Trump does not understand the true greatness of America. The US must not turn inward

Yahoo

04-04-2025

As a general rule, educated people tend to believe in free trade. Uneducated people tend to doubt it. As an educated person myself, and the descendant of 19th-century free-trade campaigners, I am a keen free trader.
The educated are often puzzled by the doubts of the uneducated because our central belief is that free trade helps poorer people get richer. Competition lowers costs and increases opportunity for people without capital.
Tariffs and other trade barriers empower monopolists, increase scarcity and put up prices. They also hamper new business entrants and featherbed 'them that hath'.
Our arguments are strong. But there is a less elevated reason why educated people like free trade: we do well out of it ourselves. We tend to have transferable skills and can move easily between different countries, so we thrive in a flexible labour market.
The high immigration that often comes with free-trade economies also helps supply us with cheap labour for menial tasks.
Despite being very rich himself, prospering in markets which have been, for the most part, free, President Trump instinctively understands the ordinary people who fear free trade.
They feel, with increasing vehemence, that they are doing badly out of it.
During his own long life, millions of American workers have declined from being the aristocracy of global labour while he was growing up to the forgotten men (they are, predominantly, male) who once worked in steel mills and car plants, timber and agriculture, and now don't or, if they do, are on pretty much the same real wages as they earned 30 years ago.
Since the financial crash of 2008-9 and the artificially low interest rates which rescued the bankers but not them, such workers have grown angrier still.
The most important word in the rallying cry 'Make America Great Again' is 'Again'. Trump invokes a glorious past. Once upon a time in America, a great nation could be forged by a pioneer people.
In its original meaning, a pioneer is someone who digs. The hands of workers who dug and built and chopped down the forests made the America he conjures up. His message is that he is on their side.
Hence the appeal of tariffs. Although anti-colonial, America is nevertheless a sort of empire – one of the people, not the ruling class.
Its territory expanded throughout the 19th century, through purchase and conquest. This echoes today in Trump's attitude to Canada, Mexico and Panama and his coveting of Greenland.
The myth, which was largely true, was that this work was achieved by a great nation alone without the co-operation of other countries.
President Trump is no historian, but he loves to summon up the shade of his Republican predecessor, William McKinley, who, as a congressman in 1890, introduced punitive tariffs.
Study the McKinley Act's motives – part protection, part threat – and you can see them embodied in Trump today.
In a passage in his inauguration speech not much commented on over here, Trump framed his protectionism as a tax cut: 'Instead of taxing our citizens to enrich other countries, we will tariff and tax foreign countries to enrich our citizens.'
In the United States, what we call HMRC is called the Internal Revenue Service. Trump promised what he called the 'External Revenue Service'. You do not need much imagination to see why this would be a popular idea with tens of millions of American voters.
In the executive orders that the president promulgated on Wednesday, he said that America's goods trade deficits 'constitute an unusual and extraordinary threat to the national security and economy of the United States.' Therefore: 'I hereby declare a national emergency with respect to this threat.'
Such a declaration enables him to bypass Congress, but it also implies less a permanent change of policy than a showdown with the rest of the world.
By never mentioning American dominance in services, he fosters a powerful illusion that the deficit in goods, a far smaller proportion of the US economy, is a life-threatening crisis.
He says it is like a patient coming through a perilous operation; in fact, it is more like a chronic but potentially curable condition for which doctors have prescribed the wrong treatment.
I share the conventional view that the Trump measures are bad for the world and therefore, by a logic to which Mr Trump is blind, ultimately bad for America.
If you force people to pay more for lots of things, they will get poorer. If they can obtain those things from other sources, they will.
In the process, mutually beneficial relationships between America and her long-standing allies will be badly strained. Anthony Albanese, the Australian prime minister, said Trump's tariffs 'are not the action of a friend'.
But the critics who see Trump's decision as crazy are mistaken. It fits with his politics, and his base is so loyal to him that if it does all go wrong, they will probably follow him in directing the blame at anyone but himself.
In the meantime, it is at least possible that Trump's calculation will pay off. He thinks America is still so powerful that many foreign companies will have to reshore there, using it as the tariff equivalent of a tax haven.
A few weeks ago, TSMC, Taiwan's huge semi-conductor manufacturer, announced what was billed as the biggest single foreign investment ever made in America – $100 billion for new factories in Texas.
The Taiwanese would probably rather keep their industry concentrated at home, but they decided, perhaps mistakenly, that the investment was the necessary price for American protection from China.
On Thursday, here in Britain, JCB announced that they were doubling the size of their US plant, also in Texas. There will be much more of this.
As so often with Trump, one confronts the unsettling puzzle that he is a dishonest man who nevertheless tells a good many truths.
The truth here is that the world trading system which he attacks is indeed not nearly as fair as it claims; that China, once it got inside, perverted it; and that the European Union is more of a protectionist trade bloc than a beacon of free trade, and is becoming more so with its carbon border tariffs in which Britain foolishly wants to participate.
Trump's attack on all this closely resembles his attack on Nato and the defence of Ukraine: he is exposing something rotten, but his cure is worse than the disease.
Although Britain triumphed economically after repealing the Corn Laws in 1846, we have sometimes been tempted towards tariffs, and for similar reasons.
At the turn of the previous century, Joe Chamberlain called for tariffs 'to secure the masses of the industrial population … employment at fair wages'.
He wanted to save our declining Empire as a means to that end. Luckily, our status as a small, trading island made protection less attractive to us than it must seem in the vast American continent.
But in the end, I suspect, Trump will fail because he too has the wrong vision of arresting his country's decline.
So strong is his sense of grievance, that he does not understand that the greatness of America today lies in the fact that it is, in the business parlance he understands, the greatest 'global brand' in history. It will not remain so if it turns in upon itself and treats its allies as enemies.
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