After announcing large tariffs on virtually every country about five weeks ago, intended to bring all countries to the negotiating table, President Trump recently said that a new trade deal had been negotiated with our oldest ally Great Britain. Trump was able to close this favorable to both sides deal, in record time. This marks the first step in the correction of unbalanced trade agreements that have crippled US producers for decades.

Despite the negative press that is trying to convince the American public that economic collapse lies ahead, Trump accomplished the primary goal of his trade negotiations. That is to open foreign markets to US producers which will eventually eliminate the trade deficit.

Because of abnormally high tariffs, quotas and market manipulations, most foreign markets’ access was severely limited or even completely closed to US companies. Because foreign nations were allowed to sell their products in the US with very little, if any, restriction the huge negative balance to trade resulted.

Because of Trump’s dramatic and so far, extremely successful tariff policy, this negative balance of trade will be eliminated. Most foreign goods will see a 10% tariff. Some goods that are vital to US national security will see a 25% tariff. Trump wants auto production back in the US, so that industry will see a 25% tariff.

The tariffs mean Americans will buy less foreign make goods, thereby reducing imports. More importantly American manufacturers and farmers will be able to sell their products in previously closed foreign markets.

Americans are extremely efficient at producing many goods including food. Opening of foreign markets will allow exports to rise by billions of dollars.

The US/UK deal will serve as a model for other countries. In time, numerous trade deals, which normally take years to negotiate, will be signed in a matter of months.

Other countries can now clearly see exactly what Trump wants.

Most governments believe that at least some tariff should be charged if a foreign country wants access to their market. But the tariff should be small, perhaps in the 2 1/2% range.

The President believes that tariffs should be a revenue generator, so he wants a 10% tariff. Countries now know to make a deal with the US, a 10% reciprocal tariff is needed. Then the exceptions must be addressed. The UK sells about 100,000 cars in the US. Many like Rolls Royce, are high priced and only a relatively few are sold worldwide.

The UK wanted to keep the 10% on the first 100,000 sold and then the auto tariff can rise to 25%. That protects the UK high-end car market while still giving Trump at least the 10% tariff he wants.

The US has exceptions to. Steel and Aluminum are products that are vital to the national security of the US. The US placed a tariff of 25% on those products. That will virtually eliminate the US from buying UK steel and aluminum. The US will produce more of its own steel.

While countries like India, Japan and South Korea have their own special needs, the US/UK agreement should be used as a blueprint to finalize their trade deals. The result will be some manufacturing coming back to the US, nearly all foreign markets freely open to US producers and eventually the elimination of annual trade deficits.

What is most incredible is that President Trump accomplished this in such a short period of time. When the USMCA finally replaced NAFTA, two years had been spent negotiating.

Right now, the Federal Reserve can be more cooperative. Even though economic growth has slowed the last two quarters and considering Fed Chair Powell says he likes to stay ahead of problems, the Fed is wrongly holding interest rates constant.

It is time to cut interest rates.

The inflationary impact from tariffs is small. We have a $30 trillion economy, which now imports about $3 trillion annually. Even if tariffs drive up import prices, the inflationary impact is small.

Trump will increase the supply of energy. That will lead to significantly lower prices which will more than offset any inflationary impact of tariffs.

Since Trump is winning the trade war and the inflationary impact from tariffs will be offset by lower energy prices, Powell should cut interest rates now.

In the meantime, all nations should follow the US/UK trade deal.
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Michael Busler is a public policy analyst and a professor of finance at Stockton University in Galloway, New Jersey, where he teaches undergraduate and graduate courses in finance and economics. He has written op-ed columns in major newspapers for more than 35 years.