- NEWSDAY.CO.TT - A la Une - 10/Aug 10:03

The world’s tariff war

Last week we suffered a nasty shock when the US government announced an extra five per cent tariff on top of the ten per cent previously levied by President Trump on TT goods entering the US. TT and Guyana alone among Caricom countries have been singled out for the favour. I guess that’s because we are the only two regional energy-based economies exporting expensive commodities, which creates a trade imbalance with the US that is not corrected by all the cheaper imports from the US that we depend upon. The punitive current rates are a blanket ten per cent tariff on countries with which the US has a trade surplus, 15 per cent on countries with which it has a trade deficit and various retributional rates on selected countries. The tariffs already have caused havoc, with many job losses in several industries worldwide, and the arbitrariness of the tariffs has led to fluctuating global markets and much business uncertainty, with things set to worsen. It is a body blow for TT’s economy. A 15 per cent increase will affect the price of our goods in the US market and our market share, making TT less attractive for new investment. For consumers, higher tariffs mean increasingly higher prices in the shops, as every country has been hit with higher production costs. On Sunday, I watched a to-me-unknown conservative economist, Oren Cass, on television arguing in favour of Trump’s tariffs. He was taking part in CNN’s Fareed Zakaria GPS programme, which questioned whether tariffs will benefit or harm the US. Cass is the founder and chief economist of the conservative think tank American Compass, which he founded in 2020. He is one of the architects of the economics of the new Trumpian Republican Party. We must be careful not to be so in thrall to liberal opinions that we miss the chance to make independent judgements, so I listened closely to try to understand his economic viewpoint and glean what makes so many others believe in it. Much better, of course, to read his new book, The New Conservatives: Restoring America’s Commitment to Family, Community, and Industry, but in the absence of that I reasoned it was important to hear him explain why he thinks destroying the established world order is good for the US. It is useful, too, to know his background. He is Harvard-educated, Jewish, worked on two presidential campaigns for Mitt Romney and is known as a public-policy commentator and political adviser. Essentially, he believes the world free-trade system is broken and unfair to the US; that free trade is not open and free, because all the mega-companies are supported by state subsidies, so their market value is somewhat predetermined; that what we think we have is really an illusion and needs to be called out as such. He argues that the US exported too many jobs and must now bring manufacturing back home. He disparaged countries whose economies are based on making goods from imported materials which, when exported, sell more cheaply in the US and undercut the price of US-made goods. He ignored the benefits the US enjoys from becoming the world’s biggest economy. Cass spoke with real conviction and belief that the tariff policy would achieve big, bold and, in his eyes, good changes in how Americans live, earn and spend. But I am unconvinced that although prices will rise in the short term, US consumers will be better off when the US again becomes a factory floor. Besides new technologies being less labour-intensive, no country can produce everything it needs for industry. Cass is not afraid to think radically, which is good, but these new Republicans focus only on the welfare of the US and spare no thought for the wellbeing of the rest of us. It became clear the extent to which the new US trading politics is driven by personal values and ideas, rather than established theories, and that its proponents are dedicated to upending the rules-based, post-WWII consensus that has shaped trade and international relations for the past 80 years and kept the world safer than ever in man’s history. My economic knowledge may be limited, but it seems logical that economic relationships between nations need to be fairly balanced, or close to balanced, to avoid chaos – but the deep cleavage comes in how that is achieved. Bullying everyone to pay the US just for the honour of trading with her is unfair and short-sighted. Destroying the reciprocal, orderly economic system for interaction is a recipe for unbridled self-interest that is amoral at best. It makes the world a meaner, nastier place in which the strong wield even more power and the rest fight over the crumbs. For sure, that filters down into society. The post The world’s tariff war appeared first on Trinidad and Tobago Newsday.