Liberation day - or mutually assured destruction day?

Donald Trump calls his decision to impose massive tariffs on almost all the USA's main trade partners "liberation day."

Some might argue that the impact on the economy, both for America and it's trading partners, if everyone engages in a round of tit-for-tat trade barriers is less like liberation and more like an economic version of Mutually Assured Destruction.


There is a small kernel of truth at the centre of the huge poisonous plant which is protectionist trade policies.

The first part of that kernel of truth is that some countries - the most egregious example being, certainly not Canada, but China - have been taking advantage of the free trade policies of other nations to pursue economic imperialism. There is a case for measures to counterbalance this - though there is no earthly reason to apply those counterbalancing measures to trade partners which have not behaved in that way.

The second part of that kernel of truth is that the enormous benefits of trade have not bee4n as equitably shared out as they should have been, and the distribution of the costs of free trade has not always been fair either.

That inequality has made it far too easy for an unholy alliance of right wing nationalist populists, left-wing anti-capitalists, and the most unhelpful kinds of environmental eco-warriors, to spread false narratives against trade and globalism in general.


let's consider for a moment what Trump's tariffs, or anyone else's, actually do. They are an increase in tax. They put up prices. Trump's tariffs will crucify American companies with integrated international supply chains and they will put up prices for American consumers.

Similarly, if the British government responds to the calls from the Lib/Dems and others and puts up retaliatory tariffs, those tariffs will hit British companies with integrated supply chains including US components or raw materials and put up prices for British consumers.

 A trade war is an exercise in mutual sabotage which can wreck the economy of both countries and which, all too often, everyone loses.

 


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