US weaponising tariff policy could be the new normal

In a massive diplomatic push, economic advisors of US President Donald Trump, have said that 50 countries have come forward to negotiate for better tariffs from the country. 

This comes after Trump announced sweeping tariffs across the board last week that brought the global economy to its knees, with markets crashing to lows that had economists and analysts alike, fearing for a global recession. 

Countries are keen on restructuring these financial barriers to foster co-operative trade relationships that could bolster their economies while alleviating the strains of recent trade disputes.

These tariffs have not only altered the landscape of international commerce but have also triggered retaliatory measures from some nations, further complicating global trade relations.

With inflation rates and economic recoveries at the forefront of global policies, the need for constructive negotiations has never been more pressing.

Professor Raymond Parsons from the North-West University Business School told Business Report that the fact that many countries want to negotiate with the US about its higher tariffs confirms the transactional element in President Trump’s tariff strategy.

"On a reciprocal basis it may therefore be possible for several countries to now ameliorate their tariff situation with the US. For example, SA may be able to replace the non-renewal of AGOA with a new US-SA free trade agreement. SA must therefore mobilise the necessary economic diplomacy to negotiate new trade arrangements that protect SA’s valuable economic relations with the US," Parsons said. 

The Professor added that any further trade negotiations with the US in present circumstances come with three general health warnings for all participants.

"First, the higher tariffs take immediate effect, while renegotiating them will take time to finalise. And the more countries that are involved, the longer it will take to do so. The risks of a global recession developing as a result of the big shock to the world trading system remain high, whatever US trade concessions may now be sought. Second, a bilateral approach to resolving these trade conflicts by the US may facilitate ‘divide-and-rule’ tensions among several nations. US demands may include non-tariff issues," he said.

"Third, unrealistic expectations must be avoided. The gap between the higher tariffs and what might be eventually negotiated downward by some economies remains high. And the core commitment of the US to ‘weaponise’ tariff policy as being in American economic interests is unlikely to change and is now the ‘new normal’," Parsons added. 

Over the weekend many countries had made moves in an effort to show 'good faith' regarding the tariffs imposed by Trump. 

Taiwan does not plan to impose reciprocal tariffs on imports from the United States, Taiwanese President Lai Ching-te said on Sunday, after Trump hit the island with a 32% levy. 

Taiwan's government has criticised the tax as "unfair" and "highly unreasonable", but stopped short of threatening its most important security backer with new tariffs of its own.

Instead, Taiwan has earmarked $2.7 billion to help industries affected by the new levy, which was among sweeping global tariffs announced by Trump last week.

Vietnam asked for a last-minute delay to the tariff as government figures showed on Sunday that its economy grew at a slightly slower pace in the first quarter. The Southeast Asian manufacturing powerhouse counted the United States as its biggest export market in the first three months of the year but its key customer has now hit it with a thumping 46% tariff.

To Lam has asked Trump for a delay of at least 45 days to the new 46% tariff. 

Meanwhile, Bangladesh said on Sunday it granted a licence to tech billionaire Elon Musk's Starlink satellite internet service, as punishing US tariffs raise fears for its key garment sector. Musk is known to have close ties to the White House, while Bangladesh was hit with a new tariff on the country's goods set at 37%, hiking duties from the previous 16% on cotton.

Zimbabwe President Emmerson Mnangagwa said on Saturday that he would suspend all tariffs on goods imported from the United States after being hit with an 18% levy.

UK Prime Minister Keir Starmer said the country's response "demands the best of British virtues -- cool heads, pragmatism and a clear understanding of our national interest", as the UK was imposed with 10% tariffs. 

Closer to home, ministers Ronald Lamola and Parks Tau agreed that the best way forward is to work hard to improve relations with the US but also enhance the focus both on stimulating domestic growth and improving our trade relations within Africa and elsewhere, diversifying our export markets.

BUSINESS REPORT