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Your guide to what Trump’s second term means for Washington, business and the world
So Donald Trump’s July 9 deadline to reimpose his so-called “reciprocal tariffs” turned out to be a deferral, though whether to August 1 or September 1 isn’t clear. Very possibly they get postponed indefinitely, despite the president’s all-caps insistence on Truth Social to the contrary, hence the sanguine response of the financial markets. As the New Yorker magazine’s greatest ever cartoon asked: “How about never? Is never good for you?”
We’ve also had some innocent entertainment from Trump sending one of his tariff-threatening letters to the king of Thailand, apparently under the belief that said country has an executive monarchy.
It’s a shambles, obviously. But it might be a shambles with some helpful effects. I wouldn’t go so far as to say Trump is good for global trade, but the bumbling ineptitude of his tariff campaign and the damage to US growth prospects is serving as a cautionary tale for governments toying with the idea of doing similar.
Although it might seem improbable anyone would copy Trump’s tariffs, few ideas come out of the US too extreme or impractical to inspire policymakers elsewhere. And quite a few politicians and even governments overseas, notably in the UK with its embarrassing habitual cringe towards American politics, have expressed a bizarre admiration of Trump’s destructive campaign to dismantle the US administrative state, for instance. It was just last year when the UK, explicitly citing Joe Biden as an inspiration, was touting “securonomics”, aptly described as Bidenomics without the money. These days, Keir Starmer’s government is following the Trump administration in promising to drink deep from the magic potion of artificial intelligence to try to cure the British economy of its persistent malaise. But Trumpist trade policy is so wrong-headed and has been so ineptly executed that even for the UK it has emphatically failed to provide a new lodestar.
The effect of Trump’s tariffs on global debates about trade are likely to resemble what happened with Brexit. Some commentators in the UK genuinely believed other member states — including, hilariously, Ireland — would follow it out of the EU. Instead, both the policy and its clownish implementation have increased affection for the EU among the 27 member states wise enough not to have followed Britain into the mire.
Countries’ reactions to Trump have generally involved trying to mitigate the damage as much as possible. No government I can think of — and particularly in south-east Asia, a great engine of globalisation — is talking about emulating his tariffs. Yes, there has been a rash of emergency duties among middle-income countries against imports from China, especially since some Chinese goods blocked from the US will be diverted on to global markets. But those remain largely targeted protection, not a change in the economies’ outward-looking philosophy.
China retains its myriad barriers (mainly of the non-tariff nature) that restrict and manage foreign companies selling into or investing in its market, but there’s nothing particularly new or Trumpian about that. Indeed, Beijing, which can hardly believe its luck, has taken advantage of the US retreat from advanced green technology to embark on a new strategy of exporting its knowhow around the world, particularly by outward direct investment.
There remain two rather large missing pieces in the international response. One is a positive rather than a passive policy reaction from other governments. The other is that multinational businesses are finding ways round the US tariffs in the short term but otherwise largely holding back from permanently moving their investments to restructure supply chains. A prolonged period of destructive uncertainty about trade policy from the US may change their minds.
In the decades after the second world war, the US led other advanced economies, if only gradually, out of the protectionism of the 1930s and towards a liberal trading order somewhat anchored on itself. Trump has done an about-turn, but there are few signs that other governments are following him back into the darkness except partially and out of necessity.
We’ll be back here in just over three weeks’ time on August 1, with Trump perhaps issuing tariff letters to the Holy Roman Emperor or the head of the Ming dynasty. In the longer term, it probably matters less how much he follows through with his threats than that day by day, month by month, he is comprehensively trashing the idea that a sustained campaign of raising tariffs will be good for the economy that does so.
