US President Donald Trump’s ridiculous on-again, off-again tariffs represent a dangerous gamble that, at best, could damage the US and the rest of the world mildly. At worst, they risk the potential destruction of the global economic system, which could lead to catastrophic consequences.
The tariffs will achieve none of the stated policy objectives, whether domestically or in terms of Trump’s stated international goals. But it also appears unlikely that the president will settle down to a more steady policy course. He has a stranglehold over the Republican Party, owing to his deep and loyal support among the party faithful and his slim but clear control over the Congress.
The source of Trump’s policy is not any study on tariffs or even economics but simply his blind faith and supreme self-confidence. Trump has always believed in the magic of tariffs. His half-baked ideas formed in the 1980s, at a time when the US was bothered by rising Japanese car imports. The Reagan administration negotiated a ‘voluntary’ Japanese quota on car imports into the US, which spurred Japanese car manufacturers to build automobile plants in the US to get around the import quota. This did not particularly help US auto manufacturers, which, at the time, produced cars that were simply unattractive in the market.
The US auto industry did eventually learn to compete with the Japanese the hard way—by making better and more reliable automobiles. However, it had nothing to do with the Reagan-era side deal that limited Japanese car exports to the US.
The US victory in the Cold War did reduce American anxieties for a time, but the US-Canada-Mexico NAFTA (North American Free Trade Agreement) treaty and China’s subsequent rise as a manufacturing power brought it all back. NAFTA was a political issue for a while in the 1990s, with fringe politicians like Patrick Buchanan and Ross Perot railing against the treaty. Some leftist Democratic leaders like Barack Obama did continue to mutter about the NAFTA, but it was really Trump who brought the issue back centre-stage.
Engine of prosperity
What much of this internal critique of US economic policy fails to acknowledge is that the US has been the most successful industrial power in the last century. It is the engine of prosperity and growth in the world economy. More broadly, it created a coalition that was both rich and successful, defeating both Hitler’s Germany and later, the Soviet Union. The US continues to remain the fastest-growing economy among the established powers, and its share of the global economy has only declined marginally in the last fifteen years.
The point is that while China’s entry into the World Trade Organization (WTO) did help it grow, it did not come at America’s cost, except in the sense that the relative power between the two has closed significantly. It is difficult to play the counterfactual game of imagining an alternative history about whether it would have been better for the US if it had not championed China’s entry into the WTO. China may likely have grown much slower, but American prosperity may also have been significantly lower. China has grown much faster because it started from a much smaller base, but that should not blind us to the fact that the US also benefited from the expansion of the WTO.
It is possible that China will outpace the US eventually, but that is also something that remains to be seen. While the US faces a number of problems going forward, so does China. It is difficult at this stage to predict which of them will succeed in handling their considerable domestic problems better. Experience suggests that liberal democracies are pretty good at this, and usually better than autocracies.
The essential point to remember is this: the US has been a successful great power and industrial economy. It has problems, but they are manageable. Many of its problems, such as drugs and illegal immigration, are rich country problems. And the American voters broadly accepted this. They voted Trump in narrowly, and mainly because of a mild inflation, social issues such as transgender rights, and general Democratic Party dysfunction.
It bears repeating: Kamala Harris lost by just a couple of million in popular vote, out of a total of 155 million votes cast. This was not a mandate for the radical changes that Trump is introducing by any means; he did not even get a majority of the votes. What Trump did achieve was complete and total dominance over the Republican Party, which means he faces no internal party opposition. He is free to do whatever he wants because he has the support of ambitious Republicans. Vice President JD Vance and Secretary of State Marco Rubio, for instance, want to use Trump’s popularity to achieve power for themselves.
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No end to American leadership
The effect of Trump’s foolishness will not be the hoped-for revival of US manufacturing, which is idiotic even as a goal. Manufacturing largely left the US because it was much too low-paying for Americans. If it returns to the US, it will only be because wages in the country have dropped below China’s, to the level of Bangladesh and Vietnam—an unlikely outcome.
Similarly, it is foolish to expect that other countries can buy as much from the US as it buys from them, even including petroleum products. This means that Trump is not going to get ‘balanced’ trade, even if others want to appease him.
Internationally, Trump’s policies will not be the end of the American era or even leadership. One of the advantages of enormous power is that the margin for mistakes is very large. Former US President Richard Nixon unilaterally and with no prior warning took the US dollar off gold exchange standard in August 1971, at great cost to US allies and others. The Reagan–era Plaza accords were again a flexing of American financial muscle at the cost of others. Trump’s unsteady policies are entirely thoughtless and foolish. They will damage the US, but not so much that it will no longer be a great power.
The chaos he engenders will frustrate America’s friends. But as long as the US remains powerful, it will also remain useful to others, which means they will continue to look to the US for help. Leadership is not just about wanting to be a leader but also having others who are willing to be led. The US can voluntarily cast away its leadership, but it will still have those who will want to be supported and thus be willing and eager for US leadership. So, the effect of even Trump’s reckless policies may ultimately have a limited effect on US global leadership.
Rajesh Rajagopalan is a professor of International Politics at Jawaharlal Nehru University (JNU), New Delhi. He tweets @RRajagopalanJNU. Views are personal.
(Edited by Prasanna Bachchhav)