General Discussion

Almost everything Mr Trump said this week—on history, economics and the technicalities of trade—was utterly deluded. His reading of history is upside down. He has long glorified the high-tariff, low-income-tax era of the late-19th century. In fact, the best scholarship shows that tariffs impeded the economy back then. He has now added the bizarre claim that lifting tariffs caused the Depression of the 1930s and that the Smoot-Hawley tariffs were too late to rescue the situation. The reality is that tariffs made the Depression much worse, just as they will harm all economies today. It was the painstaking rounds of trade talks in the subsequent 80 years that lowered tariffs and helped increase prosperity.

On economics Mr Trump’s assertions are flat-out nonsense. The president says tariffs are needed to close America’s trade deficit, which he sees as a transfer of wealth to foreigners. Yet as any of the president’s economists could have told him, this overall deficit arises because Americans choose to save less than their country invests—and, crucially, this long-running reality has not stopped its economy from outpacing the rest of the g7 for over three decades. There is no reason why his extra tariffs should eliminate the deficit. Insisting on balanced trade with every trading partner individually is bonkers—like suggesting that Texas would be richer if it insisted on balanced trade with each of the other 49 states, or asking a company to ensure that each of its suppliers is also a customer.

And Mr Trump’s grasp of the technicalities was pathetic. He suggested that the new tariffs were based on an assessment of a country’s tariffs against America, plus currency manipulation and other supposed distortions, such as value-added tax. But it looks as if officials set the tariffs using a formula that takes America’s bilateral trade deficit as a share of goods imported from each country and halves it—which is almost as random as taxing you on the number of vowels in your name.

This catalogue of foolishness will bring needless harm to America. Consumers will pay more and have less choice. Raising the price of parts for America’s manufacturers while relieving them of the discipline of foreign competition will make them flabby. As stockmarket futures tumbled, shares in Nike, which has factories in Vietnam (tariff: 46%) fell by 7%. Does Mr Trump really think Americans would be better off if only they sewed their own running shoes?