Tariffs always cause the most damage to the country that imposes them.
That is one of the few propositions to which every economist of the Left and Right can assent. Sure, tariffs also do incidental harm to overseas companies, but their weight is mainly borne by domestic consumers. We can argue about exactly how heavy the burden is. The National Taxpayers Union Foundation says that President Trump’s import taxes cost the average American family $425 a year. J.P. Morgan puts the figure at $1,000. Trade Partnership Worldwide says $2,300.
Every analyst agrees, though, that the cost outweighs any benefits to domestic producers. So, why do politicians keep returning, as moths to the flame, to such an obviously self-harming policy?
I have discussed the reasons in these pages before: the power of politically connected lobbies; concentrated gains and dispersed losses; the intuitive evolutionary appeal of protectionism; nostalgia for old industries. So far, so familiar. But we should not disregard a powerful secondary argument against protectionism — namely, the damage it does to a country’s international standing.
On Oct. 18, Trump imposed a series of tariffs on exports from the European Union as part of the long-running Boeing-Airbus dispute. Most of the goods targeted have nothing to do with aircraft. There are levies on cheeses, olives, biscuits, and books — a whopping $7.5 billion worth of products in total.
Oddly, the country most adversely affected by this is the one that is in the process of quitting the EU, namely, the United Kingdom. Of that $7.5 billion, no less than $1.4 billion hits British exports, including malt whiskey. Other U.K. products have evidently been singled out following pressure from specific lobbies. There are tariffs on suits, pajamas, and bedsheets. There is a 25% tax on excavators aimed specifically at the popular family-owned British company JCB, for which I serve as an adviser.
What have any of these things got to do with the Airbus dispute? Nothing at all. My guess is that the Office of the U.S. Trade Representative simply asked domestic firms whether there were any competitors they would like to see excluded from the market and drew up its list accordingly. That is usually how these things work, especially in the United States, which has unusually lopsided trade rules that favor producers over consumers.
Still, why this focus on the U.K.? After all, Trump is personally invested in Britain’s withdrawal from the EU and likes calling himself “Mr. Brexit.” He talks about his fondness for Britain in general and Scotland in particular. How bizarre that, just as he proposes a “fantastic” free trade agreement with America’s strongest ally, he should take aim at some of its best-loved brands in a calculatedly belligerent way.
Could it be that it is precisely the looming trade negotiations that have prompted him? Perhaps this is one of those “art of the deal” maneuvers where you put something on the table just before the talks so as to be able to take it off again once the bargaining begins.
If so, it is a miscalculation. Britain is better disposed to economic liberalism than most countries, but it has its anti-trade constituency. There are anti-capitalists, anti-Americans, anti-Trumpers, anti-Brexiteers, anti-meat campaigners. Come to think of it, those groups overlap so heavily that they might usefully be considered a single lobby, but that doesn’t mean they can be ignored. They have seized on these tariffs as proof that Britain would be better off negotiating with European pantywaists than with American carnivores.
Washington, they claim, is not interested in the mutual gains that come from a free exchange, only in throwing its weight around in a domineering and colonialist fashion. In such a climate, it becomes much harder to push for the wholesale removal of barriers on both sides, which is what a U.S.-U.K. trade deal should be all about.
Ronald Reagan, as usual, put it best:
Our peaceful trading partners are not our enemies; they are our allies. We should beware of the demagogues who are ready to declare a trade war against our friends — weakening our economy, our national security, and the entire free world — all while cynically waving the American flag. The expansion of the international economy is not a foreign invasion; it is an American triumph.
Indeed. And sustaining that triumph requires patient statecraft. The tariffs come up for review in February, by which time Britain will have left the EU. The administration can take that moment to signal its support for closer links with Britain, as well as doing American consumers a favor by sweeping these tariffs off the table. If that opportunity passes, the bilateral trade deal that the president sees as the culmination of his first term may become unachievable.