By Terri Wu Contributing Writer  President Donald Trump has dubbed April 2 “Liberation Day,” when he will unveil reciprocal tariffs to level the trading field between the United States and its 200 partners.  The White House has yet to disclose details of the sweeping tariffs. Treasury S ecretary Scott Bessent has said that the administration will focus on the “dirty 15,” or the top 15% of partners contributing the most to the United States’ negative trade balance.  Meanwhile, the 25% tariff on autos and auto parts unveiled on March 26, which also takes effect on April 2, may foreshadow the magnitude of change that Trump’s reciprocal tariff policy aims to achieve.  A U.S. trade policy investigation, ordered by Trump on day one of his administration, was due to be completed on Tuesday.  Trump tasked the Office of the United States Trade Representative and the Commerce and Treasury departments to identify violators of fair trade policies.  Experts say the journey to reciprocity will be bumpy but necessary, because no partners will voluntarily give up their longstanding trade surpluses with the United States.  According to the experts, however, the United States will ultimately be better off. In the meantime, the administration will likely adjust its plan to a more refined tariff regime tailored to the modern trade world.  “In terms of whether they will eventually blunder their way into a more sophisticated, appropriate tariff, I would say the chances of that happening are probably two out of three,” economist Ian Fletcher said. “But maybe [they] won’t.”  Frank Xie, a professor of business and marketing at the University of South Carolina-Aiken, is more confident about the outcome. He predicts an economic boom before the 2026 midterms, with early signs to appear in the next 12 to 18 months.  ‘Mandated Reciprocity’  The United States has kept tariffs low for decades. However, the country is in a different position than in the 1970s, when the trade deficit first appeared.  Its share of the global GDP has declined. According to the Social Progress Index, Americans’ quality of life has also undergone an “accelerated decline” since 2018.  The United States has suffered decades of wealth loss, said former U.S. trade representative Ambassador Robert Lighthizer.  He said it’s not a problem when a country runs a trade deficit with another over a short period. However, decades of deficit to the tune of hundreds of billions of dollars — as is the case of the United States’ trade with China — is essentially a “net transfer of wealth,” he said.  Recent releases of official economic data reflect the outcome of the reduction in U.S. wealth. Last year, the U.S. trade deficit reached more than $1.2 trillion — the most ever in history.  China’s share of the total U.S. trade deficit has declined since 2018, when President Donald Trump began imposing tariffs on Chinese imports.  At the same time, Americans owe the rest of the world $26 trillion more than what they own in foreign countries, as indicated by the U.S. net investment position in data released last week by the U.S. Bureau of Economic Analysis. The 2024 number represents a 30% year-on-year drop.  Much of the world’s investment in the United States is debt. Last year, the U.S. debt reached a record high of more than $36 trillion, or more than $230,000 in debt per taxpayer. The interest payment alone was more than $1 trillion — more than one-fifth of the federal government’s revenue.  The federal deficit in 2024 was nearly $2 trillion, which grew about 8% from 2023, according to the U.S. Treasury. The last time Washington had a surplus was 24 years ago.  Economists generally view debt as a tool for a country’s fiscal management; therefore, it is not seen as inherently bad. However, the increasingly high level of debt is concerning.   The U.S. government doesn’t have an unlimited runway to borrow money, Xie said, so the administration needs to act fast.  Historian Victor Davis Hanson describes Trump’s theme as “mandated reciprocity.”   “The United States is not rich or powerful enough anymore to subsidize the economies and militaries of its friends, or to ignore and sluff off the aggression of its enemies,” the Hoover Institution fellow said.  The Trump administration’s imposition of reciprocal tariffs means that, “Neither our friends, the EU, nor our enemies, like China, will continue to pile up huge trade surpluses by the use of asymmetrical mercantile protectionism,” he said.  Trump has said his team would consider tariff and non-tariff trade barriers when determining the reciprocal tariffs.  In addition to high duty rates, many countries make it difficult for foreign companies to enter their markets via regulatory preference and subsidies for domestic businesses.  On Monday, the USTR released its annual report detailing, by country, trade barriers in 14 categories, including import policies, government procurement processes, subsidies, and favoritism to state-owned enterprises.  At the same time, many foreign businesses trade in the open U.S. market with few barriers. No foreign governments or enterprises will voluntarily give up such privileges, Xie said, so the Trump administration will have to intervene.  ‘Dirty 15’  Taking the approach of “dirty 15” is a “matter of prioritization” to manage the implementation of the reciprocal policy, Xie said.  He cited the 80-20 rule in business, which states that usually 80% of the problem is caused by 20% of the players. In this case, he said, the administration has identified the top 15% who have contributed to a majority of the imbalance.  The White House has yet to release its “dirty 15” country list. However, official data show that the 15 trade partners holding the highest trade surpluses with the United States are: China, the European Union, Mexico, Vietnam, Taiwan, Canada, Japan, South Korea, Thailand, India, Switzerland, Malaysia, Indonesia, Cambodia, and South Africa.  While China is still No. 1 in terms of the size of its trade surplus with the United States, its share of the total halved from about 50% in 2018 to 25% in 2024. However, this doesn’t necessarily mean the U.S. supply chain’s reliance on China has decreased.  