Washington — Reeling from harassment and tariffs imposed by President Donald Trump over the past year, America’s longtime allies are desperately searching for ways to protect themselves from the president’s reckless wrath.
US trading partners are making deals among themselves — sometimes ignoring old differences to do so — in an attempt to diversify their economies away from the new protectionist United States. Some European governments and institutions as well Limit their use of US digital services Like Zoom and Teams.
Central banks and global investors are dumping dollars Buy gold. Combined, their actions could reduce US influence and mean higher interest rates for Americans already angry about the crisis. High cost of living.
Last summer and fall, Trump used the threat Imposing taxes on imports To force the European Union, Japan, South Korea and other trading partners to accept lopsided trade deals and promise to make massive investments in the United States.
But they discovered that the deal with Trump was no deal at all.
The mercurial president repeatedly finds reasons to conjure new tariffs to impose on trading partners who he believes have already made enough concessions to satisfy him.
Just months after reaching his agreement with the European Union, Trump threatened New customs duties on eight European countries For opposing his attempts to wrest control of Greenland from Denmark – although he was quick to do so I blinked. Last month, he said he would be slapped 100% customs duties on Canada To secede from the United States by agreeing to this Reducing Canadian tariffs on Chinese electric cars.
“Our trading partners are discovering that the largely one-sided deals they have with the United States offer little protection,” said Wendy Cutler, a former US trade negotiator and senior vice president of the Asia Community Policy Institute. “As a result, our partners’ trade diversification efforts are moving aggressively, seeking to reduce dependence on the United States.”
Trump supporters, such as Paul Winfrey, who was deputy director of the White House Domestic Policy Council during Trump’s first term, are concerned about the relative decline in foreign central banks’ holdings of US Treasuries, and see the national debt as a weakness that rivals want to exploit.
Winfrey, CEO of the Institute for Economic Policy Innovation, a think tank, said some Trump advisers do not feel America has fully benefited from the dollar’s position as the world’s dominant currency.
“But the fact remains that every other country is jealous of our standing, and many of our opponents want to challenge the US dollar and Treasuries,” he added.
White House spokesman Khush Desai insists that America’s standing on the world stage has not diminished.
He added: “President Trump remains committed to the strength of the US dollar as the world’s reserve currency.”
The most surprising agreement so far was the agreement announced last week between… 27 countries of the European Union and India, The fastest growing major economy in the world. The negotiators remained in this situation for nearly two decades before they reached an agreement.
Likewise, an EU trade agreement was announced two weeks ago with the European Union Mercosur countries in South America It took a quarter century of negotiations. It will create a free trade market of more than 700 million people.
“Some of these deals have been in the works for some time,” said Maurice Obstfeld, a senior fellow at the Peterson Institute for International Economics and a former chief economist at the International Monetary Fund. “The pressure from Trump has made them more eager to speed up the process and reach an agreement.”
EU exporters were jubilant about the India deal. VDMA, a group of European machinery and plant engineering companies, welcomed the reduction in Indian customs duties on machinery.
“The India-EU FTA provides much-needed oxygen to a world increasingly dominated by trade conflicts,” Thilo Brodmann, executive director of the VDMA, said in a statement. He added: “With this agreement, Europe is sending a clear signal in favor of rules-based trade and against the law of the jungle.”
On Monday, Trump took to social media to announce his own deal with India. He announced that the United States would reduce tariffs on Indian imports after India agreed to stop buying oil from Russia, which has used sales to finance its four-year war in Ukraine.
The President said that India will reduce tariffs on US products to zero and will purchase US products worth $500 billion. Business attorney Ryan Majerus is a partner at King & Spalding and a trade official in the Biden administration and during Trump’s first term said that companies and legal analysts are waiting for official documents from the White House detailing the deal.
Trump relies on the existence of limits on the ability of other countries to withdraw from the United States. America has the largest economy and consumer market in the world. “We have all the cards,” Trump told Fox Business this month.
Countries like South Korea, which depend on the American market and military protection, cannot ignore Trump’s threats. On Monday, for example, the president said he would increase tariffs on South Korean goods because the country’s legislature has been slow to approve such duties. Trade framework Announced last year. The country’s Finance Ministry responded on Tuesday by saying its head, Ko Yeon-cheol, would push lawmakers to quickly approve a bill to invest $350 billion as promised in the agreement.
“The United States was trying to identify a counterpart that would find it difficult to reject American demands outright, given the depth of its economic and security ties,” said Cha Do-hyun, an analyst at the Asan Institute for Policy Studies in South Korea.
Or consider Canada, which sends 75% of its exports to its southern neighbor. “Canada and the United States will always be closely linked through international trade,” said Obstfeld, a professor at the University of California, Berkeley. “We are talking about adjustments to the margin in one way or another.”
But growing global disapproval of Trump’s policies is already taking its toll, sending the value of the dollar, long the currency of choice for global trade, to its lowest level since 2022 last week against several competing currencies.
Daniel McDowell, a professor of political science at Syracuse University and author of “U.S. Financial Sanctions and the International Backlash Against the Dollar,” sees a shift in the air in the Trump era: Foreign countries and investors want to reduce their exposure to the United States, which has moved from a source of security and stability to a source of instability and unpredictability under Trump.
“Trump has demonstrated his willingness to use foreign countries’ economic dependence on the United States as leverage against them in negotiations,” McDowell said. “As global perceptions of the United States change, it is only natural that investors – both public and private – will reconsider their relationship with the dollar.”
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Kurtenbach reported from Bangkok. AP videographer Young Jun Chang in Seoul and AP Business Writer Kelvin Chan in London contributed to this report.