Trump's tariff rollout makes business community anxious
President Trump’s approach to setting tariff rates is causing anxiety in the business community, with the trickling flow of letters to trade partners exacerbating concerns over hits to the economy.
The president has sent two dozen letters to countries, with rates set between 20 percent and 50 percent to be imposed Aug. 1, while also leaving the door open to negotiations to lower those rates with trading partners such as the European Union.
That's left the corporate world bracing for what next month could bring.
“People have built in that there will be some inflationary impact with tariffs at some point — not all of them can be absorbed by manufacturers and things like that. But the problem becomes now you’re compounding that with this herky-jerky thing that creates instability,” said a GOP lobbyist who asked to remain anonymous to speak freely.
For example, Trump on July 7 had imposed a 32 percent tariff on Indonesia, sending out a letter on Truth Social. He then said Tuesday that he had struck a deal to lower the rate to 19 percent and give the U.S. full access to Indonesia, which is a top copper producer.
He also this week said Europe may come to the table to try to lower the 30 percent that it's been hit with, suggesting other trading partners could do the same.
“No, we’re going to be talking to people,” the president said. “The deals are already made — the letters are the deals. The deals are made, there are no deals to make. They would like to do a different kind of a deal. ... We are open to talk, including to Europe.”
Trump has consistently pulled back on tariff threats or kicked them down the road, which has created the concept of the Wall Street TACO trade, an acronym that stands for “Trump Always Chickens Out.”
That pattern is leaving various industries unsure about how to move forward.
“It's less about the platform than it is about the whipsaw uncertainty of the on-again, off-again nature of the announcements,” said a lobbyist with expertise in the restaurant industry. “No matter what you think about the policy, small-business owners are looking for certainty so they can make long-term decisions about investments in their supply chains, inventory and construction projects.”
A lobbyist with expertise in the retail sector described the uncertainty among corporations as close to the angst felt from the COVID-19 pandemic.
“If there is one thing the business community craves above all, it is certainty. The randomness of the approach for announcing and the inability to make it stop are causing ulcers, and we are approaching the early days of COVID anxiety in the business community,” the retail sector lobbyist said.
Trump’s wide-ranging “reciprocal” tariffs were first announced in early April, then paused for 90 days. Just days ahead of the 90-day mark, Trump reset the start date to Aug. 1, with tariff rates being rolled out through letters now.
Meanwhile, inflation rose by 2.7 percent in June, following warnings from economists that the cost of the tariffs would make it through value chains and start to show up in consumer prices over the summer.
Trump brushed off the June inflation numbers, which mark the second consecutive month with a rise in the consumer price index.
“Very little inflation. As you know, the numbers were very good, very much inside the margin. So, we've had no inflation. All we have is we're making a fortune. We are taking in hundreds of billions of dollars,” he said Tuesday.
Top CEOs have stepped up outreach to members of Congress about their unease over the back-and-forth on tariff rates, the GOP lobbyist told The Hill.
“CEOs are certainly concerned about — when you’re hearing deals aren’t closing, trading partners can’t understand how they’re going to price deals, they don't know what the rates are going to be on tariffs. Instability is the worst thing for business, because you can't do something that we plan for over multiple quarters for six months, a year. … It’s not sustainable,” the source said. “That message that is being carried to members of Congress, particularly senators, from big company CEOs. They can figure out how to navigate tariffs, but when it's so herky-jerk and not reasonable or rational, that's when they get concerned.”
The president’s latest letters to trading partners imposed tariffs of 20 percent on the Philippines, 25 percent on Japan and Malaysia, 40 percent on Myanmar, 35 percent on Bangladesh and 36 percent on Thailand and Cambodia, among others.
Trump got personal with some tariff threats, threatening a 50 percent tariff on Brazil while demanding the country drop its prosecution of former President Jair Bolsonaro. He also will hit Canada with a 35 percent tariff, arguing the neighbors to the north had not done enough to curb the flow of fentanyl into the U.S., even though relatively little of the drug crosses that border each year compared with the southern border.
He also has imposed across-the-board tariffs on industry specific goods, including a 50 percent tariff on steel and aluminum that went into effect last month. He has threatened to impose 200 percent tariffs on pharmaceuticals and a 50 percent tariff on copper.
Some business leaders aren’t reacting to every new detail on tariffs and are instead trusting the administration's trade policy will take a consistent shape eventually, argued one longtime D.C. lobbyist who also asked to speak anonymously to discuss trade matters.
“Businesses are getting more acclimated to the frequent tariff threats, constant trade uncertainty and mercurial Trump melodrama, and rather than reacting to each new statement, they assume things will work out before anything important breaks,” that source said.
To be sure, the administration has tried different messaging tactics to prepare Americans for possible higher prices from tariffs.
The president suggested in May that the U.S. needs to embrace a cultural shift on consumer spending, and he later likened the country to “a superluxury store, a store that has the goods” in insisting that countries would want to buy from the U.S.
On Tuesday, Trump described a twofold approach to tariffs — making money and producing in the U.S.
“There’s two aspects of tariffs. There’s the money that comes in. The other aspect is that, rather than paying the tariffs, the country or the company will build in the United States, make their product in the United States and that creates jobs,” Trump said. “And I would say, of the two, probably the more important to me is that.”
Tobias Burns contributed.