Tomorrow, May 20, Trump will celebrate his fourth month in office. It is, of course, too early to assess his economic policy. However, we can make a few observations about his tariff policy, which, so far, has been the key element of his economic strategy.

The initial objectives were fourfold:
1- Moving beyond the framework of multilateralism for international trade. Negotiating bilateral agreements has to be the new rule.
2- Implement exorbitant tariffs, Liberation Day on April 2, which forces each country to come and negotiate.
3- The fiscal impact of customs duties was supposed to reduce income tax to make the rest of the world pay.
4- The ultimate goal is to bring foreign companies to work in the USA.

Since April 9th ​​and the reduction of customs tariffs, the new tariffs are on hold until July 8th. This will be the next major step.

In the meantime, what can we learn from this very proactive policy?

1- The near absence of an agreement on customs tariffs. Only the United Kingdom has signed one, and it is not to the British’s advantage. The agreement stipulates that access to the American market will be more difficult for British products, but that access to the British market will be easier. It’s a somewhat caricatured agreement.
The other important element is the reduction of Chinese customs duties to 30%. The Middle Kingdom had implemented retaliatory measures with customs duties of 125%. The moral of the story is that there was no deal; the Chinese simply withdrew the retaliatory measures. On this score, Trump lost. American companies need Chinese products, and at 145%, it was impossible for them to remain competitive.
Japan and India, which were expected to be among the first signatories to the agreement, are not taking this path. Europe remains reluctant.

2- The second observation is that revenues will be much lower than the Trump administration hoped for. Multiplying the amount of exports by 10% and deducing the expected amount of tax revenues from this is irrelevant. Households and businesses are changing their behavior in the face of tariffs. Demand is changing, and any potential impacts on production processes are mitigated by tariff revenues. Historically, it’s consumers who pay. This will remain true, according to initial findings.

3- Companies don’t always want to play the game. The situation can become critical because it shows the consumer where the higher prices come from. Amazon did it, and Walmart did it too, each time attracting the wrath of the White House.

It is not known what will be announced on July 8, whether customs duties will be increased, but we see that the emphasis is now on diplomacy, as if customs tariffs have become boring because they are ineffective.