peacefare.net

More empty promises

In a fit of pique caused by other things, President Trump is ordering tariffs on steel (25%) and aluminum (10%) imports. What difference does that make?

Probably little if you are looking for the impact of those specific measures. They might raise prices a bit, and the inevitable retaliation will hit US exports. The EU has already announced it will target bourbon, blue jeans and Harley Davidson motorcycles, products not coincidentally manufactured in the districts of important members of Congress. Other countries will choose their own targets. If that is where things stop, it isn’t catastrophic. It just hurts American exports and worsens the trade deficit, which has already climbed since Trump took office after leveling off under Obama:

The retaliation, however, may provoke more US tariffs and a cycle of escalation abroad. This is how a trade war starts and spreads, from steel and aluminum to many other products. That’s why US markets sold off right after the announcement, and why international markets are sharply down today. They understand that increased tariffs will accelerate inflation and reduce growth. The first coordinated worldwide recovery since the financial crisis ten years ago could be brought to a premature end.

Trump is a mercantilist. He thinks protection for US industries can strengthen the US economy. This is the opposite of what American conservatives, in particular Republicans, have heretofore believed. While the President was tweeting that trade wars are easy to win, Governor Walker of Wisconsin tweeted:

I respectfully ask @POTUS to reconsider his position on steel and aluminum tariffs. They will lead to the exact opposite outcome of the administration’s stated objective, which is to protect American jobs.

Conservatives since World War II have usually advocated for free trade, albeit in accordance with rules that guarantee a level playing field. But Trump is not a conservative. His tariffs are to be levied not on the basis that the playing field is uneven, but rather on the basis of national security. This is a specious claim, as American national security has not been demonstrably affected by importing for decades both steel and aluminum, which are available from many suppliers worldwide.

The President has opened Pandora’s tariff box. There is no telling where new tariffs will be imposed by others or how long the trade war will last. All this will be litigated at the the World Trade Organization, but there is no guarantee Trump will respect its decisions, as he opposes it and other norm-setting institutions that help to regulate the liberal world order that has been the foundation of unprecedented US prosperity for more than 70 years:

What is certain, however, is that Trump’s tariffs will not be good for the United States. They may well enrich some industries, and they may bring desperately needed revenue to the US Treasury. But economic growth and US exports will decline, consumer inflation will increase, and relations with other countries will worsen. Protectionism promises what it cannot deliver. That makes it perfectly suited to Trump, whose promises have repeatedly and consistently proved empty.