Liberation Day will remain in annals as one of the most intense shocks of uncertainty of the last thirty years. After having hammered its intention to raise price barriers against countries that would scam the United States, Donald Trump unveiled its formula: therapeutic for some, smoking for others, it imposes a customs tax of 10 % on any import of goods, increased by a reciprocal customs right on net export countries.
The scholarships immediately stung the nose. Even more serious, doubts have arisen on the bond market regarding the solvency of the American debt debt. This sudden volatility is undoubtedly not unrelated to the reversal of the president, who announced on April 9 “Pause” Reciprocal customs duties … except for China, which was imposed on duties reaching 145 % – a certainly prohibitive level.
We would like to convince ourselves that a secret logic underpins these choices. We tried to find it. It’s a bit like reading divinatory signs in the bowels of the economic beast, sacrificed.
Deleterious increases
From a strict economic point of view, all studies agree on the deleterious effect of an increase in pricing barriers, both for the purchasing power of consumers and for the competitiveness of companies. Admittedly, a large market like that of the United States benefits from a positive effect called “terms of exchange”: by imposing customs duties, the country reduces its imports and pushes the world prices down, thus improving the relationship between the price of its exports and that of its imports. But the level of protection announced on April 2 goes far beyond the optimal price which could generate this benefit.
The reprisals of the great economic powers, China in mind, lead to a losing-perceive game, far from promoting the American middle class that Donald Trump says he wants to defend. According to him, inflation induced by these customs barriers is a necessary evil to “Getting its greatness to America” By reindustrializing the vast employment basins affected by the commercial liberalization of the last thirty years. Here he expresses a legitimate concern, shared by many advanced countries.
Unfortunately, the remedy is very like a placebo. As we saw during the first trade war launched by Trump in 2018 against China: the impact on American industrial employment is marginal. And if reindustrialisation takes place on American soil (which is far from being insured given the reluctance of companies to invest billions subject to erratic decisions), it may not benefit the American workers.
The positions today provided by Chinese or Vietnamese workers will probably be taken up by machines in the United States, as has highlighted the Nobel Prize in economics Daron Acemoglu in its work on robotization.
Rationality of Donald Trump
Would Donald Trump’s rationality be looking for international relations? In a recent research article, we study this possibility. When Donald Trump wants to restore his chandelier to the American economy, he stated a truth, a decrease in the hegemonic power of the United States, against China. We assess a situation in which a country may want to give up economic gains, here access to foreign products less expensive than their local substitutes, to gain negotiation power on the diplomatic scene.
Would the United States are getting rid of China to obtain more concessions on the diplomatic scene? It is possible, but perilous. This strategy can turn against its instigator: by reducing its dependence to the rest of the world, the country can paradoxically worsen geopolitical tensions, until you fail any attempt to resolve disputes through diplomatic pathways.
The interest of voters
It is probably vain to see in Donald Trump’s economic policy a rational approach guided by the interests of his voters. The American president seems to have a transactional vision of international trade. He announces a high price, justified by a eccentric formula, before entering negotiation with each small country, each multinational business manager. The numerous exemptions granted to American companies during the trade war of its first mandate would only be the premises of large -scale corruption.
As of April 11, the Trump administration announced a list of exemptions on electronic products, smartphones or laptops. Difficult not to see the desire to save multinationals with access to the president’s benevolent ear. This is perhaps there that Donald Trump complies with one of the great constants of protectionism: the most powerful are the most likely to get out of the game.
