Some analysts are complaining that the Trump Administration is endangering free trade around the world by picking trade fights with, for example, China, Japan, Mexico, Canada and Europe. Even some of President Trump’s strongest supporters complain that the U.S. is bearing down too hard on our own allies and thereby likely to hurt the overall world economy.
But there is another way to look at the worldwide trade situation. According to Peter Navarro, Director of the Office of Trade and Manufacturing Policy, “American exporters face systematically higher tariffs in the markets of more than 100 U.S. trading partners.” Consider:
- The U.S. tariff rate on automobiles is 2.5%. The European Union’s tariff is 10% and the EU exports more than three times as many autos to the U.S. as the U.S. exports to the EU.
- India applies higher tariffs 90% of the time and China 85%, thereby blocking many American exporters from selling goods to these countries at competitive prices.
- The World Trade Organization requires member states to apply the lowest tariffs it applies to the products of any one country to the products of every other country. WTO members may, however, charge higher tariffs if they apply those nonreciprocal tariffs to all countries.
- President Trump has asked Congress to pass the U.S. Reciprocal Trade Act which would allow the President to bring to the negotiating table any trading partner that applies higher nonreciprocal tariffs. If such partner refuses to lower its tariffs, the President would have the power to impose reciprocal duties on that country.
- Just because the U.S. is the strongest and wealthiest nation in the world, it cannot be expected to sacrifice the welfare of its own citizens with trade practices which treat them unfairly.
Summary. Free trade among nations enhances overall prosperity because countries are able to specialize in what they do best. But free trade should also be fair trade so that all parties have the opportunity to benefit from the increased exchange.