the President to ensure the resulting policy changes are targeted and create an environment that attracts investment and protects critical industries,” the National Retail Federation said in a news release Monday.
The National Foreign Trade Council, a business advocacy group, said U.S. companies want to retain access to foreign markets.
“American companies must maintain a competitive advantage and access to open markets globally,” the group said in a news release Monday. “We are interested in working with the government on the details of its economic strategy, including its trade, tax and customs policies.”
Trump campaigned vigorously on tariffs, which allowed him to exploit underlying frustrations with the globalized economy and send clear and repeated messages that likely made a difference in the election.
Trump, who made import taxes the backbone of his first-term economic policies, called “tariffs” the “prettiest word in the dictionary.”
Tariffs are taxes on U.S. companies that import foreign products. The tax, which can reduce the importer’s profit margin, can be avoided by switching to a domestic supply chain or passed on to the retailer in the form of a price enhance.
The latter option heightened concerns that Trump’s tariffs could contribute to near-term inflation, which could be further fueled by stimulative tax cuts expected by the recent Congress and increased labor costs due to strict immigration restrictions.
But Trump’s lack of immediate action on tariffs likely bodes well for the pace of price increases.
In his inaugural speech, Trump said he wanted to bring manufacturing jobs back to America that have largely been outsourced to foreign manufacturing centers, representing another point of economic frustration for many voters.
There were production orders in decline since the overdue 1970s and declined significantly in the 2000s following the adoption of a series of “free trade agreements”. Although they recovered slightly in the 2010s and reached a current peak of around 13 million jobs, they have not yet returned to historical levels.
A rise Investments in manufacturing construction during the Biden administration could reverse this trend to some extent. The figure shot up to more than $21 billion in October from around $6 billion annually, following the passage of a major infrastructure bill, a climate technology bill and a bill to boost semiconductor production.
