Trump and his entire team are simplistic idiots. That goes without saying. They certainly haven’t thought this through and it’s totally beyond his base of hopeless, ignorant, ill-educated fools.
Trump believes that bunging huge tariffs on imports will drive companies back to the States.
He believes it will revive manufacturing in the States and bring back jobs.
He sees it as a transactional threat. Foreign countries will fall over themselves to create better trade deals with America.
Win Win.
Except this is simplistic and naïve and takes no account of the complexity of the market.
For example: China has been hit with big tariffs making Chinese imports into the States much more expensive. Under globalisation the USA’s rare metals mining was shipped out to China. They now produce nearly all the world’s supply. If they withhold those rare metals or charge massive retaliatory tariffs the USA is snookered. They need those metals for their defence industry.
The same goes for many other industries and countries. Trade is complex.
Under globalisation the developed countries farmed out manufacturing to the undeveloped world. Labour was much cheaper. Rules less stringent. They could manufacture at a fraction the price. The result was that we could import goods at a far lower price than we could make them. Everybody benefitted by having much cheaper goods.
The problem was that our manufacturing industry collapsed with great loss of jobs and those jobs were not replaced. People were thrown on the scrapheap. Disenchantment led to the rise of populism with simplistic solutions.
Now Trump’s Tariff wars seeks to drive jobs back but it is doomed to fail because:
Global production and supply lines have become very complicated.
Firms will not undergo the huge expense of relocating if there is a hint of uncertainty – will the tariffs last? Will trade deals be negotiated?
Labour costs in the USA are far far higher than in the undeveloped world.
Countries will become protectionist, respond with their own punitive tariffs and look to develop their own manufacturing industry, seek other markets and bypass America.
The end result is that the whole world will become poorer, prices will zoom and nowhere near enough firms will expand or relocate to make it worthwhile.
The recession will be dire!!
The one thing you can be sure of is that Billionaires will profit!!
