Jeremy Warner: It seems Trump shares the EU’S love of tariffs
Think big, protect against the downside, use your leverage, fight back, deliver the goods, contain the costs, and last but not least, have fun. These are just some of principles of business success that Donald Trump lists in his bestseller, The Art of the Deal. He aims, presumably, to bring the same mindset to his presidency, and more particularly, given that this provides the latest display of pyrotechnics from Trump’s tweet-a-minute White House, to his trade policy.
These approaches can work in business, finance and real estate; that indeed is how a lot of deals get done – threat and counter-threat, walkout, walk back in, concession and withdrawal, followed by a sweetheart deal on the side, and the final clincher, so if you really must, yes, the chief executive can keep the private loo after all. But is it the way of international diplomacy and trade?
Once again, Mr Trump has shocked the world by going ahead and doing exactly what he said he would do, imposing tariffs for the purpose of protecting US industry. Outrage. Rarely do elected politicians actually keep their campaign promises. In this department at least, Trump is being as good as his word. It is almost offensive that he should. Like some Silicon Valley start-up, he promises to “disrupt” the established global order and rewrite its rules. If he continues in last week’s vein, he will certainly succeed. Regrettably, however, it seems most unlikely to be a good way – either for the US or anyone else.
The justification given for imposing new tariffs on steel and aluminium – national security – is so obviously spurious as to be laughable, especially as the main victims of the policy – the European Union (including Britain), Canada, Mexico and Japan – are some of the US’S key allies. Trump’s commerce secretary, Wilbur Ross, says it’s not about destroying free trade, but securing fair trade, and on some level, he may have a point. The US has good reason for grievance in a number of instances – with China, Japan, and even the European Union, which if Trump escalates the trade war to cars, stands to be the biggest loser from his posturing.
Yet in the round, the EU is no more protectionist than the US. Both have myriad different tariffs and non tariff barriers to trade. State subsidy, overt and hidden, is also relatively common in both jurisdictions. True enough, on a simple average of “Most Favoured Nation” tariffs, the EU is a bit more protectionist than the US at 5.71pc against 3.56pc. But factoring in countries with which these two trading blocs have trade deals, the EU turns out to have a lower tradeweighted tariff than the US. The US also uses a lot more temporary trade restrictions. In the round then, the two seem pretty similar.
There is no point in imposing higher tariffs to bring jobs back to the rust belt if it results in retaliatory action that destroys jobs elsewhere in the economy. What is more, tariffs on steel and aluminium impose direct costs on manufacturing further downstream, raising prices and damaging the economy in the round. Mr Trump says trade wars are easy to win; the reality is that there are no winners from this kind of nonsense, only losers.
Two further points seem worth making. Whichever way this goes, it’s going to end up undermining the World Trade Organisation, the supposed international arbiter in trade disputes. If the WTO finds some way of accommodating the national security exception claimed by Trump, it only further discredits itself by seeming to be America’s patsy. But if it declares the tariffs illegal, the US will simply walk out, entrenching the idea that the US no longer plays by the international rule book it was pivotal in establishing. Post-war history has been defined by the spirit of multilateralism, or international co-operation. But that era seems to be drawing to a close. You need a particularly optimistic frame of mind to think this will work out well. The other point is to do with our old friend Brexit. That the world’s largest economy is turning in on itself, and that it is prepared to use bully boy tactics in its trade negotiations, does not bode well for the UK Prime Minister’s pursuit of “Global Britain”.
Mr Trump’s approach is “Art of the Deal” brinkmanship and oneupmanship, in which for every winner there must be a loser. That’s not what free trade is supposed to be about. Which way should the UK be jumping; towards the US, or back into the EU’S embrace? Pick your poison, seems to be the answer.
Tidal power nemesis
The best thing that could be said for the £1.3bn plan for a tidal power lagoon in Swansea Bay was that per kilowatt-hour, it stood a good chance of coming in somewhat cheaper than Hinkley Point C, the nuclear white elephant being built across the Bristol Channel in Somerset.
Well, now it won’t get that chance. Ministers have been threatening to pull the plug on this little piece of Welsh Assembly hubris – described by Greg Clark, the Business Secretary, as “an untried technology with high capital costs and significant uncertainties” – for months, and have now plucked up the courage to refuse the funding.
Wales claims to be a pioneer in tidal power, but it’s been far from plain sailing. The company behind the plans for a massive turbine in Ramsey Sound in Pembrokeshire went into receivership more than a year ago after developing a fault in one of the sensors designed to shut the thing down when wildlife came too close. Since the sound is a thoroughfare for such wildlife, it always seemed likely the turbine would be more off than on.
Promoters of these home-grown technologies nevertheless deserve some sympathy. British consumers will be paying through the nose for decades to come for the privilege of allowing EDF and its Chinese partners to perfect and showcase their nuclear technologies at Hinkley and beyond. Tidal power is by contrast a predictable, safe and clean form of energy that would be entirely made and developed in Britain. So much for Mr Clark’s shiny new “industrial strategy”.
‘Mr Trump says trade wars are easy to win; the reality is that there are no winners from this nonsense, only losers’
A worker packs coils for delivery at a German steel company, the EU has become the main victim of Trump’s new steel tariffs, despite being a close ally