Heather Mallick: Donald Trump's tariff love affair dangerous to U.S., world economy
President Donald Trump’s latest catapult in the tariff wars was low comedy indeed. “I am a Tariff Man,” he has said. Of the latest 25 per cent tariffs he placed on at $270 billion worth of Chinese exports to the U.S., he says the cash is swelling the U.S. bank account.
I have no doubt he believes there is one account, just down from Trump Tower, and that foreigners pay tariffs into it. In real life, these huge fees will be paid by importers and ultimately American consumers, but the idea that they’re federal profits is Trump’s “theology,” his aides have admitted. He cannot be persuaded otherwise.
We all have pet theories. Trump also believes that, like a battery, there is a finite amount of energy in every human and exertion will deplete it, which explains his perpetual golf carting. I believe that when you’re ill, white foods are best, which means mashed potatoes, scrambled eggs, vanilla ice cream and barley.
Both pet theories are ludicrous and I imagine both Trump and I will meet an early death. But his tariff notions are actually dangerous. They will bash the U.S. economy and if they balloon and persist, the global economy too.
The tariffs on Chinese goods won’t work on goods where China has cannily made itself almost the only supplier, and at prices pared to the bone. Bloomberg mentions electronic components, furniture, appliances and networking gear as the products under tariff that the U.S. most needs from China.
Importers will have to seek out other trading nations but new supply chains are very difficult and expensive to build, especially with low-wage nations like Vietnam, Cambodia and Laos. Ah, the U.S. has history with them.
Weirdly, given that Trump has started pointless trade wars on so many fronts, including Canada and South Korea, new Secretary of State Mike Pompeo just finished an astonishing world tour of insulting and threatening allies in the crudest terms. Was that smart?
There’s a larger problem that Trump and his cronies haven’t considered because they are so bulbously rich that they don’t know how the 99 per cent live. I always think of JP Morgan Chairman Jamie Dimon’s 2014 holiday card. It had photos of his family smashing a tennis ball around a lavish living room in one of his many mansions, the message being that he could destroy more things in a minute than you will ever own, and not count the cost.
The acquiescence of the American middle and working class in a new Gilded Age has been astounding. What stops them rioting in the streets for taxing the 1 per cent, unionization, and a Green New Deal? Answer: they’re bloated with cheap stuff from China that helps to conceal the full extent of their economic decline since the 1970s.
Take Walmart, Amazon and Wayfair, which sell plenty of Chinese or foreign-sourced goods to Americans and Canadians, and for rocketingly low prices. The products are so cheap and cheaply made that shopping has become a recreation open to all.
When tariffs force prices to rise, people will soon find life increasingly uncomfortable and strangely insulting. Wait till they can’t afford a new barbecue.
Buying cheap foreign-made household goods that you want but don’t need is the equivalent of bubble wrap and foam packing peanuts to soften economic blows. It distracts from the economic abuse of the public. Americans, like Canadians, worship the god of cheap. Imagine them losing their faith.
As for China, Trump’s tariffs will lower that nation’s very high GDP slightly but Beijing will win in the end. It has the advantage of Communist flexibility to redirect workers as it pleases and it has time. Xi Jinping isn’t running for office.
But as the French economist Thomas Piketty has pointed out wonderingly, why is high annual growth so dearly sought? Why not low growth left to rise cumulatively over decades? The rate of return on capital has become greater than the rate of growth of income and output, Piketty says, and that has caused rising inequality.
Why not tone down this dangerous haste, this rush to the top? Trump is irrationally exuberant about his precious tariffs. Ahead lie penury and pain, and possibly a Democratic president in 2020.
Heather Mallick is a columnist based in Toronto covering current affairs. Follow her on Twitter: @HeatherMallick