MNI INTERVIEW: Lots More Coming On Trump Tariffs - Eissenstat
MNI (DETROIT) - Tariffs will remain central to U.S. President Donald Trump's policy agenda as he begins renegotiating the U.S.-Mexico-Canada agreement and confronting China on a broad set of economic and geopolitical priorities, Everett Eissenstat, a top White House economic and trade adviser in the first Trump administration, told MNI.
But whereas the U.S. is expected ultimately to settle into a stable state with its neighbors and closest allies, a prolonged clash with China would see decoupling in certain sectors, particularly technology, said Eissenstat, formerly lead negotiator for the U.S. at the G7, G20 and APEC summits.
"It's a good bet we'll end up with some forms of increased tariffs at the end of this administration," he said in an interview on the sidelines of an automotive conference hosted by the Federal Reserve Bank of Chicago in Detroit.
"More nationalist popular leaders are being elected all over the world. They need to find ways to work together. Natural synergies will continue to exist – when Canada is doing well it's in our interest – but we’re going to have a more fragmented world, particularly in regard to China and technology."
USMCA REVIEW
In his first two weeks in office Trump has announced 25% tariffs on Mexican and Canadian imports – now deferred for 30 days – and imposed a 10% tariffs on Chinese goods. Eissenstat also expects the president to make good on threats to tariff Europe before the month's end. (See MNI: EU To Talk With US, Boost Industry Protection-Officials)
Trump sees tariffs as a tool for renegotiating existing trade agreements, remedying unfair trading practices, solving the trade deficit and even achieving foreign policy objectives, Eissenstat said.
Immigration and drug trafficking were the first two concerns addressed with America's closest trading partners, but the renegotiation of the U.S.-Mexico-Canada agreement – originally set for 2026 – likely gets expedited as well, he said. Contentious issues include the automotive industry's rules of origin for claiming preferential treatment, restrictions on Chinese companies using Mexico as a platform for exporting to the U.S., and the resolution process for disputes. (See MNI INTERVIEW: Trump Canada Threats Amount To A 10% Tariff)
"I could see a situation where this starts out as one negotiation and then folds into a broader negotiation about trade relations and maybe some modifications to the USMCA that might lead to stability over time," Eissenstat said.
"The 25% may be in place for a while, it’s possible they can be paused again, depending whether progress is being made. But that possibility of tariffs being put in place will remain for quite some time."
DIFFERENT TRACK FOR CHINA
Trump's objectives with regards to China is more difficult to decode, Eissenstat said. Not only are the issues deeper, more complex, more enduring and harder to resolve, there are many more vested interests, including members of Congress. (See MNI: China Targeting Negotiation, Removal Of All Levies)
"The negotiations with China are on a different timetable, a different trajectory. I'm not sure what he ultimately wants from China. I think he’d like to see them purchase more exports, stop subsidizing production, grow their own economy, consume more, deregulate, enable data to flow. China could take on more WTO obligations, reach the highest standards of any member," Eissenstat said.
Bilateral trade deficits and even the overall deficit are a metric of fairness to Trump and his trade counselor Peter Navarro, Eissenstat said. The 2024 U.S. goods deficit at USD1.2 trillion was the highest on record.
"The U.S. can’t be the only consumer in the world. China is big enough that it could do that," he said. "There will not be a full decoupling. Trade will continue, but for some sectors it’s going to be pretty fragmented."
Failure to make to come to an understanding between the world’s two largest economies could lead to “other types of economic coercion, which will lead to more political coercion and a very, very bad dynamic,” Eissenstat said.
“There’s going to be a lot of pressure on third markets, particularly smaller economies to be part of one or the other, it’s very difficult to do that because they want to serve both and have interest on both sides.”