(Bloomberg) — Donald Trump has imposed more tariffs than any American president in at least a century — but only a fraction of those he threatened.
This week’s withdrawal of a proposed tariff against European countries over Greenland is the latest example of how Trump sometimes wields the tariff gun without firing it. And the number of unfulfilled threats only increases.
So far, the president has not applied the broad tariffs he promised to countries such as Mexico and Canada, nor on products such as semiconductors and foreign films. So-called “secondary tariffs” for countries that trade with U.S. adversaries — most recently Iran — have also yet to materialize.
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Trump claims his willingness to use tariffs has helped the U.S. win trade concessions, access critical minerals and resolve conflicts around the world. It is a negotiation strategy in which even the threat generates bargaining power. But there are signs that counterparties are becoming accustomed to his maneuvers — which could make them less effective.
“There is clearly a credibility problem that the government has with anyone it is negotiating with,” said Tim Meyer, a professor at Duke University School of Law who specializes in international trade. “Other countries have already read the manual. You let him announce a deal and hope the issue goes away.”
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“When friends shake hands”
Some of Trump’s retreats came after his targets threatened to retaliate — particularly China. The president raised tariffs to triple-digit levels but largely backed off after Beijing said it would block exports of crucial rare earths.
The potential for retaliation was one element of the Greenland saga that unfolded this month. Trump promised to impose tariffs on goods from European countries that opposed his claim to the autonomous Danish territory, saying they would start at 10% on February 1 and rise to 25% in June unless an agreement was reached “for the Complete and Total Purchase of Greenland.”
His harsh words caused anger and consternation among US allies in the European Union, which had negotiated a trade deal with Washington last year and now said they would suspend its approval. “In politics as in business, a deal is a deal,” said European Commission President Ursula von der Leyen. “When friends shake hands, it has to mean something.”
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According to US Trade Representative Jamieson Greer, it is Europe that has not fulfilled its part.
“The EU has failed to implement its commitments” despite quick moves by the US to reduce its own tariffs, Greer said in a statement. The US and EU have “a range of foreign and economic policy issues that go beyond the four corners of the agreement”, he said. “If the United States can compartmentalize important but unrelated issues, the EU should not use it as an excuse for noncompliance.”
European leaders have floated other measures in response. Many greeted Trump coolly when he spoke on Wednesday at the World Economic Forum in Davos, Switzerland.
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Soon after, Trump announced a deal that appeared to reduce tensions, although the details are not entirely clear. On Thursday, the president promised to reveal more about the framework — but perhaps only weeks from now.
“I think Europe is breathing a sigh of relief right now,” said Josh Lipsky, director of international economics at the Atlantic Council, a think tank in Washington. “They stood their ground, put together a retaliation package.”
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“For those who doubt”
The reaction in financial markets may also have weighed in — as in previous episodes in which Trump retreated.
U.S. stocks and Treasuries plunged earlier this week as the confrontation over Greenland intensified, then rebounded as the deal was announced. It was an echo of the original so-called “reciprocal” tariffs, which Trump launched in April with great fanfare, only to quickly put them on pause in the face of market turmoil.
Since then, the president has retreated from so many threats that investors and markets have started to incorporate this probability into their projections. The pattern even gained a nickname: the “TACO trade” — an acronym in English for “Trump Always Chickens Out”.
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Asked about the label, the White House pointed to American military operations such as the capture of the president of Venezuela and the bombing of Iranian nuclear facilities. “Anyone who doubts President Trump’s willingness to walk the talk when others refuse to reach a deal should ask Nicolás Maduro or Iran what they think,” said White House spokesman Kush Desai.
Trump can cite a series of trade deals with major economies, from Europe to Japan to South Korea, reached in his first year back in office. Some came with investment promises, although not yet detailed. The president says his protectionist policies will help revive U.S. manufacturing, and the tariffs have also been generating revenue for the government — another stated goal — to the tune of $30 billion a month.
Another point in Trump’s favor is that his new import tariffs did not raise prices for the American consumer as much as some analysts predicted. In part, this is because the actual rates are not as high as advertised.
In addition to revoking or abandoning tariff plans, the government granted many exemptions. A recent study, co-authored by Harvard economist Gita Gopinath, found that the effective tariff on US imports in September was just half the legal rate.
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“Rolex came to see me”
Some tariff threats simply remained in the air. For now, that category includes Trump’s recent promise to impose a 25% tariff on countries doing business with Iran, a move designed to pressure the government in Tehran following its crackdown on protests. The White House has not yet released additional details about the proposal. On the flight back from Davos on Thursday night, the president told reporters that the measure would come “very soon”.
This is an example of a “secondary tariff”, in which pressure is applied not directly on the target country, but on its trading partners — an instrument that is credited to Trump, but which he has not yet managed to actually use. At times, he threatened to use it against Venezuela and Russia as well. But in all cases, this risks harming the US’s own trade relations and sensitive conversations about tariffs, including with major economies like China and India.
In Davos this week, Trump gave the public an example of how he used trade as a cudgel against host country Switzerland after a tense phone call with its leader.
“She just pissed me off, to be honest with you,” the president said. So he raised the rate from 30% to 39%, “and then everything really exploded. And I started getting visits from everyone. Rolex came to see me. Everyone came to see me.”
It’s an approach that may have to change slightly if the Supreme Court rules that Trump doesn’t have the authority to use emergency powers to impose tariffs, as he has been doing. In this case, he must resort to other legal provisions, although none so broad.
The volatility of Trump’s tariffs worries even some protectionism advocates.
In a text published after the dispute over Greenland, Oren Cass — who runs the conservative think tank American Compass Institute and has been supportive of Trump’s trade policy — warned that threats to Europe could turn against the US.
Instead of restoring stability on new terms, “we now face the risk of seeing previously agreed agreements fall apart,” he wrote. “What point is there for another country to sit at the table and negotiate trade, in response to tariffs, if it can expect to be hit again by the same tariffs even after resolving reasonable disputes?”
But Trump presents the Greenland episode as the latest proof that his tactics work — meaning Europeans and others should probably prepare for more threats, according to Lipsky of the Atlantic Council.
“They could wake up in a week and say the tariff is back,” he said. “Everyone lives with that possibility.”
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