World politics
fromAxios
5 days agoHow global economic imbalances resemble an ancient parable
Global imbalances persist across eras, and policymakers often focus on partial symptoms rather than the system generating them.
A trade court shut down President Donald Trump's 10 percent global tariffs on most U.S. imports Thursday afternoon. In the 2-1 ruling, a panel of judges ultimately blocked the Trump administration from imposing the 10 percent tariffs on the basis that they were not justified under a 1974 trade law. The judges ruled Trump had wrongly invoked the law when he implemented the tariffs on February 20.
U.S. trade deficits are large and need to be brought down. Reducing U.S. fiscal deficits is important. At the same time, there is no doubt in the US ability to pay the world and therefore no crisis. The U.S. has run a trade deficit for most of the past 50 years, but has never had a fiscal crisis related to this imbalance because international investors have kept buying up U.S. assets throughout that period.
For the first time ever, the U.S. is invoking Section 122 of the 1974 Trade Act, which allows tariffs of up to 15% for as long as 150 days to quickly address international payments problems. On Saturday, Trump hiked his new tariffs to 15%, less than 24 hours after setting them at 10% in an executive order. That's after the Supreme Court ruled the president has no authority to apply tariffs under the International Emergency Economic Powers Act.