Trade wars are no good, Mr. Trump
Published: 05th March 2018 04:00 AM |
Anyone vowing to make irrational ideas work is considered to be out of his elements. But if you are US President Donald Trump, anything goes. For, unconventional ideas are the hallmark of his presidency and the latest one is an impromptu announcement to impose import tariffs on steel and aluminium. The move is against Republican orthodoxy on free trade, but the most damning isn’t the idea itself, but Trump’s statement afterwards: “Trade wars are good, and easy to win.” The EU wasted no time proposing counter-tariffs on bourbon and bikes. If this happens, the obvious next step is for the US to jack up tariffs on the EU’s BMWs and Volkswagens. In other words, retaliate-to-retaliate measures will spiral into an escalatory trade war.
The devastating impact can be felt across economies: businesses destroyed, unemployment increased and prices raised. Diplomatic ties will suffer a nervous breakdown and spur a global trade war. Why? The US is the world’s largest importer of steel, not to mention significant aluminium imports, from Canada, Brazil, Mexico, South Korea and Russia. The proposed tariffs may compel all leading economies into groupthink, which can be a powerful force, but in this context, could prove destructive for global economic progress.
Tariffs are a postwar norm, which Trump believes have been ruinous for the US. But critics say ditching the broader agenda of free trade is profound economic ignorance as trade wars are bad and impossible to win. Previously, George W Bush too imposed steel tariffs, but it backfired raising costs. Clearly, Trump’s trade advisors aren’t cut from the same cloth, with his commerce secretary favouring tariffs and top economic adviser opposing them. The reality is, unless existing trade pacts are renegotiated and new ones created, bilateral trade imbalances can’t be fixed. As the leader of a superpower, Trump should stop being a petulant child refusing to eat his greens, and instead act to promote everyone’s economic well-being.