In many instances, the supply chain has simply moved from China to a third country, but Chinese companies are still directing the manufacturing.  “You’re moving production away from China, but the United States is still dependent on corporations under the control of a hostile regime,” said Fletcher, who also sits on the advisory board of the Coalition for a Prosperous America, an advocacy organization exclusively representing manufacturers that have production in the United States.  Basing manufacturing in the United States would eliminate that risk, said Fletcher, and that’s what Trump’s policies are aiming for.  When asked about automakers’ reactions to the new 25% tariffs, Trump said, “It depends on whether or not they have factories here. I can tell you, if they have factories here, they’re thrilled.  “If you don’t have factories here, they’re going to have to get going and build them because otherwise, they have to pay tariffs. Very simple.”  Prices Will Rise, Then What?  Some specifics about the new auto and auto parts tariffs are still up in the air, said Mark Tallow, a partner with trade law firm Sandler, Travis, and Rosenberg, in the company’s “Two Minutes in Trade” podcast. However, based on the specific directions in the implementation process, he said the tariffs don’t look temporary.  The president also said the duties are “permanent.”  Fletcher said that is Trump’s signature style: “Everything he does, he does this big, blunt move. And then they start making adjustments afterwards.”  Xie doesn’t believe Trump will give concessions on the newly announced auto tariffs.  The president, he said, wants the tariff to generate enough pain — thus incentive — for auto parts manufacturing to move to the States.  Xie expects the automakers to push their parts suppliers to move to the United States. He added that if 25% is not enough, Trump could always add another 5 or 10%.  Prices of cars will inevitably go up, Fletcher said. “The question is going to be how upset the public gets about this.”  Trump has anticipated that foreign automakers will raise their car prices. “I couldn’t care less if they raise prices because people are going to start buying American-made cars,” he told NBC News on Saturday.  “I couldn’t care less. I hope they raise their prices, because if they do, people are going to buy American-made cars. We have plenty.”  Fletcher said the president has already been thinking of where to spend the new tariff revenue to alleviate consumers’ pain because he proposed an income tax deduction on loans for buying American-made cars. Any change in income tax deductions will need approval from Congress, where Republicans hold a slim majority in both chambers.  The new auto tariffs are expected to generate an additional $100 billion in annual revenue and bring in $600 billion to $1 trillion in investments into the United States, according to the White House. Peter Navarro, a senior trade adviser to President Trump, told Fox News on Sunday that the overall tariff revenue would reach more than $6 trillion over the next decade.  Xie said that early signs of the results of such investments could appear within 12 months. That could bring in new jobs and more income for American consumers, who, with the assistance of potential tax cuts, might find they can live with higher prices.  The Tax Foundation, a tax policy watchdog, estimated that Trump’s tariffs imposed as of March 25 would cost the United States a 0.4% drop in gross domestic product and 309,000 full-time jobs. The analysis has considered price increases and tariff revenues, but not the incremental investments the tariffs may bring into the United States.  Although tariffs didn’t cause inflation during Trump’s first term, there is rising concern that they will do so this time around because the levies are more universal.  The actual outcome is a result of many factors. Importers, exporters and consumers together bear the burden of increased prices. The type of goods matters because if consumers are willing to buy alternative domestic products, the price may not rise as much as the tariff rates. Other policies that accompany tariffs may also sway overall prices for consumers.  On Sunday, Goldman Sachs said there was a 35% probability that the U.S. economy will enter a recession within 12 months, up from an estimated 20% probability earlier in the month. The investment bank attributed the increase to tariffs raising prices and slowing growth.  A Small Window  Tariffs are only one piece of Trump’s total economic strategy, Xie said, noting that the administration’s $500 billion investment in artificial intelligence also plays a key role in resetting global economic competition.  He believes AI development will cause a seismic shift in the labor force worldwide, and the technological leader will reap the most benefits.  High U.S. labor costs, the key factor driving multinational corporations to favor foreign over domestic investments, might become irrelevant when labor is much less significant in the production process.  “It’s going to transform the world and dramatically change how wealth is created and distributed,” Xie said.  Given the United States’ mounting debt and interest payments and the speed of the AI race, the administration has a small window to act, he said.  Trump’s second term so far has been defined by its breakneck pace. Just over two months into his administration, Trump has opened salvos on many fronts: downsizing the government, cutting spending, stemming fentanyl inflow, securing the border, and increasing private investment.  The president has used tariffs as a centerpiece to steer his foreign policy, shift the global supply chain, and attract investments to the United States.  Xie said such rapid actions are needed to deliver on Trump’s campaign promises.  “I think there’s a real urgency.”  The post What to expect from Trump’s global tariffs  appeared first on Santa Clarita Valley Signal. ...read more read less