Donald Trump’s tariff blitz is not exactly making friends with long-time allies, economists, or the libertarian, free trade Right. His approach has made him persona non grata at publications such as National Review and the Wall Street Journal. Yet although the president wields the tariff stick like a madman swatting flies, there is more logic to his approach than one might glean from much of the press.
Fundamentally, Trump’s tariff policy is an attempt, albeit crude, to reverse decades of unfair trade relations, most notably with Europe. His focus is to force the EU, whose trade policies he has labelled an “atrocity”, to reform its protectionist system, under which tariffs on US-made cars are by some counts four times higher than the equivalent American tariffs on European cars. The situation is similar in such sectors as food, beverages and other agricultural products. In some areas, American products sold in Europe are frequently taxed at 30 per cent or more.
As the historian Michael Lind has pointed out, tariffs have long been a tool in the arsenal of both advanced and developing countries. And they still are. Today, the EU imposes high tariffs on electric vehicles made in China. Other countries, including rising power India, have levied tariffs of 70 to 100 per cent on electric vehicles from China and elsewhere. Few Canadians recognise that Canada, beneficiary of a $100 billion merchandise trade surplus with the US last year, has been highly protectionist and for a long time. Canada recently levied a 100 per cent tariff on imported Chinese EVs and a 25 per cent surtax on Chinese steel and aluminium.
To deal with Trump’s policies, America’s traditional allies need to recognise that the greatest threat to the West is not American tariffs but China’s massive drive to dominate the market in manufactured goods in virtually every industry. In the US, notes an EPI study, the growth of China’s trade deficit cost roughly 3.7 million jobs between 2001 and 2018.
Until recently, multinational corporations and financial markets have been remarkably untroubled by Beijing’s stated aim by 2050 of becoming the leading global superpower. But those in the public realm have to take a longer range view that recognises that the West’s greatest long-term challenge lies in relentless Chinese mercantilism.
This West’s trade disadvantage with Beijing extends from the most prosaic to the cutting-edge. During the pandemic, the US found itself dependent on China, the source of the affliction, even for the most basic medical supplies. “Why can’t the greatest economy in the history of the world produce swabs, face masks and ventilators in adequate supply?” asked Lawrence Summers, the former head of President Obama’s National Economic Council, on social media on March 21 2020.
America’s inability to produce even basic goods has not fundamentally altered since. The generally anti-Trump media complains how companies cannot even source screws in the United States. Although chief executives and libertarian economists may see this as a reason to keep the floodgates open, a rational person might suspect that an America that cannot produce even such simple goods will not long lead the world.
But Chinese dominance is also spreading to the most critical sectors. In 2023, it consumed roughly half of the world’s steel and emerged as one of the world’s largest automobile producers – electric cars largely powered by coal play a key role. It has also invested heavily to take over the aerospace industry from both Boeing and Europe’s Airbus. It has grown rapidly in sectors like semiconductors, batteries, airplanes, and automotive parts, and now accounts for more than half of all world shipbuilding. Unlike Japan in the 1980s, whose growth threatened American industries, China’s rise also threatens America’s basic ability to produce advanced military goods.
Once this is understood, it seems fairly insane for Europeans and the UK to be criticising the United States while continuing to turn a blind eye to China. Britain’s Keir Starmer’s attempt to cosy up to China in order to “Trump proof” his realm seems the road to ever great irrelevancy, although perhaps his Labour Party can benefit in its drive to curb free speech from the censorship masters in Beijing.
European leaders need to realise that Trump’s desires are not revolutionary, but similar to their own: if you want to do business in our country, create jobs and production here. This is not only reliant on getting key trade partners to reduce their protective barriers but to force companies, like Honda, to scrap plans for shifting production of new models to Mexico and instead make them in Indiana. Both Eli Lilly and chipmaker Taiwan Semiconductor have already been persuaded to invest billions in the United States, when their products in the past could easily be shipped in from abroad.
Of course many businesses – notably those with strong Chinese supply links – will be reluctant to accept that the current economic regime is over. But others are now seeking out more domestic suppliers. McKinsey surveyed supply chain executives and found consistent concern that supply chains are too vulnerable to international disruption.
Rather than rant, European, UK and Canadian political leaders need to push for negotiations aimed at equalising tariff barriers and look for ways to build a reinvigorated economic and security alliance. Trump, after all, is a committed dealmaker, and perhaps can be persuaded to ratchet down his demands and give countries, including his own, time to adjust.
Trump will, and rightfully so, work to unravel existing trade barriers, and recalibrate relations by ending nearly 80 years of now unsustainable American economic and security protection. America’s president may be half-mad, but our friends abroad also need to realise that, without a strong tie to America, they would likely be reduced to little more than Chinese vassal states.
This piece first appeared at: Telegraph.
Joel Kotkin is the author of The Coming of Neo-Feudalism: A Warning to the Global Middle Class. He is the Roger Hobbs Presidential Fellow in Urban Futures at Chapman University and and directs the Center for Demographics and Policy there. He is Senior Research Fellow at the Civitas Institute at the University of Texas in Austin. Learn more at joelkotkin.com and follow him on Twitter @joelkotkin.
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