Trump’s New Trade Fights (and Deals)
President Trump has resumed his approach of big threats against some trading partners and generous pacts with others. Experts see new risks.
Andrew here. For years, Warren Buffett has warned that the proliferation of nuclear weapons represents “the great problem of mankind.” The news that the U.S. has agreed to a broad nuclear agreement with Saudi Arabia is likely to cause consternation in Omaha. It should also prompt the rest of the world to consider the implications.
Buffett once said, “We can’t put the genie back in the bottle — but we can keep that genie contained.” The deal will likely mean billions of dollars for U.S. companies, but lawmakers in the U.S. and in Israel are raising questions.
One other issue to consider: Buffett recently said that A.I. may represent as big of a risk as nuclear weapons. Now think of the combined risk, in light of OpenAI’s admission on Tuesday that two of its models broke out of their “sandbox” and hacked another company to cheat on a test. More below.
New carrots and sticks
Trade is back on President Trump’s agenda, with new threats against Canada on billions of dollars’ worth of goods, and a major nuclear accord with Saudi Arabia.
The moves reflect a return to the Trump administration’s approach of carrots for favored allies and threats of stiff tariffs to intimidate others into acquiescence. But many of the administration’s moves carry big risks, experts say.
Example A: Saudi Arabia. The administration is expected to announce on Wednesday a broad accord that could let the Middle Eastern country eventually enrich its own uranium, according to The Times and others.
The long-discussed proposal — initially broached during the first Trump administration — is meant to tighten ties with the Saudis as the war with Iran has strained relations. But it’s also expected to give U.S. nuclear companies, including Westinghouse, billions of dollars worth of contracts.
More money could come if, after the conclusion of a two-year study, Washington allows Riyadh to enrich nuclear material on Saudi soil. Americans would build an enrichment facility for the Saudis under a “black box” arrangement that wouldn’t transfer sensitive technology to the Gulf state, according to The Wall Street Journal.
Yet skeptics worry about nuclear arms proliferation. Saudi Arabia wouldn’t be subject to the stronger nonproliferation terms that the U.S. required of the United Arab Emirates in a 2009 nuclear deal.
Example B: generic drugs. Makers of generic pharmaceuticals must onshore their manufacturing to the U.S. within two years, or face a 100 percent tariff starting in 2028, President Trump wrote on Truth Social on Tuesday. (It would go up to 200 percent in 2029.)
Analysts warn that the threat could push up treatment costs for millions of Americans, instead of fulfilling Trump’s promise of lower drug costs.
Example C: Canada. Polling suggests that Canadians are willing to support Prime Minister Mark Carney in fighting back hard against Trump’s threatened 50 percent tariffs on an array of Canadian goods, set to take effect next month.
One thing to watch: whether the courts uphold the Trump administration’s use of a provision within the Tariff Act of 1930, known as Section 338, to justify the Canadian tariffs.
Example D: more tariffs. The administration is set to impose new duties on dozens of trading partners by Friday to replace a set of 10 percent tariffs, imposed under a 1974 law, that are set to expire this week, according to Bloomberg.