Tariff Picture Getting More Confusing  05/08 06:31

   

   WASHINGTON (AP) -- The more President Donald Trump talks about his efforts 
to reach deals with America's trading partners, the more confusing the tariff 
picture gets. His team seems good with that, saying Trump is using "strategic 
uncertainty" to his advantage.

   Trump says the United States does not have to sign any agreements, and that 
it could sign 25 of them right now. He says he is looking for fair deals on all 
sides, and that he does not care about other countries' markets. He says his 
team can sit down to negotiate the terms of a deal, and that he might just 
impose a set of tariffs on his own.

   "I am struggling to make sense of it," Chad Bown, a senior fellow at the 
Peterson Institute for International Economics, wrote in an email.

   Late Wednesday on his social media site, Trump wrote that he'll be holding a 
news conference Thursday morning concerning a "MAJOR TRADE DEAL WITH 
REPRESENTATIVES OF A BIG, AND HIGHLY RESPECTED, COUNTRY." He added that it 
would be "THE FIRST OF MANY!!!"

   Although Trump's team holds up his best-selling book "The Art of the Deal" 
as proof that he has a master plan, much of the world is on tenterhooks. That 
has meant a volatile stock market, hiring freezes and all kinds of uncertainty 
even as Trump continues to promise that new factories and jobs are on the 
horizon.

   A look at how the trade talks may play out:

   Trump still wants tariffs

   As part of any deal, Trump wants to keep some of his tariffs in place. He 
believes the import taxes can generate massive revenues for a heavily indebted 
federal government even though other countries see the whole point of striking 
a deal as getting rid of tariffs.

   "They're a beautiful thing for us," Trump said recently about tariffs. "If 
you can use them, if you can get away with using them, it's going to make us 
very rich. And we'll be paying off debt, we'll be lowering your taxes very 
substantially because so much money will be taken in that we'll be able to 
lower your taxes even beyond the tax cut that you're going to be getting."

   So far this year, the U.S. government has collected $45.9 billion from 
tariffs, about $14.5 billion more than last year, according to the Bipartisan 
Policy Center. Those revenues could escalate sharply given the 10% baseline 
tariffs, the 145% rate being charged on Chinese goods and rates as high as 25% 
on steel, aluminum, auto and Mexican and Canadian imports.

   To reach Trump's stated goals of repaying the $36 trillion debt and reducing 
income taxes, his tariffs would need to raise at least $2 trillion annually 
without causing the economy to crash in ways that lead to lower overall tax 
revenues. That would be close to impossible mathematically.

   How do negotiations work?

   The Republican administration has said 17 of its major 18 trading partners 
have essentially presented them with term sheets, which list the possible 
compromises that they are prepared to make. Agreeing to a mutual understanding 
of the terms would be only the start of any trade talks.

   But foreign leaders have said it is unclear exactly what Trump wants or how 
deals could be codified into a durable agreement. They also know Trump approved 
the United States-Mexico-Canada Agreement in 2020, only to charge new tariffs 
on those same two trading partners this year.

   While meeting with Trump on Tuesday, Canadian Prime Minister Mark Carney 
suggested the next version of that agreement would need to be strengthened to 
prevent a repeat of the fentanyl-related tariffs imposed this year by Trump 
that Canada saw as arbitrary.

   'Some things about it are going to have to change," Carney said.

   Can the US reach a deal with China?

   The 145% tariffs on China -- and the 125% tariffs on the U.S. that Beijing 
imposed in response -- hang over the entire negotiating process. Treasury 
Secretary Scott Bessent acknowledges that those tariffs are not "sustainable."

   The first talks between the U.S. and China are set to begin this weekend in 
Switzerland, but they will likely be limited to finding ways to de-escalate 
tensions enough for meaningful negotiations to take place.

   The key issue is that China is the world's dominant manufacturer, which 
makes also makes it a leading exporter in ways that can supplant domestic 
industries. Because China suppresses domestic consumption and focuses on 
production, the rest of the world buys what it makes because there is not 
enough internal demand. The U.S. wants to rebalance trade, but it has done so 
also through tariffs on countries that could be its natural allies in defending 
their auto and tech industries against China.

   "Obviously in this trade puzzle, China is the biggest piece," Bessent said 
this week. "Where do we end up with China?"

   Chinese Foreign Ministry spokesperson Lin Jian has suggested that a 
meaningful way for the Trump administration to jump-start talks would be to 
pull back on its rhetoric and punitive import taxes.

   "If the U.S. truly wants to resolve the issue through dialogue and 
negotiation, it should stop threatening and pressuring and engage in dialogue 
with China on the basis of equality, respect and mutual benefit," Lin said 
Tuesday.

   Asked on Wednesday whether he would reduce the tariffs on China as a 
condition for negotiations, Trump said, "No."

   The president also disputed statements by the Chinese government that his 
administration sought the talks in Geneva. "Well, I think they ought to go back 
and study their files," Trump said.

   Would Congress need to approve any deals?

   Not necessarily.

   Trump unilaterally imposed his universal tariffs without Congress, using the 
1977 International Emergency Economic Powers Act to do so, which has led to 
multiple lawsuits. The administration also maintains that any agreements to 
change the rates would not need congressional approval.

   Previously, presidents, including Trump in his first term with his "Phase 
One" China deal, could negotiate only "more limited agreements that have 
focused on select bilateral trade and tariff issues," according to a 
Congressional Research Service report updated this April. Other examples of 
limited deals include a 2023 agreement on critical minerals and a 2020 deal on 
digital trade with Japan.

   The challenge is that Trump has also made nontariff barriers such as safety 
regulations for autos and the value added taxes charged in Europe part of his 
talks. He wants other countries to change their nontariff policies in exchange 
for the U.S. reducing the new tariffs he introduced. Other countries, in 
return, might object to U.S. subsidies to its companies.

   In theory, it would take House and Senate approval to complete a deal that 
would address "non-tariff barriers and require changes to U.S. law," the 
Congressional Research Service report said.

   Is it really a deal if Trump just imposes it?

   If other countries fail to satisfy him, Trump has suggested he will just do 
some kind of internal deals and set a tariff rate, although he technically 
already did that with his April 2 "Liberation Day" tariffs. The import taxes 
announced by Trump then led to a financial market sell-off that caused him to 
pause some of his new tariffs for 90 days and charge the lower 10% baseline 
rate while negotiations take place.

   It appears Trump will agree not to impose the originally threatened tariffs 
if he thinks other countries are making adequate concessions, essentially 
meaning that the U.S. gives up nothing because the tariffs are new. But Trump 
might also pull back his tariffs without necessarily getting much in return.

   "Trump is notorious for making maximalist demands and then retreating as 
negotiations go on, so we'll see how long he sticks with his formula," said 
William Reinsch, a senior adviser at the Center for Strategic and International 
Studies, a Washington think tank. "But so far it is pretty clear that countries 
coming in and wanting a 'normal' trade negotiation with both sides making 
substantive concessions are being rebuffed."