Trump's tariff strategy faces political and economic headwinds ahead of midterms

U.S. President Donald Trump is maintaining his high-tariff trade strategy despite voter disapproval and economic criticism, with a new poll showing most American adults believe he has gone too far. The president has imposed some of the highest U.S. import duties since the Great Depression on major trading partners like the European Union, Canada and Mexico. A recent poll found more than 64 per cent of U.S. adults say his latest tariffs have gone too far, up from 58 per cent in January. This comes less than a month before the November 3 midterm elections.

The primary legal tool Trump is now using is Section 301 of the Trade Act of 1974, which allows tariffs on countries deemed to engage in unfair trade practices. New duties range from 10 per cent to 12.5 per cent on imports from 60 economies. The strategy marks a dramatic shift from a relatively open global trading system that many mainstream economists believe has benefited the United States by boosting growth, keeping prices low and enhancing business competitiveness. "Factory construction jobs of today mean more manufacturing jobs down the road once those factories come online," said White House spokeswoman Taylor Rogers, pointing to statistics showing manufacturing jobs are on an upswing. The White House argues a factory boom is underway. However, studies from institutions like the New York Fed and Harvard have shown that overseas companies have largely not lowered their prices to offset the tariffs U.S. businesses pay at the border, meaning those businesses absorb the costs or pass them to consumers.

Before the trade war, tariff rates among major U.S. trading partners were often comparable. According to the Brussels think tank Bruegel, the U.S. rate averaged 1.47 per cent for EU goods, slightly above the EU's 1.35 per cent average on American products. The relationship with Canada was also similar before trade talks broke down this summer, with Canada's effective tariff rate on U.S. imports at about 2.4 per cent, less than half the 5 per cent the U.S. had on Canadian imports, according to Oxford Economics. Now both countries are mired in a tit-for-tat dispute with escalating tariffs.

The United States exported $3.4 trillion in goods and services last year, making it the world's second-largest exporter after China. Trump has cited a 1977 law allowing action without congressional approval in an economic emergency, though the Supreme Court struck that down in February. He has since turned to other trade laws. The president has levied what he calls "reciprocal" tariffs on dozens of countries, arguing that some nations have higher tariffs, manipulate currencies or subsidize industries. Global trade enthusiasts recognize the damage from past shifts, such as the nearly 3 million U.S. manufacturing jobs lost in the four years after China joined the World Trade Organization in 2001. Many U.S. companies struggled to compete with an influx of discounted Chinese products. Despite higher prices and legal challenges, Trump holds fast to his belief that imposing high import duties is a winning strategy, even as the political gamble intensifies ahead of the midterms.

With files from The Globe and Mail