Trump/Brazil: Delusions of Grandeur Go South
Trump thinks he can rule the world, but he doesn’t have the juice
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Statue of limitations?
Note: Trump announced a bunch more tariffs, some very high, late yesterday. Everything suggests that this is the new normal, unless the courts rule (as they should) that everything has been illegal. I’ll have a full analysis of the economics of Smoot-Hawley 2.0 in Sunday’s primer.
As I said yesterday, Donald Trump isn’t “winning his trade war.” He’s imposing a lot of tariffs, and so far nobody has stopped him even though his actions are clearly illegal. But “winning” a trade war, if it means anything, means using tariffs to extract meaningful concessions from other countries. And while some major trading partners, notably the European Union, are humoring Trump by pretending to make concessions, when you look at what they’re actually doing it’s just vaporware.
Is Trump an incompetent negotiator, easily hoodwinked? Maybe. But more fundamentally, he just doesn’t have the juice. The U.S. market is big, and denying other countries access to that market hurts them. But it doesn’t hurt them that much, and anyone imagining that America can use the threat of tariffs to force major policy changes abroad is suffering from delusions of grandeur.
Consider the case of Brazil.
In some ways Trump’s dealings with Brazil are exceptional, even in the context of his unprecedented break with 90 years of U.S. tariff policy. For one thing, Brazil is facing 50 percent tariffs — considerably higher than anyone else.
For another, Trump’s demands on Brazil are different in kind from what he’s demanding from anyone else. The European Union and Japan have been targeted because of alleged unfair trade practices, although exactly what these practices are has never been clear. Canada is being targeted over claims that it’s a major source of fentanyl, which is a lie but would be a real grievance if it were true. But Trump has explicitly linked tariffs on Brazil to the nation’s temerity in trying Jair Bolsonaro, the former president, for attempting to overturn an election he lost.
So Trump is an enemy of democracy and accountability for would-be authoritarians, but we knew that. Beyond that, it’s utterly illegal for a U.S. president to use tariffs in an attempt to influence another nation’s internal politics. Presidents do have considerable discretion in tariff-setting, but there are a limited number of allowed reasons for imposing temporary tariffs:
· To give a U.S. industry a breathing space against an import surge (Section 201)
· To preserve an industry essential to national security (Section 232)
· Unfair foreign practices (Section 301 and anti-dumping duties)
Presidents can also claim additional powers during an economic emergency — but Trump keeps insisting that the U.S. economy is doing great, which presumably means that there is no emergency.
Now, just about everything Trump has been doing on trade is illegal, but in the case of Brazil it’s completely blatant. I don’t think even the most cleverly unscrupulous lawyer could find anything in U.S. law that gives a president the right to impose tariffs on a nation, not for economic reasons, but because he doesn’t like what its judiciary is doing. (Famous last words?)
So the confrontation with Brazil illustrates in especially stark form the lawlessness of Trump’s tariff spree. It also, however, illustrates the gap between the amount of power Trump apparently thinks he has and the reality.
I keep seeing articles saying that the United States is Brazil’s second-most-important trading partner. That’s not even true, unless you ignore the fact that when it comes to international trade the European Union lives up to its name, presenting a unified front on tariffs. In any case, you should realize that we really don’t loom very large in Brazil’s overall export picture. Here’s the breakdown for last year:
Source: International Monetary Fund
Do Trump and his advisors really think they can use tariffs to bully a nation of more than 200 million people into dropping its efforts to defend democracy, when it sells 88 percent of its exports to countries other than the United States?
Wait, there’s more: The Trump administration has exempted fresh orange juice — 90 percent of which is imported from Brazil — from its tariff. Apparently we need what Brazil sells us. And this is an implicit admission that, contrary to Trump’s constant assertions, U.S. consumers rather than foreign exporters pay tariffs.
What some of us want to know is why orange juice, which people can live without, is getting a break, while coffee, an absolutely essential nutrient, isn’t.
Sure enough, the tariffs seem to be backfiring politically. In an echo of what happened in Canada, where Trump’s pressure clearly saved the incumbent Liberal government from massive electoral losses, the threats against Brazil have done wonders for the popularity of Luiz Inácio Lula da Silva, the current president:
Source: The Economist
As I said, Trump may think he can rule the world, but he doesn’t have the juice, orange or otherwise. In fact, he is unintentionally giving the world a lesson in the limits of U.S. power.
MUSICAL CODA