The simultaneous commercial wars of President Donald Trump with Canada, Mexico, China and the European Union equivalent to a huge economic and political commitment: that Americans support months or years of economic hardship in exchange for the distant hope of reindustrializing the heart of the United States.
It is greatly risky. In recent days, Trump has recognized, despite all his safe campaign predictions that “we are going to have a boom as we have never had”, which the United States can go to a recession, driven by its economic program. But, in public and in private, he has been arguing that “a slight disturbance” in the economy and markets is a small price to pay for bringing back to the United States the jobs in the manufacturing industry.
Its closest political partners are redoubled the strategy. “President Trump’s economic policy is simple,” wrote Vice President JD Vance on social networks on Monday. “If you invest and create employment in the United States, you will be rewarded. We will reduce regulations and taxes. But if you build outside the United States, you will be alone. ”
The last time Trump tried something like that, during his first term, was a failure. In 2018 he imposed 25 percent tariffs on steel and 10 percent to aluminum, arguing that he was protecting the national security of the United States and that, ultimately, tariffs would create more jobs in the United States. Prices rose and a temporary increase in about 5000 jobs throughout the country was produced. During the pandemic, some of the tariffs were built, and today the industry uses approximately to the same number of Americans as then.
However, the most worrying thing was the series of subsequent studies that showed that the country lost tens of thousands of jobs —More of 75,000, according to a study – in the industries that depended on the imports of steel and aluminum. The hour of American steel manufacturers had also descended, while the productivity of the manufacturing industry in general in the United States increased.
The experiment that Trump is trying now is much greater. And retaliation tariffs that are being imposed on American manufacturers-with Europeans pointing to Kentucky bourbon, as well as ships and Harley-Davidson motorcycles manufactured in uncertain electoral trend states such as Míchigan and Pennsylvania-are carefully designed to cause suffering in places where Trump’s supporters will feel more.
“If Trump is serious with what he says about maintaining these tariffs, he is betting his presidency to his success and the patience of the American people, at a time when the people do not seem to be with a patient mood,” said William Gallston, an academic of the Brookings Institution.
It is unlikely that Trump will stop deter. He has been defending the tariffs for decades, convinced of his power to end what he considers an era in which the United States has been bled both by his allies and his adversaries. Although many of his main economic advisors, headed by the secretary of the Treasury, Scott Besent, were never known for defending broad tariffs in the past, they all know that obedience to Trump’s vision about geoeconomy is the price of occupying a place of power and influence in the government’s economic club.
“To the extent that the practices of another country harm our economy and our population, the United States will respond,” said Besent last week in a speech before the New York economic club. “This is the commercial policy ‘United States first’.”
The reality is that Trump’s arguments to impose tariffs are everywhere, as they have complained – officially never never – a series of business executives after visiting the White House in recent weeks. Michael Froman, commercial representative of the United States from 2013 to 2017 and now president of the Foreign Relations Council, synthesizes Trump’s arguments in three categories.
“When the president thinks of tariffs, he usually thinks about three things: leverage, income and reindustrialization,” said Froman on Wednesday.
“The leverage is working, for now,” he said. Mexico and Canada have devised plans to reduce the amount of fentanyl that crosses the border, even if they are delivering programs that applied previously, but have reformulated or revived in response to their demands. Interestingly, Canada has been affected by some of the toughest tariffs, despite the fact that very little of the fentanyl that enters the United States arrives through the Canadian border. (The outgoing prime minister of Canada, Justin Trudeau, He said last week: “What you want is to produce a total collapse of the Canadian economy, because it will be easier to annex”).
But Froman argues that the White House is already seeing the decreasing yields of its strategy. “You can do this once or twice and get agreements,” he said, “but at some point the countries say we will take reprisals,” as Canada and the European Union have now done.
Trump also loves the idea that tariffs generate income. In his investiture speech he spoke with the admiration of President William McKinley, who promoted huge tariffs in the 1890s, and argued that this period was a high point of US economic policy. “Instead of taxing our citizens to enrich other countries, we will impose tariffs and taxes to foreign countries to enrich our citizens,” Trump said on January 20. “To this end, we will create the Foreign Tax Service to collect all tariffs, rights and income. They will be huge amounts of money that will enter our treasure, from foreign sources. ”
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But, once again, the facts are not always like that. Although the US government raised more than 60,000 million dollars in China tariffs during Trump’s first mandate, it also compensated for US farmers who were affected by retaliation tariffs imposed by Beijing. That cost almost the same.
The last justification that Trump offers for tariffs is that they will return jobs to the United States. It is a very rooted concept in its psyche and in its political history; It manifests little interest in examining empirical studies that can cloud the panorama.
Of course, no matter how much Trump would like all products to be manufactured in the United States, there is a reason why countries trade with each other. Some have a comparative advantage to manufacture certain products. Others are in a different phase of development. And sometimes countries do not want to get stuck by manufacturing low technology products when they could rise on the scale. The cities north of Boston dominated the country’s footwear industry during the nineteenth century; Today they are better known by the new software companies, law firms and some of the country’s most expensive properties.
But in Trump’s worldview, as he himself acknowledged in a 2016 interview, what matters is traditional manufacturing. The 1950s, he said, was his ideal, when American manufacturing and power reigned supreme.
Trump is not impressed when economists who attack their tariff plans point out that cars’s pieces can pass a dozen times through the border with Canada before its final installation in a US production vehicle, which will be more expensive due to its tariffs on Canada. Or that the sophisticated designs of the most advanced semiconductors are sent again and again to Taiwan Semiconductor, the most successful chips manufacturer in the world, before the chips themselves occur in Taiwan, although the intellectual property inherent in the design is American.
One thing that Trump and his predecessor, Joe Biden, have in common is the desire that the manufacture of chips will return to the United States. The Biden approach was the Chips Law, which was approved with bipartisan support and allocated more than 50,000 million dollars in federal funds to launch investments in the most advanced chip manufacturing plants. Actually, the concept began in Trump’s first mandate, although at the end of his speech against Congress last week, he dismissed him.
“His Chips law is a horrible, horrible thing,” he told legislators. “We give hundreds of billions of dollars, and it means anything. They take our money and don’t spend it. ”
The solution is the tariffs, has concluded. If the chips themselves are manufactured in the United States, they will be free of tariffs.
Your problem is time. It takes years to build the most advanced chips facilities. (Intel has just delayed at least four years a factory that initially promised that he would open in Ohio in 2025 or 2026). And even when they are built, the United States will continue to depend on Taiwan for about 80 percent of its most advanced semiconductors.
It is not clear if voters will be willing to wait so long to obtain results.