Roving Periscope: Playing hardball, few countries dance to Trump’s tariff tunes

Virendra Pandit

New Delhi: US President Donald Trump may not have predicted this. Gone are the days when America’s diktat prevailed worldwide. With globalization, networking, and privatization, geoeconomics is fast replacing geopolitics, and geostrategic goals are a far cry now.

His grandstanding and then the inability to perform have earned him a tag: TACO, Trump Always Chickens Out! After a series of failures, and as a face-saver at home, he has been lobbying hard for a feather in the cap, the Nobel Peace Prize; after a  slavish Pakistan, he just bankrolled Israel to recommend his name for it.

And few are now worried about the trade war between the US and China.

Trump, who returned to the White House on January 20 amid much fanfare and Biden-bashing, and set out to “Make America Great Again” (MAGA), boasted that he has been a dealmaker all his life. But he would not have bargained for what awaited him: the world no longer listens to his worn-out rhetoric.

Nothing explains this than his so-called ‘reciprocal tariff’ policy’s fate. He has been announcing transparent falsehoods day in and day out, taking credits and making U-turns, setting fresh deadlines, and issuing threats to anyone who would listen to an ageing superpower well past its prime.

All his threats to Canada, Greenland, Panama et al have come a cropper. And all the ongoing wars he promised to end are still on in Gaza Strip, Yemen, Iran, and more. India subtly exposed his claim that he managed a ceasefire against Pakistan.

His ‘trading partner’ countries know it’s all ephemeral, even hogwash. If they can’t do business with America, well, they can now do it, piecemeal, with multiple countries, what with the democratization of supply chains in a highly networked planet and the ease of financial transactions. In other words, the US, indeed no other country, now calls all the shots in an increasingly multipolar world. And he is mighty worried even with the talk of de-dollarization.

Trump is worried that his old business tactics are no longer working.

That is why he is delaying tariffs as the rest of the world plays hardball, the BBC reported on Wednesday.

His White House had grandly promised “90 deals in 90 days” after partially pausing the process of levying what the US president called “reciprocal” tariffs.

In reality, there won’t even be nine deals done by the time we reach Trump’s first cut-off date on July 9 (Wednesday), the reports said.

The revealing thing here, the poker “tell” if you like, is the extension of the deadline from Wednesday until August 1, with a possibility of further extensions – or delays – to come. Trump, however, “declared” no changes or fresh deadlines now.

From the US perspective, Treasury Secretary Scott Bessent said all focus has been on the 18 countries that are responsible for 95 percent of America’s trade deficit.

The jaunty letters being sent from the US to its trading partners this week are simply a reincarnation of that infamous White House “Liberation Day” blue board.

The rates are basically the same as were first revealed on April 2. The infamous equation, which turned out to use a measure of the size of the deficit as a proxy for “the sum of all trade cheating” lives on, in a form.

This is all being announced without the market turmoil seen earlier this year because of this additional delay.

Financial markets believe in rolling delays, in the idea of TACO, that Trump Always Chickens Out – although they may embolden foot-dragging on all sides that lead to a renewed crisis.

However, the real takeaway here has been the Trump administration’s inability to strike deals. The letters are an admission of failure.

The White House may be playing hardball, but so are most other nations.

Japan and South Korea were singled out for the first two letters, which effectively further blow up their trade deals with the US.

The Japanese have done little to hide their fury at the US approach.

Its finance minister even hinted at using its ownership of the world’s biggest stockpile of US government debt – basically the biggest banker of America’s debts – as a source of potential leverage.

The dynamic from April has not really changed.

The rest of the world sees that markets punish the US when a trade war looks real, when American retailers warn the White House of higher prices and empty shelves.

And there is still a plausible court case working its way through the system that could render the tariffs illegal.

But the world is now also starting to see the numerical impact of an upended global trade system.

The value of the dollar has declined 10 percent this year against a number of currencies.

At Bessent’s confirmation hearing, he said that the likely increase in the value of the dollar would help mitigate any inflationary impact of tariffs.

The opposite has happened.

Trade numbers are starting to shift too. There was massive stockpiling before tariffs, there have been more recent significant falls.

Meanwhile, Chinese exports to the US have fallen by 9.7 percent so far this year.

But China’s shipments to the rest of the world are up 6 percent. This includes a 7.4 percent rise in exports to the UK, a 12.2 percent increase to the 10 members of the ASEAN alliance and 18.9 percent rise to Africa.

The numbers are volatile, but consistent with what might be predicted.

Revenues from tariffs are starting to pour into the US Treasury coffers, with record receipts in May.

As the US builds a tariff wall around itself, the rest of the world is likely to trade more with each other – just look at the recent economic deals between the UK and India, and the EU and Canada.

It is worth noting that the effective tariff rate being imposed by the US on the rest of the world is now about 15 percent, having been between 2 percent and 4 percent for the past 40 years. This is before the further changes in these letters.

The market reaction is calm for now. It might not stay that way.