If you wanted to sum up in a single phrase the reasons why people support and vote for Donald Trump, or in the case of Ireland, root for him from abroad, then I think you could do a lot worse than this: “We’re sick of being taken advantage of”.
If you understand that sentence, then you understand the whole case for Trumpism: That America has had its generosity abused for too long. That an immigration and asylum system designed to help the needy has become instead a gravy train for economic migration. That America’s friends and allies have taken advantage of its defence spending to freeload on their own defence (ironically Trump fans in Ireland would tend to disagree with American Trump fans on this one). That woke ideologues have taken advantage of that natural and good human disposition – compassion – to shoehorn in layers of extremism into the culture. And that other countries have taken advantage of America over trade, undercutting the US on taxes and regulations, and creating massive trade surpluses that cost American jobs.
Trump and Trumpism is about putting an end to all that – ending the situation where his country is “being taken advantage of” and reminding everyone again what the world would look like absent American generosity. Making America Great Again. It is a powerful message because, like every powerful message, there is substantial truth to it.
Thus, when Donald Trump says he will impose 25% tariffs on Canada and Mexico – with similar steps likely to target the EU this week – a lot of people are happy to trust him on the basis that what he is doing is about “restoring fairness” to a trading relationship he says has become unfair.
It probably helps that free trade is, by definition, a “globalist” idea that promotes the idea of the world as ultimately a single world economy and is spiritually anti-nationalist. Nationalists, who comprise the great bulk of Trump admirers, are instinctively uncomfortable with anything that breaks down national borders or barriers, and thus the idea of tariffs (re-erecting trade borders, in essence) is spiritually nationalist in a way that tickles the soft underbelly of many of his fans.
None of that makes tariffs or a trade war a good idea, for either the United States or anyone else. I shall now attempt to persuade you of why, with five points:
First, tariffs promote inefficiency and drive costs higher for everyone and everything.
I am not talking here about inflation – we will get to that later – but about something called the supply chain. First, understand the theory of tariffs: That by taxing imports, you make domestically produced goods relatively cheaper and more attractive. People are more likely to “buy American” than they are to “buy Chinese”. In theory, this means more jobs for Americans and more American cash kept in the US economy.
In practice, it means that at every stage in the production of a product, the components are more expensive. Take a car: The aluminium is more expensive to import. The rubber for the tyres costs more to import. The little microchips that run the dash display are more expensive to import. What tariff supporters tend to miss is that the American car might be American-made, but many of its components are imported as well. Tariffs do not only drive the cost of foreign goods up – they also drive up the cost of what you are making in American factories.
Second, tariffs promote foreign ingenuity at the expense of American ingenuity
There’s a reason why Trump’s trade policy is called “protectionism”. It literally means that American industries are “protected” and given a special advantage in the United States. In other words, no matter how expensive they are to produce, the US Government will intervene to make foreign products relatively more expensive. Think about the incentives this creates.
A foreign company that wants to sell into the American market despite the tariffs is actively incentivised to become more efficient and more advanced, getting costs down to be competitive. A US company has no such incentives – it can offset some of its higher supply chain costs by cutting back on research and development because keeping its products competitive is no longer the job of the company, but the Government’s tax man.
What happens, though, when in a few years foreign products are cheaper, even with the tariffs applied? At that stage, you can only keep the cycle going by jacking the tariffs (and thus the costs to everybody) even higher, or you can abandon ship and admit you got it wrong, having set your own industries back several years.
Third, tariffs are, indeed, inflationary. But not only in the way you think.
Donald Trump said something fascinating on Sunday, on Truth Social: “Canada owes us a lot of money”.
We will ignore for a moment that this is not literally true – since everybody knows you take Trump seriously not literally – and imagine that it is spiritually true. Even at that, Canada will not be paying the United States a cent. The taxes raised by Trump’s tariffs – an estimated 1.6trillion over a decade – will come entirely from US taxpayers and consumers. They will pay for Trump’s trade policy every time they purchase something of foreign origin in a shop, even if that something is a loaf of bread made in America with Canadian grain.
