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November 27, 2024 - 2:30pm
Donald Trump has returned to form as the self-described “tariff man” by threatening Mexico, Canada and China with tariffs of up to 25% on “day one” of his presidency in January. Mexican President Claudia Sheinbaum has responded by saying that Trump’s complaints about drugs flowing across the border were an “American problem”, and that her country would impose tariffs of its own if the incoming US administration followed through.
The dust-up reveals the divided priorities which exist within the prospective Trump administration. The President-elect sees tariffs as a means both to protect American industry and to threaten countries pursuing policies that he perceives as damaging to the US. When Trump talks about “America First”, he really means it: the policies he prefers are aimed at shoring up American industry and closing the borders. In economic terms, this means the “reshoring” of firms which have left the United States.
Trump’s priorities, however, are likely to conflict with the goals of the policymakers who carried his protectionist policies into the Biden administration. These people tend to be foreign policy hawks — such as current National Security Advisor Jake Sullivan — who are concerned about the rise of China and want to stifle Beijing’s growth through a combination of tariffs and sanctions, especially against semiconductors.
While both policies may appear similar, in that they each make use of protectionist measures, it will not be long until they come into conflict with one another. Take the example of “friendshoring”, the idea that manufacturing currently undertaken in China — which would be too expensive in America — should be undertaken in “friendly” countries instead. Mexico, with its relatively low labour costs, has been key to this friendshoring concept.
But if Trump wants to impose tariffs on Mexico this obviously conflicts with the aims of those who want to pursue friendshoring, because the goods which are supposed to replace Chinese products will also be subject to tariffs. The reason for this is clear: despite both policies being broadly protectionist, they have different aims. Friendshoring advocates simply want to stifle China’s economy but do not really care about American jobs, while Trump himself is far less concerned with the Chinese economy and more focused on trying to return jobs to the US.
The deck is stacked against Trump in this debate. American business has never been enthusiastic about a trade war with China because it would lose access to cheap, highly-trained labour. If these companies can tap labour from countries such as Mexico or Vietnam, they can live with this. Because friendshoring and reshoring are broadly nestled under the category of protectionist policy, expect the American corporate sector to push hard for the former at the expense of the latter.
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SubscribeThese people tend to be foreign policy hawks — such as current National Security Advisor Jake Sullivan — who are concerned about the rise of China and want to stifle Beijing’s growth through a combination of tariffs and sanctions, especially against semiconductors.
So, are tariffs bad in principle or only when Trump mentions them?
Boring… We all know Trump is wrong
This author is making the same mistake most globalist apologists also make. He considers the critical factor to be where the money comes from and who owns what. He’s probably lived his whole life in that world with that mindset, a world of profits, balance sheets, costs of labor, etc. What he and a lot of others don’t live in that world, and these days many are hostile to it. Americans are well past caring whose corporate accounts record what profits in trade with China or whoever else. All they know is they haven’t seen any of it for a long time and they’re tired of this situation. For better or worse, this is what’s coming. Even if Trump fails, it won’t change the basic political or economic situation on the ground. Americans hate the corporations, hate big business, hate the executives, and hate the capital class. It runs deep. They don’t care about keeping American elites richer than their Chinese counterparts. As far as they’re concerned, the capital class has already betrayed the country and the people.
Along those same lines, people don’t care about ownership. A factory built in a friendly country like Mexico or Japan isn’t as good as a factory built in America, but it’s better than the same factory built in China. Who owns it is irrelevant. Possession is 9/10 of the law. The reality is that much of the economic benefit of economic activity, especially industrial production, is reaped by the people wherever the physical infrastructure is because that’s where the jobs are and that’s where all the satellite industries that provide services and other things for that factory are. If you want to start a restaurant, it helps to have customers that have money and factory employees have money. If you want to provide security, or office supplies, or transportation, or whatever other service, you need customers to serve, a center of economic activity, like a factory. This is what tariffs are about. It’s not about growing the economy. It’s not about ownership. It’s about the bottom line of where the factory is and who benefits from that. Whether the factory is run by corporate overlords from China or America or outer space doesn’t matter to voters. Americans don’t give a flip. The capital class doesn’t seem to care about American workers, so American workers are returning the favor. They’d probably rather have Chinese owned factories in Cleveland than American factories in Guangzhou by many orders of magnitude. What goes around comes around. American companies pursued profits without regards to where the labor came from or who got the jobs, so American voters are pursuing jobs and benefits without regard to where the capital comes from or who reaps the profits. The chickens of globalism are coming home to roost. This is not a good time to be an American elite engaged in global trade.
There’s a fair chance that the clash between populist sentiments and the elite push back against them will indeed spark an economic crisis, perhaps even another Great Depression, but there was a chance of that happening anyway even if nothing changed. Even if it does happen, maybe it needs to. The problems are so systemic it might take a disruption of that magnitude to change incentives enough to start to crawl out of this hole we’ve dug for ourselves. If/when it happens, it won’t matter who is president. Trump or whoever else might get some of the blame, but the people will pin the lion’s share of the blame on the billionaires who drive the globalist enterprise. They won’t suddenly forget the people they despise and start throwing stones at their chosen champion. No indeed, they won’t forget. They won’t forget the decades of closing factories. They won’t forget the private jets and private yachts and giant mansions of the billionaires who have built their fortunes upon the globalist scheme. The people will be even angrier, and they’ll go even further to smash the elites. Billionaires will get no sympathy, and no quarter, from the American working class. The sharks are circling. The defeated globalists would be wise not to rock the boat.