Along with using tariffs to wage trade wars, U.S. President Donald Trump has long been obsessed by the idea that foreign countries are cheating the United States by keeping their currencies artificially low. Now he has managed to unite those twin obsessions into a potentially dangerous new rule that could spark more trade tensions and potentially further roil relations with China, Japan, and the European Union.
This week, the U.S. Commerce Department finalized a new rule that will allow Washington to levy tariffs on countries that it believes are undervaluing their currency, which theoretically makes their exports cheaper and gives them an edge in competition with American-made goods. U.S. countervailing duties, normally reserved for use against certain imports that are proved to be dumped at below-market prices, could now be slapped on imports from any country that the Commerce Department decides has cheap money.
“This Currency Rule is an important step in ensuring that unfair trade practices are properly remedied,” Commerce Secretary Wilbur Ross said in a statement.
Ironically, however, the new currency rule is just the latest effort by the Trump administration to remedy the negative fallout of its own trade policies. The overall economic picture remains good—with a better-than-expected jobs report Friday, even though Trump’s much-touted economy has created fewer jobs per month than the Obama administration.
But sectors exposed to the trade wars, such as agriculture and manufacturing, are shedding jobs and racking up bankruptcies. For farmers who lost their biggest export market thanks to the trade war with China, Trump has offered tens of billions of dollars in bailouts—but despite Chinese promises of big agricultural purchases, those export markets have yet to return.
And just last month, the administration suddenly expanded tariffs on imported steel to include products made with steel because pricier imports of raw steel make goods using that steel more expensive (and thus less competitive) for U.S. manufacturers to churn out. New research suggests that the steel and aluminum tariffs may have cost the manufacturing sector as a whole 75,000 jobs; those new “cascading tariffs” are an implicit recognition that the steel tariffs, just as expected, caused plenty of pain but did almost no good for U.S. businesses.
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