President Trump's recent tariff policy is stirring concerns, especially with the 10% across-the-board tariff and additional targeted tariffs on select countries.
Inu Manak, trade policy fellow at the Council on Foreign Relations, joins Asking for a Trend to explain that this could result in the largest tax hike on Americans in recent history, noting that she anticipates mixed reactions from trade partners.
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Let's welcome Inu Manak, uh, fellow for trade policy for the Council on Foreign Relations. Inu, uh, I was just talking to Rick, but, but of course want to get your response and your reaction to the news. You know, you know, was it what you expected, Inu? Was it more aggressive, less aggressive? Give us your take.
Well, I think this was a lot more aggressive than many of us anticipated. We're seeing a 10% across the board tariff in addition to targeted tariffs on, on a set of countries. Uh, it's not reciprocal, what he's calling reciprocal at all. If you're looking at the numbers, it doesn't quite make sense. Uh, President Trump is cherry picking some data to make some of our trading partners seem like they have higher barriers than they do. Uh, so I'd like to see the formula for how they're calculating some of this, but at the end of the day, this is probably going to be the biggest tax hike on Americans since the 1940s.
You know, I'm curious how you think trading, trading partners now respond to this. Do you think they negotiate? Do you think they retaliate? What would you expect?
I think it's probably going to be a mix. I think some partners are going to retaliate right away. Some have indicated that if tariffs went into effect today, they had retaliation ready to go. Uh, others are going to try to figure out how they can get out of this, get exemptions, uh, find out what the challenge and problem is that President Trump is concerned about, and find ways to address that. So if there are legitimate trade problems, I think partners will be ready to come to the table, but they would have done that absent of tariffs. So it is really bizarre that he's taking this approach to try to get our trading partners to come and talk to us about some of these problems.
Inu, do you, just the baseline here, uh, do you understand, can you explain what you think is the stacking mechanism here? In other words, the 10% applies and then the reciprocal applies and then we have some, uh, product specific, uh, things such as steel and aluminum and autos. Is your understanding that basically you add all those tariff rates together or does one set of tariffs replace another?
Well, from what I've seen so far, it seems like all of these are going to be stacked on top of each other. Now, until we see more clarity, uh, in the text of whatever, uh, authorities that the president is calling upon to do this, we will see exactly what exact how this is going to work. So right now I would say they are going to be stacked and our partners are going to face significant tariffs. If you look at China for example, um, they had tariffs up to 42% on average, uh, using 301 and the IFA tariffs that President Trump already put in place, and we're seeing an additional 34% of that. That's going to take their tariffs to over 70%. So this is really going to be significant and, and harm the US economy.
Let me, let me just work that through on one specific product category, cars from Japan. So if you stack all the tariffs, that is the 10% baseline, uh, that is the 25% auto import tariff, and then this new 24%, so you're, you're talking about a 60, almost 60, 60% tax on cars coming from Japan, which is it, I mean that's going to trigger dramatic price increases right away, right?
Absolutely. I, I think we're going to see price increases that will happen as we did last time, uh, on all the products that President Trump put tariffs upon, uh, in his last term in office. And, and that's basically what we saw that all those costs were then passed on to consumers as well. Um, so he's calling this, uh, something that's going to be liberation, that's going to be helpful to the American people and lower cost. The only thing these tariffs are going to do are increase costs, not just for American consumers, but for producers that use products to make other things, including automobiles. The Japanese companies that invest here, including a lot of auto companies, make things with parts that they import from the rest of the world, and they're going to need those imports to make those vehicles. So what are we talking about here? Potentially no cars being made in the United States? I think this is really, really wild.
You know, great to have that instant analysis and reaction. We appreciate it.
Thank you for having me.