‘Liberation’

The clown show just goes on and on.

President Donald Trump declared April 2 “Liberation Day” with enough extravaganza to go with it. This is the day when more tariffs will be imposed by the US on virtually every other country trading with them.

By this morning, Manila time, we should know exactly what tariffs will be imposed. Over the last few days, there has apparently been much debate among Trump’s advisers – enough debate to prevent even a rough outline of the tariff plan to be divulged.

Since he took over last January, Trump has unleashed much sound and fury about imposing tariffs on what used to be the US’s closest allies – especially Canada and Mexico. He has backtracked several times – especially when strong-willed leaders of other nations pushed back and imposed countermeasures. He could do so again this “Liberation Day.”

As things stand, new tariffs have been imposed on everything coming from China, steel and aluminum regardless of source and some specific impositions on a number of goods from Canada. Although, by themselves, these additional tariffs might seem much less than advertised, they create enough havoc for the existing supply chains.

The markets have made their opinion of the coming wave of tariffs. In the run-up to “Liberation Day,” markets receded across the globe. The US stock market has been on a losing streak. Among the most battered stocks is Tesla, owned by Trump ally Elon Musk.

Trump promised “reciprocal” measures against all countries imposing some form of duty on American exports, including value added taxes apparently. Only one country took this seriously: Vietnam. Last week, the Vietnamese reduced the tariffs they imposed, hoping to evade a tidal wave of “reciprocal” tariffs Trump threatens to impose.

The term “Liberation Day” might seem seriously misused to refer to a program of measures constricting trade among countries. But in Trump’s mind, consumed as he always is by imagined grievances, the rest of the world has been oppressing the US by exporting more than they import.

Trump imagines that by penalizing the exports of other countries, American manufacturing might enjoy a renaissance. He has always believed that the US will be wealthier if it does not import things. It is a pretty deranged version of international economics. But this is exactly what Filipino orthodox economic nationalists, who reject foreign investment flows and imports of goods, have believed for decades.

This extreme protectionism was actually fashionable over a century ago when nations observed mercantilism and engaged in beggar-thy-neighbor trade policies. This discredited orthodoxy produced two world wars and a devastating global depression. But Trump and other surviving self-reliance nationalists (such as North Korea, Cuba and our own CPP) never grasped that.

American consumers will be the first casualties of Trump’s tariff binge. Tariffs influence pricing much like a sales tax does. It is the end-user who finally pays for the tariff.

Tariffs will likewise affect the supply and value chains. Much of what might be mistakenly called “American cars” are composed of parts manufactured elsewhere. If tariffs are imposed on those parts, “American cars” will have to raise prices.

Trump seems to be hoping that by imposing tariffs on foreign cars, he will encourage a revival of American car production. That is not likely. It will take many years and a lot of expense for a non-American car producer to transfer production facilities to the US. It will be wiser to sit out the remaining years of the Trump presidency. The next administration, learning from the adverse effects of erecting a tariff wall, will likely return to free trade.

The US buys a lot of Canadian oil at a steep discount. If tariffs are imposed on this product, energy prices for Americans will rise.

Canadians, angered by Trump’s abrasive treatment, have cancelled holidays in the US. Tourism flows to the US have significantly dropped.

Technology is among the US’s most competitive business sectors. But a lot of high technology inputs used by American firms are imported from Taiwan, South Korea and Japan. Consumer technology products are likely to be more expensive.

On top of the effects of Trump’s tariff wall, other countries are preparing to impose retaliatory tariffs on American products sold in their markets. When this happens, American manufacturing is likely to be hit.

Hardly anyone outside the US market buys American cars anymore. They are seen as less efficient, technology backward and oversized. This trend can only be aggravated by retaliatory tariff measures. The countries targeted by Trump’s tariffs have mostly decided to ride this episode out and wait for sanity to return to international trade.

In the meantime, adjustments in the world’s supply and value chains will be made. The net effect of this is the increasing isolation of the American economy. A number of analysts have ventured that the biggest winner of Trump’s tariff wall will be China. The Asian economic superpower is readier than ever to move into markets cut off by America’s trade war.

Trump’s policies do not seem to be guided by a well-grounded view of the emerging global economy. He has managed to offend America’s closest allies. Everywhere, Trump’s economic policies are seen as myopically transactional. He seems to be using the threat of tariffs to bully other nations to grant him concessions.

With Trump and his shallow economic views in charge, America seems to be waging war against the rest of the world.