A win/win

So Trump has finally got round to announcing those tariffs, and also why he is using tariffs in the way he is.

Anyone who has not cut a deal is being whacked with extraordinary levels of tariffs, many of which are amazingly destructive to America’s own interest.

Even those with a deal are paying; 15% on Japan, S. Korea and the EU, but 20% on Taiwan the largest microchip maker in the world, a component in almost everything these days. All of this is bad enough but Trump cannot stand anyone who challenges him or does not kowtow to him.

So Brazil gets 50% tariffs because it is trying to prosecute a corrupt former leader who tried to overthrow the government; but then Trump likes those who try to overthrow democracy. Then Canada gets 35%. because it is recognising Palestine as a state, or perhaps because Carney is no-one’s poodle or maybe because of something else; it is hard to tell.

Amazingly enough Trump can do this because the Supreme Court has been stuffed with his supporters who allow him to use emergency powers because a trade deficit is an “unusual and extraordinary threat to the national security and economy of the United States”.

Besides pointing out that the USA needs a trade deficit so that other countries have the dollars to buy its bonds, it is hard to see why a Brazilian internal court case is a threat to the USA or why Canada’s Middle East policy is either. This is just political meddling and everyone knows it.

But leaving that aside the economic consequences are going to cascade through the world’s economy and especially America’s.

Just look at Canada and you can guess what will happen. I have been to the border of the USA and Canada twice, both times to report on just how close the two economies are, and tariffs are going to be amazingly damaging.

American and Canadian companies have plants and offices on both sides of the frictionless border, tariffs are going to disrupt the constant movement of parts and finished goods both ways. It is also hard to get a cigarette paper between the two countries, America is therefore, in a sense, imposing massive tariffs on part of its own economy.

35% tariffs will really hurt Canada but then so will the efforts it will have to make to move away from dependence on its bigger neighbour. Both of those things will hurt America too, and all the other tariffs will also.

America is the only country playing this game, the rest of world trade continues in the same way as before with few tariffs and normally with fewer tariffs year after year.

By not retaliating Trump sees every other country as weak, but most world trade is not with the USA and will continue and probably increase now that America’s market is more difficult to sell to.

Well done Mr. President, every country in the world now has less reason to trade with your country and more reason to trade with each other and every import is now much more expensive.

A win/win, just not for America.

Jonty’s Jottings

From Jonty Bloom Media Ltd

Economics, trade and Brexit, not necessarily in that order but the dog always comes first.