The Intentions of Donald Trump Behind the Counter-Tariff

On April 2, (, America time ), U.S. President Donald Trump announced a basic tariff rate of 10% on imports from all countries and territories around the world and higher tariffs on dozens of countries with a trade surplus with America. The imposition of this retaliatory tariff is part of Donald Trump's important campaign commitment to narrow the gap between the tax rates of America and the level of tax that he believes other countries are unfairly imposing on American goods. However, economists do not entirely agree with the President of America, as tariffs are essentially a type of tax imposed on importers, and are often passed on to consumers. Nevertheless, this move could put pressure on other countries to negotiate and reduce import tariffs on American goods. Donald Trump's argument According to information from the White House, the countervailing tax policy is an effort to address the tariff disparities and non-tariff barriers that America faces from its trading partners. The White House stated that the prolonged trade deficit - exceeding 1.2 trillion USD in 2024 - has caused serious repercussions. Manufacturing is shifting overseas, the middle class is weakening, small towns in America are gradually losing their vitality, while non-market economies like China are rising. In particular, unfavorable economic policies from trading partners are threatening America’s ability to produce essential goods, from civilian demands such as household appliances to military needs such as weapons, posing a risk to national security. Another noteworthy point is the burden of value-added tax (VAT) that American companies face when exporting. According to internal estimates, American companies must pay over 200 billion USD each year in value-added tax (VAT) in other countries - a "double" burden as American goods are taxed at the European border, while European goods entering America are exempt from similar taxes. "Accessing the American market is a privilege, not an entitlement," Mr. Trump declared, asserting that this is an "emergency" that requires decisive action. The goal of this policy, according to the White House, is also aimed at providing high-paying jobs for Americans, producing cars, household appliances, and great products "Made in USA." According to the arguments from the White House and Donald Trump, retaliatory tariffs are the key promise that helped Donald Trump win the election, and now he is fulfilling that promise to lead America into a new golden age. The rich benefit Tariffs are a tax imposed on imported goods, collected at the American border by the Customs and Border Protection Agency. The entire amount - estimated to be around 80 billion USD last year - is transferred into the federal treasury to cover government spending. However, the authority to decide how this money is spent belongs to Congress. President Donald Trump, with the backing of Republican senators controlling the Senate and House, wants to use this revenue to offset the tax cut plan that analysts say primarily benefits the wealthy, AP reported. Specifically, he wants to extend the tax cuts that were passed during his first term and are set to expire at the end of 2025. According to research by the Tax Foundation, a nonpartisan Washington research organization, if these tax policies are extended, the U.S. government could lose up to $4.5 trillion in revenue from 2025 to 2034. Trump hopes that revenue from import taxes will help offset this shortfall. Another research organization, the (Tax Policy Center), argues that although people at all income levels benefit, higher-income households will benefit the most. Specifically, the top 10% of the wealthiest may see their after-tax income increase by 5%, while the remaining 80% of the population only receive an increase of less than 1%. This raises concerns that tariffs - which are promoted as protecting American workers - ultimately primarily serve the upper class. "Strike first, negotiate later" Moreover, looking more broadly at Trump's entire first term, it can be seen that the strategy of imposing retaliatory tariffs clearly demonstrates his flexibility and "understanding of the law" in the game of power, both domestically and internationally. Reciprocal taxes are not a new idea. A Wall Street Journal article citing sources familiar with the matter revealed that during Trump's previous term, Peter Navarro, who served as a senior adviser on trade and manufacturing, backed the idea. Mr. Navarro called on lawmakers to support a reciprocal tariff bill initiated by Republican Congressman Sean Duffy - who is currently the Secretary of Transportation in the Trump 2.0 administration. By June 2023, Donald Trump pledged that if re-elected, he would persuade Congress to pass a law allowing for tariffs commensurate with the tariffs that other countries impose on American goods. The slogan "eye for an eye, tariff for a tariff, at the same tax level" has become a symbol in his campaign. The difference is that the plan proposed by Donald Trump after taking office for a second term is even broader than the original idea. In addition, the imposition of taxes may demonstrate a proficiency in leveraging presidential power and the executive branch. In fact, the Constitution of America grants the power to decide tariffs to Congress. However, over time, Congress has delegated this authority to the President through various laws, which specify the particular cases in which the President can impose tariffs - usually when imported goods threaten national security or cause serious harm to a particular industry. With this move, the imposition of taxes is based on the authority from the International Emergency Economic Powers Act of 1977 (IEEPA). In his first term, Donald Trump followed traditional procedures, including holding public hearings before imposing tariffs. But in his second term, he leveraged emergency powers under the 1977 act to act more flexibly. However, this plan risks violating the Most Favored Nation principle (MFN) of the World Trade Organization (WTO), which requires members to treat each other equally in trade. Although America has long not strictly complied with WTO regulations, the imposition of countervailing duties this time marks a significant turning point, reflecting the ambition to reshape the global trade order in favor of America. Journalist Alan Beattie of the Financial Times pointed out that in this way, the Trump administration is creating a new tool "to impose any tariffs they want, for any reasons they can put forward on a legal and highly flexible basis." Experts believe that Trump's plan to impose retaliatory tariffs is essentially a "strike first, negotiate later" tactic - a lever for other countries to make concessions and come to the negotiating table, thereby reducing import tariffs with America. On the other hand, some experts argue that tariffs may be a necessary "bitter pill" to force other countries to change their trade policies. If successful, America could achieve more favorable bilateral agreements, reduce the trade deficit, and bring production back home. However, if it fails, escalating trade tensions could push the global economy into a spiral of instability, especially in the context of a recovery from the pandemic that remains fragile.