[source image]
Dow Jones NewsApr 4, 12:00 AM UTC
DJ Resistance Is Futile, Make a Deal: Trump's Tariff Message to the World -- WSJ
By Kim Mackrael, Vipal Monga and Michael Amon
Leaders from Canada, Europe and China are threatening stiff countermeasures against the U.S. in response to President Trump's surprisingly steep tariffs on nearly all imports. The administration's response is, don't even think about it.
Trump is trying to short-circuit the trade war's cycle of retaliation by threatening massive new tariffs on any country that responds, and by dangling the prospect of a better deal for those who hold their fire and negotiate. The highest tariffs -- the so-called reciprocal duties for many countries with goods-trade imbalances with the U. S. -- don't go into effect until Wednesday, giving world leaders time to plead their cases with a president who considers himself a master dealmaker.
"One of the messages that I'd like to get out tonight is everybody sit back, take a deep breath, don't immediately retaliate, let's see where this goes," Treasury Secretary Scott Bessent told CNN soon after Trump's tariff announcement Wednesday. "Because if you retaliate, that's how we get escalation."
So far, much of the world is holding out hope for a deal. Anthony Albanese, the prime minister of Australia, which has a free-trade agreement with the U.S. but now faces 10% tariffs, said his government wouldn't join a "race to the bottom" by retaliating. Japan, which will be subject to 24% tariffs, didn't immediately announce plans to retaliate. India, facing a 26% tariff, according to Trump's executive order, indicated it had no plans to retaliate.
Even the two countries that have retaliated -- China, which faces tariffs of up to 70% now, and Canada, which went from a no-tariff free-trade agreement to 25% tariffs on many exports -- have held back their most potent weapons.
For Canada, that is in part because Trump threatened to double tariffs on the country when Ontario's provincial leader began taxing electricity exported to the U.S. at 25%. Similarly, Trump threatened 200% tariffs on European alcoholic beverages, including Champagne, after the European Union said its retaliation against earlier steel and aluminum levies would include a 50% tariff on American whiskey. The EU delayed implementing the first of those duties -- which the bloc said would eventually hit up to $28 billion of American products -- until mid-April in hopes of striking a deal.
Now European and Canadian leaders are walking a tightrope, trying to project strength with countermeasures while still holding out hope for talks with Trump.
EU Trade Commissioner Maroš ef?ovi?, who is scheduled to hold a video call with U.S. trade officials Friday, said he would work "round the clock" in pursuit of a deal with the Trump administration.
Retaliating countries have a dilemma. The U.S. imports more goods from Europe, China and Canada than it exports to them, which has long angered Trump and also limits their abilities to respond with tit-for-tat tariffs. They also want to avoid putting levies on products they need and can't easily obtain from other trading partners.
Countries that retaliate against the U.S. risk worsening their own economic problems, said Barry Appleton, co-director of New York Law School's Center for International Law. "It's like putting your head in a lion's mouth," he said. "Don't do that."
Europe is laying the groundwork for a novel response that could target America where it hurts the most: its superiority in services exports.
Targeting big American tech companies such as Alphabet or Meta Platforms, or taking other measures to restrict U.S. services, is widely viewed as a last resort for the bloc because doing so could provoke a harsh reaction from the Trump administration and damage the EU's reputation as an open market. There is also a risk of raising costs for consumers or having unintended consequences for European companies.
"Sometimes it's important to have a gun, and sometimes it's also important to put it on the table, even if you're not using it," said Bernd Lange, who chairs the European Parliament's trade committee.
French President Emmanuel Macron said the EU could activate a new law that allows the bloc to respond to a country's attempt to use economic coercion against it. Options for retaliation under the law are wide-ranging and include the ability to restrict services companies' access to the market or curb the enforcement of intellectual-property rights.
Macron called on industries "to remain united, to be determined" rather than making one-off deals or announcing investments in an attempt to negotiate exemptions with Washington.
"What would the message be of having major European actors investing billions of euros in the American economy at a time when they are hitting us?" Macron said. "We need to have solidarity."
Administration officials and Trump allies have said such an aggressive posture against Trump is exactly the wrong move.
"I wouldn't want to be the last country that tries to negotiate a trade deal," Trump's son Eric Trump said on X. "The first to negotiate will win -- the last will absolutely lose. I have seen this movie my entire life."
Administration officials have indicated that Trump isn't willing to budge on the broad outlines of his trade policies. Almost every import will now be subject to at least a 10% tariff, a level that officials described as a floor. But there is negotiating room regarding the higher tariffs on select countries that have large trade surpluses with the U.S.
Commerce Secretary Howard Lutnick said tariffs on China would come down if it stopped the export of the ingredients used to make the drug fentanyl.
"All they have to have is a phone call from President Xi to President Trump saying I'm going to end fentanyl production that's killing Americans and it drops 20%," he told Bloomberg Television.
Instead, China came out swinging Thursday. A Commerce Ministry statement said the tariffs "violate international trade rules, severely infringe the legitimate rights of relevant parties and represent a typical act of unilateral bullying." But the ministry didn't specify which further steps were planned.
In Canada, Prime Minister Mark Carney announced new 25% tariffs on a range of autos imported from the U.S., in response to U.S. tariffs on foreign-made cars. He and Trump have pledged to begin hashing out trade disagreements after Canada's April 28 election, but he expressed pessimism about striking a good deal with Trump.
"I don't want to give false hope," Carney said Thursday. Although the tariff policy "will hurt American families, until that pain becomes impossible to ignore, I do not believe the administration will change direction," he added.
Write to Kim Mackrael at kim.mackrael@wsj.com, Vipal Monga at vipal.monga@wsj.com and Michael Amon at michael.amon@wsj.com
(END) Dow Jones Newswires
April 03, 2025 20:00 ET (00:00 GMT)
Copyright © 2025 Dow Jones & Company, Inc.
