Trump and Trade Policy

By this time tomorrow we will hopefully know the outcome of the US Presidential Election. It still seems too close to call, but that has not stopped many on the Centre-Right – including free marketeers – from hoping that Donald Trump will emerge victorious. They argue that a second Trump term would be good for the UK as he is more likely than Kamala Harris to strike a trade deal with the UK which in and of itself would be significant and, in a world where he slaps tariffs on everyone else, it would really benefit Britain. This is wrong for a number of reasons.

First, while a Free Trade Agreement with the US would be very significant for the UK and would be a real ‘Brexit Benefit’ it is highly unlikely to materialise regardless of who is in the Oval Office. The US will push for greater access to the UK for its agricultural exports and this will include produce such as chlorinated chicken and hormone treated beef. Unfortunately, if this were to happen there would be outrage in Britain as an unholy alliance of the Daily Mail, the Guardian, the NFU, and Jamie Oliver would all object and peddle scare stories on how it will destroy British farming and how we’ll be forced to eat ‘unhealthy’ food from America. As someone who worked on the negotiations with the US last time around this is exactly what did happen and would almost certainly happen again. There is almost no scenario where Trump would not insist on the UK accepting chlorinated chicken and hormone treated beef and so unless Labour does the right thing and lifts the ban then a FTA is not going to happen.

Second, let’s assume we do somehow negotiate a FTA with the US. It would still likely take at least a year to negotiate and to enter into force. In the meantime Trump will have levied tariffs on key UK exports such as steel and Scotch which would be crippling and imperil the jobs and livelihoods of people working in those sectors. What is more, officials at the Department of Business and Trade are already working on plans to implement retaliatory tariffs on American goods. This will drive up costs for British businesses and consumers and again will jeopardise jobs and exacerbate the cost of living crisis. The UK imposing retaliatory tariffs will likely infuriate Trump and would make a FTA even more unlikely.

Third, even if the UK does miraculously strike a FTA with the US and for some reason Trump decides to not impose tariffs on the UK in the interim, it is still not necessarily good news for the UK. If the Trump Administration slaps high tariffs on goods from the EU and the rest of the world but not the UK then you might be tempted to think that this would be good for the UK as it would give us an edge over our competitors. You would be wrong. We should not be supporting a ‘beggar-thy-neighbour’ approach to trade from Trump. Given that our most significant trading partner is still the EU, anything which makes consumers in EU countries poorer or which hurts their businesses is bad for the UK’s interests. If their consumers see higher prices in shops due to the EU levying retaliatory tariffs on the US, or if they lose their job because their company is struggling due to high tariffs in the US then they obviously have less money to buy products made in the UK. What is more, if firms in the EU and the rest of the world are facing higher costs then they will be less productive and so British consumers may face higher costs when buying products made in these countries.

Fourth, free marketeers should not be supporting a ‘beggar-thyself’ policy in the US. While tariffs do hurt firms in the country on which they are levied, the real pain is suffered by businesses and households in the country which implements them. They drive up costs for the businesses in that country and this is passed onto households in the form of higher prices and fewer job opportunities. Advocates of protectionism argue that this will create jobs but in reality it simply protects a few industries at the expense of everyone else. Americans will be poorer if Trump gets in and so will have less money to spend. A FTA with the US would be great, but it’s not much good if ordinary Americans can’t afford to buy goods made in Britain or if its businesses can’t produce as many of the goods which we want to buy on this side of the Atlantic.

Finally, other than what has been explicitly stated regarding tariffs, we do not know exactly what else Trump will do when it comes to trade. In his first term some of Trump’s  most damaging policy ideas were tempered by his Trade Representative Robert Lighthizer who, although wrong on tariffs, did appear to guide Trump away from moves such as withdrawing the US from the WTO. We do not know who will be advising him this time around but there is every chance that he will bring back his fellow convicted felon Peter Navarro who has some extremely eccentric views on trade. If the US does leave the WTO then the organisation will essentially collapse and the legal rules underpinning the global trading system will go unenforced which will be bad for the UK and the entire world as countries become increasingly protectionist. Free trade has lifted countless people out of poverty and has made the UK wealthy, Trump taking the US out of the WTO would make us all poorer.

President Biden has not been much better than Donald Trump was when it came to international trade. It is also highly unlikely that Kamala Harris would reverse any of Biden’s policies on trade. However, Trump’s policy proposals for a second term would be even worse and even in a scenario where the UK somehow strikes a FTA with the US, we will all be poorer under Trump 2.0.

Thanks as ever for reading. I’ll probably write another post on Friday.