Hamer: Back from the Brink: The Path Forward on Tariffs

This week, President Trump removed “reciprocal” tariffs on most countries, while retaining a 10% baseline tariff on all nations outside the USMCA (Mexico and Canada) agreement.

A 25% tariff remains on finished autos, aluminum, and steel globally, with potential new tariffs on semiconductors and pharmaceuticals under consideration. A suspended 25% tariff on Mexico and Canada, tied to illegal migration and fentanyl, could be reinstated.

The USMCA is the most successful U.S. trade deal to date. It resulted in China being displaced as the top U.S. trading partner, elevating Mexico and Canada to the top two spots. Negotiated during Trump’s first term, it affirmed bipartisan support and recognition of the importance of strengthening the North American trading bloc in order to better compete with China on the global stage. Trump’s deal-making prowess also shone in the Abraham Accords, a diplomatic triumph worthy of a Nobel Peace Prize.

Treasury Secretary Scott Bessent, a global macro trends expert, is leading the administration’s tariff strategy. On Wednesday, Bessent acknowledged that China was the “biggest source” of trade issues for the United States and the rest of the world, adding: “China has escalated, and President Trump responded very courageously to that, and we are going to work on a solution with our trading partners.”

 A 145% tariff on China persists, sparking retaliation and escalating into a trade war with the world’s second-largest economy (18-20% of global GDP). The U.S., with over 25% of global GDP despite hosting less than 5% of the world’s population, maintains a $1 trillion goods deficit but enjoys a services surplus and leads in foreign direct investment (FDI).

The situation remains serious. Business and consumer confidence is down, significant inflation could return, and a recession is more likely. 

To strengthen the U.S. position amid tensions with China, the following policies are key:

• Strengthen USMCA: Eliminate non-tariff barriers to boost North American production. Texas, the top U.S. export state, benefits significantly. Permanently remove the 25% tariff threat on Canada and Mexico and enhance TN visa and labor mobility.

• * Reduce or remove tariffs on countries – like Israel – that agree to slash tariffs on U.S. goods to zero.
• * Insist on the removal of unfair non-tariff barriers that hurt market access for U.S. goods and services.
• * Secure new trade pacts: Within 30 days, finalize deals with key strategic global partners like the UK, Japan, South Korea, Taiwan, and Israel.
• * Prioritize India: A trade deal with the world’s most populous democracy would be a major win.
• * Stabilize EU relations: A trade agreement could curb excessive EU tech regulation, balancing U.S. innovation with European oversight. Germany’s next leader offers hope for progress.
• * Avoid new sectoral tariffs: Businesses need predictable, reasonable tariffs. Enough is enough. 
• * And speaking of China, work to slash tariffs to 25% if China agrees to slash to a corresponding level: Higher tariffs risk surging consumer prices, potentially making this the costliest Christmas ever and harming American small businesses that rely on imports from China. China could use our energy -- LNG -- and agricultural products. Dust off and update the “Phase One” deal from Trump’s first term. You don’t have to be Milton Friedman or Henry Kissinger to recognize that a full blow trade war between China and the United States could be disastrous economically and spiral into a security crisis. 

 Even with the reciprocal tariff pause, we are still at the highest tariff rates – by far – in the past 100 years. Tariffs are taxes on U.S. businesses and consumers. It’s incredibly important for the pro-growth policies of the Trump administration’s agenda to move forward, including extending the 2017 Tax Cuts and Jobs Act, deregulating the economy, easing permitting, and expanding energy supplies while cutting government spending and bureaucracy.

 Recent moves signal progress, but uncertainty remains. With global tariffs at historic highs, humility and collaboration are essential to refine the global trading system and prioritize the interests of the United States and its businesses to achieve the prosperity we all want to see.

Editor’s Note: The above guest column was penned by Glenn Hamer, president & CEO of the Texas Association of Business. The column first appeared on Hamer’s social media platforms.