Calling Trump’s bluff on ‘reciprocal’ tariffs
Summary
Countries can test his inconsistent trade rhetoric by offering zero tariffs on all bilateral goods and services.President Trump isn’t consistent about what he wants from his mammoth new tariffs, and that may be an opening for trading partners to test his occasional rhetoric about desiring “reciprocal" trade. Call his bluff and offer zero tariffs on all bilateral goods and services.
Granted this is a long shot. We’ve long thought Mr. Trump’s “reciprocal" line is mainly political spin intended to mollify Republicans and businesses that his tariffs may not be permanent. Wall Street bought this line to its painful regret until last week. The truth is that Mr. Trump loves tariffs for their own sake and he really seems to believe the U.S. will prosper by making or growing everything it consumes only in the 50 states.
That’s the message his chief tariff spinners, Peter Navarro and Commerce Secretary Howard Lutnick, are delivering: Forget about negotiation. Mr. Trump mostly sounds that same message, as he posted Thursday (we’ll spare you the all caps): “To the many investors coming into the United States and investing massive amounts of money, my policies will never change."
But never doesn’t ever really mean never in Mr. Trump’s protean mind. A day later, as the financial markets kept falling, the President sent out this Truth Social message:
“Just had a very productive call with To Lam, General Secretary of the Communist Party of Vietnam, who told me that Vietnam wants to cut their Tariffs down to ZERO if they are able to make an agreement with the U.S. I thanked him on behalf of our Country, and said I look forward to a meeting in the near future."
No doubt Mr. Trump was trying (and failing) to stop the market bleeding, but this is also a trade opening for Vietnam and the rest of the world. One option is retaliation, which is what China did on Friday. That risks tariff escalation from Mr. Trump, and most countries can’t punish the U.S. as much as China can. At least at first, other U.S. trading partners could offer to eliminate all tariffs and other non-tariff barriers between the two countries or trading blocs.
Mr. Trump may be faking this negotiation line, but it’s worth testing. If markets continue in turmoil, or if a recession looms and his approval rating craters, the President may feel the need for a face-saving escape route. That could be when he decides to spin his tariffs not as permanent but as the genius negotiating strategy his apologists claim it is.
The Vietnam offer is a shrewd one. Mr. Trump hit Hanoi with a 46% arbitrary tariff last week, and To Lam offers zero rates in return. Zero would be the best outcome for both countries, but if a deal ends up with a far lower tariff rate, it will be an improvement.
Similar logic seems to have persuaded Mr. Trump to avoid further tariffs on Canada and Mexico last week, at least for goods that qualify under the USMCA trade deal from his first term. Given the compatibility of its economy with the U.S. and Mr. Trump’s Anglophilia, Britain might also be a trade-deal candidate. Elon Musk broke with Mr. Trump on tariffs this weekend and said he thinks tariffs should be zero between the U.S. and European Union. Good idea.
We aren’t Pollyanish about this. Mr. Trump really may believe that the “little disturbance" he predicted from his tariffs will soon give way to a new era of prosperity. If his rhetoric on reciprocal tariffs is merely spin, then the rest of the world can pursue alternative trading arrangements that leave the U.S. behind. But the zero option is worth a try.
