Markets and foreign negotiators have responded with a shrug. After all, Trump paused the bulk of his tariffs in early April, and his team promised as many as 90 deals in 90 days.
The 90-day mark came and went a week ago, and there has been just one deal, with Britain, and concepts of deals, with Vietnam and Indonesia.
The dearth of deals to date has fed the narrative that “Trump Always Chickens Out,” the so-called TACO trade, that he overplays his hand, and that his trade war is going badly.
This narrative misconstrues Trump’s goals, overstates the importance of deals and breeds complacency about his willingness to raise tariffs.
Going into his second term, many of Trump’s own advisers liked to portray tariffs as a negotiating chip to get other countries to lower their own trade barriers and buy more American stuff.
Trump himself never subscribed to this. He has been clear and single-minded about his goal: He wants tariffs, the higher the better. Whether that is achieved unilaterally or via deals is secondary.
Trump advisers argue that only tariffs can effectively address trade deficits, which, they say, reflect a plethora of nontariff barriers such as regulations and taxes that suppress consumption and imports. Yet since the 1980s, Trump has advanced a simpler rationale: Others should pay for access to the U.S. market or the protection of the U.S. military.
And, despite the absence of deals, he has succeeded. In June alone, Treasury collected $27 billion in customs revenue, up $20 billion from a year earlier, a pace that would imply $240 billion more a year. That isn’t enough to eliminate most families’ income tax as Trump once promised, but it can still pay for plenty of other priorities.
The idea that Trump backs down dates to April, when he announced steep “reciprocal” tariffs on almost everyone, and 145% on China. Markets cratered, and he walked the tariffs back.
But he never relinquished his 10% “baseline” tariff on almost all imports. When he first floated such a tariff on the campaign trail, it seemed like a worst-case scenario. Today, many trading partners now see that as a best-case scenario.
Including his tariffs on steel, aluminum and autos, the average effective tariff on all U.S. imports as of July 2 was 13.4%, according to JPMorgan Chase. That’s below the April 9 peak, but well above the 2.3% last year, and the highest since the 1940s, before the U.S. and its allies set up the mechanisms to bring down world trade barriers.
So even without deals, Trump has, by his own definition of success, already won his trade war.
Trump’s ambivalence regarding trade deals seems out of character for someone who prides himself on the art of the deal. Yet as a private developer, Trump understood that deals generally required everyone to give something up. Trump couldn’t dictate terms to bankers or investors when he needed them more than they needed him.
Today, he leads the world’s largest economy with the largest military. Everyone else needs the U.S. more than vice versa, and Trump assumes that he can thus dictate terms and that others have to live with them.
This is a departure from Trump’s first term, when he did negotiate many actual deals: an amended trade agreement with South Korea, a new agreement with Japan, and the U.S.-Mexico-Canada Agreement to replace the North American Free Trade Agreement. None entailed a big increase in tariffs. Some even included small U.S. concessions.
Back then Trump had leverage, but it was constrained by checks and balances and norms. He generally raised tariffs using established laws, such as the “Section 301″ investigation used to penalize China’s unfair trading practices or the “Section 201″ safeguard tariffs on solar panels and washing machines.
In negotiations, U.S. officials were careful about going too far, knowing the other side had to sell any deal to its own public.
Republicans, who then like now controlled Congress, disliked tariffs, especially on allies, and pressured Trump to renegotiate rather than scrapping existing deals.
And opponents were more determined: Canada, Mexico, the European Union and China retaliated, and many businesses forced to pay the tariffs sued.
Many of those checks and balances and norms are now gone. Trump claims the authority to raise tariffs on anyone and anything indefinitely for virtually any reason under the International Emergency Economic Powers Act, a law intended to sanction adversaries such as Iran or Venezuela. One court has declared his use of it illegal; that decision has been stayed.
President Trump has long advanced the notion that others should pay for access to the U.S. market.
As for trading partners, none except China and Canada have retaliated. Many took Trump seriously when he said retaliation would mean worse treatment. It hasn’t turned out that way. Trump has threatened the EU and Mexico, which didn’t retaliate, with tariffs comparable to those on China, which did.
The absence of retaliation gives Republicans in Congress, who don’t share Trump’s fondness for tariffs on allies, less ability to oppose him.
For Trump, another disadvantage of deals is that in theory both sides are expected to abide by them. But Trump disdains such constraints and enjoys moving the goal posts. He hit Canada and Mexico with 25% tariffs to make them crack down on fentanyl and illegal migration. They did, and Trump has threatened to raise tariffs further. He might consider new deals no more binding than his first-term pacts.
So Trump, at long last, has his tariffs, a free hand to raise them and little pressure to roll them back. But is that necessarily a good thing? Trump’s tariffs haven’t caused the feared recession, but nor have they yet to spark a manufacturing renaissance. Much of the tariff money pouring into Treasury comes out of the pockets of American companies and consumers.
The risk with Trump’s unilateralism is that he pushes tariffs beyond what the markets or trading partners can tolerate. Markets weakened Tuesday on signs tariffs are starting to show up in consumer prices.
Previous presidents pursued freer trade not because they were bad at deals but because for all its flaws, it made U.S. companies and workers more productive, consumers better off, and other countries (with the notable exception of China) more invested in U.S. leadership. Trump might emerge a winner from his trade wars; it remains to be seen if the U.S. will as well.
Write to Greg Ip at greg.ip@wsj.com