Wednesday 8th March
It is almost impossible to keep up with the serial tweeter Donald Trump. Blink and you miss them. In the time it takes Theresa May to declare for the nth time that she will make a success of Brexit, the Trumpster has tweeted that he will start a trade war and he will win it…
The whole trajectory of recent years has been for free (or as free as can be negotiated) trade deals. The EU’s Single Market is the best in the world. And America soon followed with NAFTA (basically Canada, USA and Mexico) and there is another in South East Asia. It has been demonstrated that allowing unfettered and free trade between countries is good for everyone. But the Donald disagrees. He says that Free Trade Agreements hurt the USA, that everyone is ‘ripping them off’, that Free Trade is closing American Factories and Coal Mines and Steel Plants. And there is some truth in this, but only some. It is American businessmen who are to blame – just as in Britain, rather than invest in new machinery and processes, they prefer to close down factories and import from the far east. And bugger the consequences. International Capitalism has no conscience – it will always follow the biggest profit. So, Donald’s answer is to place large tariffs on Steel entering the USA, in the hope that American companies will start buying steel produced in America instead. But, strangely, it doesn’t work like that. Firstly, it puts up the price of Steel, and not only for foreign steel but home-produced will rise in price too. And maybe that imported steel will start to get cheaper. Very rarely do Government’s taxes and tariffs have the desired effect.
And then, of course, there will be the inevitable retaliation. The EU, and China and Japan will start to impose tariffs on American imports. And tit-for-tat – everyone loses.
Trade Wars are not winnable. They are just as destructive as all wars, only jobs and living standards are the victims not territory and direct death.
So, we may be about to be entering a new downturn. World trade is the biggest driver of wealth. Combined with the inevitable increases to come in interest rates, prepare for a bumpy ride
Not exactly the best of times to have triggered Article 50…