Is Donald Trump serious about his tariff agenda? Does he really see these import taxes as a long-term revenue raiser for the US exchequer? Or, as the financial markets had thought – at least up to this week – is he just looking for quick deals and will use the threat of tariffs, or their short-term imposition, to get his way in other arenas?
Perhaps the president is not even sure himself. Referring to his tariff agenda in his speech to Congress on Tuesday he warned: “There will be a little disturbance, but we’re okay with that.”
Many American businesses and consumers may not agree, as supply chains are disrupted and prices start to go up. On Monday night, Trump gave the car industry
a one month reprieve from tariffs imposed on Mexico and Canada. But, he seems determined to push ahead and says further reciprocal tariffs on all trading partners will be introduced in April.
There is trouble ahead for Trump and for the US – and global – economy if he sticks to these commitments to impose tariffs more generally. In relation to the EU, Trump has spoken about tariffs of 25 per cent which would spark a damaging trade war. To justify this, he has focused on the EU VAT regime – which is not a trade barrier at all – and the impact of European rules and regulations on US sales in areas such as food, and the oversight of big technology companies.
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There are ways to address these issues. But tariffs is not one of them. Trump would impose huge costs on the US economy, as well as others, were tariffs to stay in place for any length of time. The theories put forward by some of his senior advisers that tariffs do not put up prices to consumers and that they can be used to raise longer-term revenue are nonsense. And the very uncertainty that all the trade threats are fostering is damaging in itself.
Wall Street is now worried that Trump is actually serious about tariffs – and perhaps this reaction may give him pause for thought. Businesses will also be lobbying the administration and the Republic party. The impact of inflation on consumer sentiment is also worth watching.
Tariffs are not, as Trump has said, about protecting American jobs. Perhaps there are sectors who will benefit, in the short term at least. But, overall, in an era of complex international supply chains, barriers to trade such as tariffs mean trouble and cost – and ultimately fewer jobs and lower living standards.
For Ireland, the threat of tariffs and the breakdown of international trade rules carries significant dangers. In the short-term, economic activity will be hit as companies wait and see what happens. Beyond that, there are dangers to inward investment, exports, tax revenue and jobs.
As a trading economy, Ireland is unfortunately heavily exposed to Trump’s economic madness.