But it is more inflationary than simply driving up costs on foreign goods. It also drives up costs for American goods through the law of supply and demand.
Imagine for a moment that Trump’s tariffs work exactly as expected and US consumers suddenly stop buying foreign cars and only buy American. The demand for American cars – Cadillacs and Lincolns and Chevrolets – will go through the roof. The basic laws of economics say that when demand rises faster than supply can expand, prices will shoot up.
What happens then? Well, what happens then is that the effect of tariffs is nullified, because US goods simply increase in price to match the price of the tariffed goods.
In the end, you get a lot of economic pain and a lot of inflation and a lot of disruption – just to end back where you started.
Fourth, this is not “just a tactic”. It will not “hurt China and the EU more than it hurts the US”.
I’ve put this point fourth because I can already hear you, dear reader, saying that Trump’s tariffs are just a negotiating tactic to get what he wants from the border and once he gets a good deal on Fentanyl and migration he will back down and trust the plan and this is all Trump playing Chess on a global scale and it is too high-level for your mid-wit Trump-hating brain, McGuirk.
We will assume for a moment that you are right. That Trump’s tariffs are in fact, just a temporary tactic. Well, in that case, why should anybody take them seriously?
Trump’s tariffs have been signed into law by executive order, meaning that the next President can sign them away, by executive order. There is no legislation underpinning them. He has not passed them through Congress, in part due to his own love affair with the idea that he can make and unmake the world with the stroke of a presidential pen. But what has been done with the stroke of a pen can be undone with the stroke of a pen.
The Chinese – the biggest targets of his ire – are not a democracy. Unlike the Americans, they do not have an election in four years. The Chinese can win a trade war with America by making the trade war painful for their own people, and the Americans, and knowing that all they have to do is wait four years for the voters to elect a Democrat out of sheer frustration. The Chinese Government, after all, is going nowhere. Whereas Donald Trump will cease to be President, as a matter of constitutional guarantee, on January 20th 2029, at Midday. At which point this entire trade war can be ended by his successor at the stroke of a pen.
You know what else isn’t a democracy in the same sense as the US? That’s right: The European Union. Whose Brussels-based bureaucracy will still be there in 2029, and which has proven pretty impervious to EU election results over the years.
In fact, a more likely trade war consequence is to push the EU and China – and other countries – closer together in terms of trade. Trump often appears to forget that the US might be a superpower, but other countries and trading blocs have power of their own.
Finally, self-sufficiency is an inherently stupid idea.
This is an important one, which is why I have left it to last.
If you wanted to sum up the spirit of Trumpist economics, it would be “America is a superpower and a huge country, it doesn’t actually need anyone else, we can make everything ourselves”.
This is sort of the reverse of the usual Trump rule – you should take it literally, not seriously. Because it is literally true, if terribly unserious.
It is true as a matter of fact that the United States could just make its own semiconductor chips instead of importing them from Taiwan, or that it could promote Californian wine instead of letting people drink Bordeaux or Burgundy. But what this ignores is that there is a cost in terms of both finances and quality. The Californians, god love them, will simply never produce wine that is of the caliber of the best Burgundy. The US, with all the effort in the world, will never produce semiconductors as cheaply as Taiwan does. Expand these two examples to the whole range of products that power an economy, and you get an increase in costs and a decrease in quality.
There is a reason you hire a plumber to fix your pipes when they leak: That reason is that you could in theory do it yourself by buying all the equipment, reading lots of books, and becoming an expert. Or you could just save yourself the time and trouble by getting someone who has already done that work to do it for you.
This is the bottom line: Imports save you time and money and get you a better product. Or a more available product.
To tax them is to tax your own time, and your own money. In return for what will inevitably be bad wine and broken pipes.
This policy will fail. The tariffs will be withdrawn. When they are withdrawn, Trump will tout some minor concession from somebody, somewhere, as the greatest deal in human history.
And frankly, too many of you will either fall for it genuinely, or pretend to fall for it just to save face.