Kelly Sloan
Say what you might about the UK’s decision to emancipate itself from the shackles of the European Union almost a decade ago… even the most fervent “Remainer” has to be muttering a quiet prayer of thanks this morning. Britain’s economic independence has, if nothing else, shielded the Realm from the worst of President Donald Trump’s “Liberation Day” tariffs, those inflicted on the UK being among the lowest — a “mere” 10%, which is the baseline, half of the 20% imposed on the EU. All things considered, Britain is actually in as good a place as it could be to negotiate a more sensible trade relationship with the U.S., notwithstanding the fact the current Labour government under PM Sir Kier Starmer hardly seems up to the task. But at least they are relatively well positioned to at least try and handle the economic fallout.
The global economic war President Trump has started — because that is what tariffs are, a form of economic warfare — is, depending on how you crunch the figures, either the largest peacetime tax increase in U.S. history, or the biggest tax increase in U.S. history, forget the qualifier. It is difficult to see how the economic impacts, domestic and international, will be any less detrimental than those of other mechanism of market interference. I’m waiting for President Trump to steal former President Joe Biden’s line: “Milton Friedman’s not running the show anymore.”
There is little sense to be made of the tariff campaign, at least from the free enterprise side of the ledger. The whole scheme is based on a number of liberal economic myths: the first is protectionist policies will drive domestic manufacturing growth. That makes sense until you consider most American manufacturers import a great deal of their raw material, taxes on which will drive their input costs up — indeed, fully 40% of imports into this country are inputs; and then you realize tariffs spark retaliatory measures that will reduce American exports — not to mention the simple fact the recession and restricted access to American markets will arrest economic growth in places that may wish to buy things from the U.S. as their economies improve.
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“But the trade deficit!?” I hear you cry. What about it? The concept of the “trade deficit” is one of those economic chimeras that in the abstract sounds like a horrible thing, but in reality makes little difference. Former U.S. Sen. Pat Toomey recently pointed out, for instance, the U.S. has been in a trade deficit with Japan for some 50 years, and yet by any quantifiable metric the American economy is outpacing Japan’s. It’s not an argument a trade deficit bears a causal relationship to prosperity — the UK and Uganda have trade deficits, Australia and Angola have surpluses. It’s irrelevant.
If the theory behind imposing tariffs makes little sense, Trump’s formula for assessing them makes even less. It starts with a 10% “baseline” for every country on the planet, and then imposes “reciprocal” tariffs on a list of countries, calculated by adding up each country’s tariffs on U.S. goods, along with its “currency manipulation and trade barriers.” What you get is a rather arbitrary number, half of which is the tariff applied to that country. This has resulted in some strange arrangements. Iran and Venezuela, for instance, both regimes at the very least antagonistic to U.S. interests, face only the base 10% and 15% respectively; Israel (America’s strongest and most reliable ally in the Middle East) is hit with a 17% tariff, and Taiwan (our most critical Asian ally and bulwark against communist Chinese aggression) gets walloped with an unconscionable 32% rate. Similar high rates are applied to a number of third-world countries to which we have spent the last 80 years preaching the virtues of free enterprise. It strikes me as no less immoral to arrest the ascent of developing nations to prosperity by imposing tariffs than to do so by imposing labor and environmental regulations.
Much of the Trump fascination with tariffs also centers on myths surrounding “globalism.” There is some legitimate concern here, to be sure; the modern nation-state, as Roger Scruton wrote “is the by-product of human neighborliness, shaped by an ‘invisible hand’ from the countless agreements between people who speak the same language and live side by side.” That’s why conservatism recoils at the homogenization inherent in international leveling organizations like the EU and the UN. “But it is the point,” wrote Margaret Thatcher, “at which such instincts induce us to try to plan or control the international spread of free-enterprise capitalism that is the point where luddism substitutes for conservatism.” Amen.
Kelly Sloan is a political and public affairs consultant and a recovering journalist based in Denver.
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