Precisely what poor, benighted Syria and prosperous, neutral Switzerland have done to deserve US tariffs of 41 per cent and 39 per cent respectively is hard to discern. Neither is the kind of industrial superpower that represents a threat to America’s economic hegemony, and both would, in their different ways, prefer to stay on reasonably good terms with the Trump White House.
It is, sadly, easier to see why Canada got whacked with a 35 per cent levy on some of its exports – and Donald Trump’s tariff tactics do have a hint of the mob about them. Mr Trump suggested that Canada’s decision to recognise the state of Palestine as a sovereign nation would make it harder to achieve a trade deal, and he also mentioned the scourge of fentanyl. But then again, Mexico, which has also recognised Palestine and is by far the more important source of the drug, has been granted a 90-day tariff reprieve.
Ever since the opening salvo in the Trump tariff war on 2 April – so-called Liberation Day – the shifting schedules and random pauses have lacked both rhyme and reason. Even at the time, their supposed “reciprocity” was ridiculed. They have generated huge uncertainty, and, for a time, did so much damage to the dollar and US Treasuries on the capital markets that even Mr Trump had to make a tactical retreat.
In fact, the US president’s observed tendency to cave in whenever a trading “partner” showed any sign of resistance led to the unwelcome “Taco” sobriquet – “Trump Always Chickens Out”.
Some countries, such as the UK, Japan and the EU member states, have breathed a sigh of relief that they have escaped the worst, while others – often impoverished ones with no diplomatic leverage, such as Bangladesh and Lesotho – will find it difficult to cope with tariffs that are now considered moderate, but would have seemed shocking even a few years ago.
Yet the game, even now, is not over. China – the second-largest economy in the world, and America’s most formidable rival – has been left out of this supposedly final list of tariff increases. The trade talks between the two economic giants in Stockholm are dragging on, the prohibitive mutual tariffs having been abandoned, and they may well be extended past the next deadline of 12 August.
President Trump met his match in Xi Jinping, and will not be imposing any further punitive trade sanctions on China for fear of another tit-for-tat escalation. Thus far, the markets have received the latest news of tariffs with some equanimity, but a collapse in trade between the world’s two greatest economies would generate the kind of turmoil Mr Trump doesn’t need right now.
Even assuming that the eventual trade truce with China avoids disaster, these US tariffs are, in broad terms, the highest since 1934 and the era of the notorious Smoot-Hawley Act, which helped to strangle world trade and exacerbated the Great Depression. The Trump tariffs are no less damaging to world trade, and thus to economic growth, including that of the United States.
But these restrictions on trade are what Mr Trump’s Maga “base” voted for, the folk memory of the previous disastrous experiment with tariffs having faded. The president’s winning slogan was “America First”, epitomising a zero-sum, nationalistic view of the world, and unfortunately, he has proved as good as his word on inauguration day: “Instead of taxing our citizens to enrich other countries, we will tariff and tax foreign countries to enrich our citizens.” Words that were both misguided and economically illiterate, naturally – but a promise kept.
Many of the worst fears of America’s friends and allies are coming true in these early months of Mr Trump’s second term. With far more preparation than took place prior to his first term (which followed an election that, reputedly, he never expected to win), the US president has pressed on with his protectionist, isolationist, nativist agenda with speed and determination, surrounded by mostly underqualified, grotesquely sycophantic cronies.
The judiciary is increasingly cowed, and Congress is listless in defending the constitution. The tendency to Caesarism is apparent in everything from the theatrical executive orders to the grandiose golden remodelling of the White House, and the contempt for the chair of the US Federal Reserve, Jerome Powell – a “moron”, apparently.
Mr Trump thinks he can, with a stroke of a Sharpie, abolish the birthright to citizenship enshrined in the 14th amendment, passed in 1868. His conception of “America First” is more America Alone, yet everything he does weakens American power and prosperity. It is an inward-looking, selfish, exclusionary approach. Undoubtedly it enjoys a political constituency, but ultimately it will prove self-defeating.
This second attempt at a trade Liberation Day is another dark day for America.
