It was always going to take Americans — their democracy-supporting institutions such as courts, ordinary Americans, business and opposition and governing parties — to curb Donald Trump’s excessive presidential powers. America’s trading powers have limited agency.
On September 3, the US Appeals Court ruled that Trump, the US president, had exceeded his authority by imposing sweeping import tariffs on a range of goods. In a move that caused global uncertainty, Trump relied on questionable trade deficits to slap these tariffs on countries. He also created a spurious link between trade and US foreign and national security policy.
For the better part of the year, he managed to bully US trading partners into bilateral trade deals. Most of these deals have favoured the US.
Emerging markets were not spared. For all intents and purposes, the African Growth & Opportunity Act (Agoa), a trade law that grants unilateral duty-free access to the US, is as good as dead.
Countries such as SA, a participant in Agoa, have been slapped with punitive tariffs of 30% by the US. Under pressure, Pretoria has had to hastily negotiate a reciprocal bilateral trade deal with the US. Washington has been lukewarm about Pretoria’s trade offer.
China, which continues to regard itself as a developing economy despite its economic prowess, has largely ignored the US’s bellicose posture. In a provocative move, last week it hosted leaders of North Korea, India and Russia in a ceremony that ended with a military parade.
This, with the court setback, showed Trump as a weak leader.
It’s important to understand what really happened last week.
Trump has used the tariff policy, ordinarily the domain of Congress, to punish US trading partners and spur on America’s re-industrialisation. The first part has been successful. The re-industrialisation bit is taking longer to eventuate.
Instead, the tariffs have deprived American consumers of choice and made imports expensive. Few US companies are coping.
SA has begun to feel the pain, according to an Absa presentation reported by Business Day on Monday. This was even before the effect of the tariffs.
The Reserve Bank has estimated that as many as 100,000 jobs may be lost.
The less-publicised reason for the tariffs is US domestic policy. Trump, who is becoming unpopular amid a weaker opposition, hopes that the tariffs (effectively extra taxes) will help him fund tax cuts for his billionaire allies and reduce public debt alongside cuts in US foreign aid and wider headcount reduction in civil service.
The appeals court setback is a temporary victory. The tariffs remain in force. So, SA and other emerging markets exporters will continue to bear them.
His oligarch friends have yet to taste the benefits of this chaotic tariff policy.
Though largely timid and deferential towards Trump, the Republican Party is getting irate and resentful at how he is usurping the party’s powers. Worse, the US midterms are a year away.
The appeals court setback is a temporary victory. The tariffs remain in force. So, SA and other emerging markets exporters will continue to bear them.
The Trump administration has celebrated that they stay in place. The next stop is the Supreme Court. That’s where things get slightly complicated. The court, which is politicised, has several Trump appointees.
If they rule in his favour, it will leave only American businesses and ordinary Americans as the last line of defence.
Though Trump has used executive orders to implement much of his Make America Great Again agenda, he has yet to break laws or ignore court rulings. Put differently, he is still within the remit of the law in his power grab.
Which means the developing world has nothing to celebrate from last week’s court ruling. Trump has it where he wants it: namely, do the deal or face tariffs.
It will take years, probably Trump’s term, to pronounce on the legality of the trade deals. As in other jurisdictions, courts are notoriously slow.
Under the circumstances, emerging markets should continue to shield their exporters through diversification and negotiate the best deals they can get from the US.
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