Quick Take on Trump’s Tariffs
The world woke up today to yet another blow to the international system. The Trump administration, this time, went after international trade. Global trade has been a pillar of the postwar international order with the creation of US trade policy, the World Bank, and the European Coal and Steel Community (later the European Union). Yesterday, the White House announced a sweeping 10% tariff increase across the board, with additional tariffs on different sectors and countries. Jordan, again, was no exception. Jordanian goods saw a 20% tariff increase, another economic hit that pushes the country into a further unpredictable future.
Three Things You Should Know:
Jordan - US trade: Beginning in the early 2000s, Jordan and the US created a Free Trade Agreement (FTA) gradually reducing, and in some cases eliminating, tariffs on Jordanian goods. Jordan relies heavily on the US market. The US is one of Jordan’s biggest markets 25% of Jordanian exports go to the US - mostly textiles, chemicals and pharmaceuticals. A 20% increase on tariffs will affect Jordan’s private sector, the largest contributor to the national GDP. Jordan’s private sector, 60% of which are small to medium businesses, has already taken a hit through the USAID shutdown, which supported and worked closely with the private sector, specifically with SMEs. The closure of USAID projects and termination of local USAID jobs has been a massive hit of unemployment to our very small middle class (think of jobs that pay 2,000 JOD monthly compared to maybe 700 JOD monthly in a government job). Just like I described downstream effects of the USAID withdrawal on all sectors of our economy, this tariff will bring downstream effects - disturbingly at the same time.
The New Tariffs as Seen by Jordanian Experts: Jordan’s textile sector, its biggest export to the United States, has been under the previous FTA but is now subject to 20% tariffs. Economic specialist Jawad Abbasi, in a conversation, argued that the 20% tariff for Jordan in comparison to the 10% tariffs on Egypt and Morocco, is the detail that might severely impact Jordan’s textile sector. Abbasi argues that the lower tariff benefits Egypt as it becomes a more attractive exporter to the United States. It will also affect the supply chain and prioritize new chains that focus on countries with similar sectors. Speaking to Yousif Mansour, Jordan’s former minister of state for economic affairs, he explained that Jordan failed to monopolize on its textile industry and these new tariffs, combined with lower tariffs in Egypt will possibly lead to a departure of this industry - becoming another economic hit to Jordan’s already stagnating economy.
How China Wins: While Trump’s team is supposedly focused on a stronger, safer and more prosperous US- it has actually inadvertently helped increase the reach and influence of competing states. The new tariffs target Jordan’s chemical and fertilizer sector, Jordan’s largest export product after textiles, amounting to almost 20% of total exports. But China and India are the biggest importers of Jordan’s chemicals and fertilizers. So while the US is imposing tariffs on a close ally and deepening Jordan’s economic crisis, other markets, like China might see this as an opportunity to create its own trade agreements with Jordan. Frankly, China may be a more attractive partner in comparison. Jordan has had a “Great Wall” against trade with China in favor of the US (remember the 5G bid, or the Atatrat project) that stood for decades against China’s aspirations to expand. That will break down as China provides the main market for Jordanian goods.
My Take:
What’s left? US soft power has largely withdrawn. Now, US trade has become more expensive. It would be uncomfortable to think there is a rift between Jordan and the US. But it is more uncomfortable to face the reality - Washington likely is not thinking of Jordan - the closure of USAID and the launch of tariffs are DC battles with the effects on Jordan only an afterthought, confined to think-tank roundtables streamed to a few dozen people.
I detailed previously in two separate pieces about the potential consequences of the USAID shutdown in Jordan. The future is bleak. Now, with Trump’s new tariffs, Jordanian leadership will yet again be faced with brutal consequences from our dependence on the US. While the foreign assistance cannot be replaced so easily, trade agreements can be. Economic giant China will see these new tariffs as new market openings to expand cooperation with markets and countries that previously were resistant to them.
Post-covid economic recovery is slow, worsening regional security is affecting Jordan’s tourism sector, our old trading partner, Syria, is again descending into chaos, repeated Israeli aggressions in the region stir up identity issues…Jordan’s near future is indeed bleak and its largest ally continues to disregard it. What is a step too far?
We need to take a step back and look at the larger picture - the USAID shutdown, the new tariffs, and Trump’s attitude towards major issues in the region. White House statements on the forced displacement of Palestinians, or threatening strikes on Iran, or the non-policy on Syria all strain the longstanding bond of Jordan-US relations. This undermines US strategy. Actively harming a close, loyal, strategic ally like Jordan is counterproductive. The reality is clear - we have a Jordan-US problem that comes at a time of regional tension. There are active campaigns of destabilization and misinformation in the area, which I detail here, and we need our alliance more than ever. We clearly see Jordanian leadership is up against a future tsunami - high youth unemployment, further economic downturn, water scarcity, and opposition voices growing angrier using reality (rather than the hyperbole they relied on in the past).
I don’t know how much more I can write about dangerous steps by Washington or the need to protect and work together with allies like Jordan. It seems this administration is flat-out ignoring Jordan’s value and the crucial role it plays in the region. While Trump is adopting a transactional approach to policy he should be reminded that it pushes unintended transactions on other sides. I have written before about the need for Jordan, and the region as a whole, to further integrate within itself. That is our best option.