Trump team studies gradual tariff hikes under emergency powers
MEMBERS of president-elect Donald Trump’s incoming economic team are discussing slowly ramping up tariffs month by month, a gradual approach aimed at boosting negotiating leverage while helping avoid a spike in inflation, according to sources familiar with the matter.
One idea involves a schedule of graduated tariffs increasing by about 2 to 5 per cent a month, and would rely on executive authorities under the International Emergency Economic Powers Act, the sources said.
The proposal is in its early stages and has not yet been presented to Trump, the sources said – a sign that a monthly stepped approach is early in the deliberation process.
Advisers working on the plan include Scott Bessent, the nominee for Treasury secretary, Kevin Hassett, set to be director of the National Economic Council, and Stephen Miran, nominated to lead the Council of Economic Advisers, said the sources, who requested anonymity to discuss internal deliberations.
Hassett did not reply to a request for comment, nor did a spokesperson for Bessent. Miran declined to comment.
A spokesperson for Trump’s transition team referred to the president-elect’s previous public comments and social media posts about tariffs.
BT in your inbox
Start and end each day with the latest news stories and analyses delivered straight to your inbox.
China’s yuan and currencies sensitive to its economy such as the Australian and New Zealand dollars strengthened after the report. The offshore yuan was up 0.1 per cent in Asia trading on Tuesday (Jan 14), while the Aussie climbed 0.3 per cent.
China has been ramping up support for the yuan as it remains close to a record low offshore. Still, investors expect Beijing to eventually allow weakness if Trump slaps higher tariffs on Chinese exports.
Universal tariffs
During the 2024 presidential campaign, Trump floated minimum tariffs of 10 to 20 per cent on all imported goods, and 60 per cent or higher on shipments from China.
Since he won the election in November, multiple reports have emerged on how aggressively he will implement tariffs – with Trump himself calling one report of a measured rollout false.
The uncertainty is leaving investors and companies guessing. The S&P 500 Index earlier Monday dropped below where it ended on Nov 5, just before Trump was elected, before rebounding later in the day. Investors recently have been dumping Treasuries as fears grow that inflation will remain stubborn partly because of new tariffs, creating a headwind for stocks and the broader economy.
With just a week until Inauguration Day, economists can only guess as to how Trump’s trade wars will influence the economy. That’s left a complicated picture for the Federal Reserve, because Trump’s tariff threats are seen as a risk to the growth outlook while potentially stoking inflation if nations retaliate.
International Monetary Fund managing director Kristalina Georgieva said that tariff threats are already driving up longer-term borrowing costs around the world.
Uncertainty about the incoming administration’s trade policies is adding to worldwide economic headwinds and “is actually expressed globally through higher long-term interest rates”, she told reporters in Washington on Friday. That’s happening even as short-term rates have gone down, a “very unusual” combination, she said. BLOOMBERG
Share with us your feedback on BT's products and services
