The closing of the US: Americans likely to suffer more than others

Global markets have calmed perceptibly after several days of turmoil, presumably because a belief has taken hold that a period of negotiations over the United States’ new tariff policy is now beginning. This belief is predicated on the notion that US President Donald Trump’s higher than expected tariffs are designed to be the starting point in lengthy deal-making. Given the possibility of recession and discontent brought on by higher duties, this reasoning goes, Mr Trump almost certainly plans to cut new deals and agreements. This is what some of his allies have said in public — most notably his billionaire advisor Elon Musk, who said that the endgame should be free trade between the US and the European Union. But this might also be a misreading of Mr Trump’s intentions. The President was in fact offered duty-free access to the European market for all American industrial goods by the European Commission again this week — and he turned it down, saying that the US had been “treated very badly”. There is a good possibility, one which is perhaps being underpriced by the markets, that Mr Trump is willing to shrug off pain to the US economy and to its consumers in order to restructure the world economy and stop this supposed mistreatment of the US.

 

The fact is that the various ideas and intentions being propounded by high officials in the Trump administration and by Mr Trump himself do not sit easily together. In fact, in many cases, they are mutually contradictory. For example, if tariffs are merely a starting point for negotiation, then they cannot, as Mr Trump has sometimes said, be the primary mechanism by which manufacturing returns to the US. If the eventual purpose is free trade but on better terms, then the promises that the President had made in the past of “massive revenue” from tariffs that would allow him to cut taxes cannot by definition be fulfilled. Even if the tariffs stay, then that massive revenue may not materialise if they succeed in achieving the President’s other aim of reducing the US’ trade deficit to zero. Altogether, there is considerable incoherence in how this policy has been presented and justified, which does lead to the conclusion that they are in fact an ideological preference of the President, for which multiple post-facto justifications are now being designed.

 

The various higher tariffs Mr Trump presented last week at his memorable ceremony in the White House Rose Garden will come into effect on Wednesday. So far, not one country has been able to offer the US anything that has gained them additional time or an exemption. This does not bode well for any negotiations to come. If so, global markets are in for a hard time — but so are American consumers. The country has long been the envy of the world for its standard of living, and US-based consumers always have access to the best and most technologically advanced products. Indeed, because of the low sales-tax profile in the country, prices in the US of many goods — such as phones, for example — are usually the lowest in the world as well. This age of plenty will come to an end for Americans if the Trump tariffs are retained. They will miss out on technological advances, have to pay more than the rest of the world, and endure shipping and other delays. Any manufacturing that is onshored may not match the outside world in quality and price, reducing the desirability of goods made in the US. Nobody will suffer as much from the closing of America as Americans.