WASHINGTON (AP) 鈥� Bullied and buffeted by President Donald Trump鈥檚 tariffs for the past year, America鈥檚 longstanding allies are desperately seeking ways to shield themselves from the president鈥檚 impulsive wrath.
U.S. trade partners are cutting deals among themselves 鈥�- sometimes discarding old differences to do so 鈥� in a push to diversify their economies away from a newly protectionist United States. Some European governments and institutions are such as Zoom and Teams.
Central banks and global investors are dumping dollars and . Together, their actions could diminish U.S. influence and mean higher interest rates and prices for Americans already angry about the .
Last summer and fall, Trump used the threat of to strong-arm the European Union, Japan, South Korea and other trading partners into accepting lopsided trade deals and promising to make massive investments in the United States.
But a deal with Trump, they鈥檝e discovered, is no deal at all.
The mercurial president repeatedly finds reasons to conjure new tariffs to impose on trading partners that thought they had already made enough concessions to satisfy him.
Just months after reaching his agreement with the EU, Trump threatened for opposing his attempts to seize control of Greenland from Denmark 鈥� though he quickly . And last month, he said he鈥檇 slap for breaking with the United States by agreeing to .
鈥淥ur trading partners are discovering that the largely one-sided deals they concluded with the U.S. provide little protection,鈥欌�� said former U.S. trade negotiator Wendy Cutler, senior vice president at the Asia Society Policy Institute. 鈥淎s a result, trade diversification efforts by our partners are on turbo charge, looking to reduce dependence on the U.S.鈥欌��
Trump supporters such as Paul Winfree, who was deputy director of the White House Domestic Policy Council during Trump鈥檚 first term, are wary of the relative decline in U.S. Treasury note holdings by foreign central banks and view the national debt as a vulnerability rivals would like to exploit.
Winfree, CEO of the Economic Policy Innovation Institute, a think tank, said that some of Trump’s advisers do not feel America has fully benefited from the dollar’s status as the world’s dominant currency.
鈥淏ut the fact remains that every other country is jealous of our status, and many of our adversaries would love to challenge the U.S. dollar and Treasuries,鈥� he said.
White House spokesman Kush Desai insists America’s standing on the global stage has not been diminished.
鈥淧resident Trump remains committed to the strength and power of the U.S. Dollar as the world鈥檚 reserve currency,” he said.
India and the EU clinch a long-awaited deal
The most eye-opening deal so far has been the pact announced last week between the the world鈥檚 fastest growing major economy. Negotiators had been at it for nearly two decades before they closed the agreement.
Likewise, an EU trade deal announced two weeks ago with the took a quarter century of negotiation. It will create a free-trade market of more than 700 million people.
鈥淪ome of these deals have been in the works for quite some time,鈥欌�� said Maurice Obstfeld, a senior fellow at the Peterson Institute for International Economics and former chief economist at the International Monetary Fund. 鈥淭he pressure from Trump made them more eager to accelerate the process and reach agreement.鈥欌��
EU exporters were jubilant over the India deal. VDMA, a group of European machinery and plant engineering companies, welcomed lower Indian tariffs on machinery.
鈥淭he free trade agreement between India and the EU brings much needed oxygen to a world increasingly dominated by trade conflicts,鈥� VDMA鈥檚 executive director, Thilo Brodtmann, said in a statement. 鈥淲ith this agreement, Europe is sending a clear signal in favor of rules-based trade and against the law of the jungle.鈥�
‘We have all the cards鈥�
On Monday, Trump went on social media to announce his own deal with India. The U.S., he posted, would reduce tariffs on Indian imports after India agreed to stop buying oil from Russia, which has used the sales to fund its four year war in Ukraine.
The president said that India would reduce its tariffs on American products to zero and buy $500 billion worth of American products. Trade lawyer Ryan Majerus, a partner at the King & Spalding and a trade official in the Biden administration and during Trump’s first term, said that businesses and legal analysts were awaiting official White House documents spelling out details of the deal.
Trump is banking on there being limits to other countries鈥� ability to pull away from the United States. America has the world鈥檚 biggest economy and consumer market. 鈥淲e have all the cards,鈥欌�� Trump told Fox Business this month.
Countries like South Korea, dependent on America鈥檚 market and military protection, can鈥檛 afford to ignore Trump鈥檚 threats. On Monday, for example, the president said he was increasing tariffs on South Korea goods because the country鈥檚 legislature has been slow to approve the announced last year. On Tuesday, the country鈥檚 Finance Ministry responded by saying its chief, Koo Yun-cheol, would push lawmakers to quickly approve a bill to invest $350 billion as promised in the agreement.
“The U.S was trying to identify a counterpart that would find it difficult to refuse U.S. demands outright, given the depth of its economic and security ties,鈥� said Cha Du Hyeogn, an analyst at South Korea鈥檚 Asan Institute for Policy Studies.
Or consider Canada, which sends 75% of its exports to its southern neighbor. 鈥淐anada and U.S. will always be tightly linked through international trade,鈥� said Obstfeld, a professor at the University of California, Berkeley. 鈥淲e鈥檙e talking about adjustments more or less on the margin.鈥欌��
But the world鈥檚 growing rejection of Trump鈥檚 policies is already having an impact, driving down the value of the dollar, long the currency of choice for global commerce, to its lowest level since 2022 last week versus several competing currencies.
Syracuse University political scientist Daniel McDowell, author of the book 鈥淏ucking the Buck: U.S. Financial Sanctions and the International Backlash against the Dollar,鈥� sees a vibe shift under Trump: 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 driver of instability and unpredictability under Trump.
鈥淭rump has shown that he is willing to use foreign countries鈥� economic dependence on the U.S. as leverage against them in negotiations,鈥� McDowell said. 鈥淎s global perceptions of the US are changing, it is only natural that investors 鈥� public and private alike 鈥� are reconsidering their relationship with the dollar.鈥�
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Kurtenbach reported from Bangkok. Associated Press videographer Yong Jun Chang in Seoul and AP Business Writer Kelvin Chan in London contributed to this report.
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