Why would anyone be surprised at Trump’s tariffs?

WHETHER Trump’s tariffs help, or ultimately hinder, the US economy, the one thing they shouldn’t have been is a shock to anyone, writes James Morrow.

IF Australia and the United States were Facebook friends, our relationship status would likely be, “it’s complicated”.

On the one hand Malcolm Turnbull’s successful — if overshadowed — trip to Washington with Australian business leaders, as well as his recent harder line on China, would seem to have brought the two old allies closer together than ever.

On the other, Donald Trump’s earlier warm embrace of Australia turned distinctly chilly this week with the US president’s announcement of blanket tariffs on imported steel and aluminium.

At first glance it seemed like quite a jolt, just as Australian steelmakers were rubbing their hands together at the prospect of helping to supply a promised American infrastructure boom and grow their share of the US market.

But more startling than the proposed tariffs is the fact that anyone is surprised by the move.

By now, the only people caught unawares by Trump are those who haven’t been paying attention. Which is why it is amazing that so many people were caught flat-footed by the US president’s unilateral decision to slap tariffs on imported aluminium and steel.

President Trump made it clear he was in favour of protectionism for American industries long before he was elected. (Pic: Mandel Ngan/AFP)

This is a man who campaigned, after all, on ditching the Trans-Pacific Partnership — putting the global economy on trial and catching out his opponent, Hillary Clinton, who amended later versions of her memoirs to omit her previous endorsement of the TPP.

Back in 2016, Trump was running hard on tariffs.

Here’s the then-candidate in June 2016: “Our original Constitution did not even have an income tax. Instead, it had tariffs emphasising taxation of foreign, not domestic, production.

Trump went on, telling his audience, “yet today, 240 years after the Revolution, we’ve turned things completely upside down. We tax and regulate and restrict our companies to death and then we allow foreign countries that cheat to export their goods to us tax-free. How stupid is this?”

As it turns out the supposedly completely unpredictable madman has a method, for those who choose to look for it.

Thus while Trump’s critics forensically pick through his every utterance hoping to catch him out in lies they can add to their tallies of mistruth, they miss the bigger picture wherein he is fulfilling the pledges he made during the campaign.

Conservative judges? Tick.

Defeat of ISIS? Tick.

Artwork: John Tiedemann

And now, as he threatens to kick off a trade war with China, he is looking for another tick: restoring the glory days of American manufacturing.

Of course, it’s one thing to reorient the philosophical direction of the US Supreme Court, or dispatch a bunch of Islamist bandits back to the Stone Age they crave.

It’s quite another to fire up industrial jobs in an economy that long ago moved into the world of high tech and services.

While conventional wisdom holds that lower tariffs are better for an economy and there’s no way to bring back manufacturing once it’s gone, the US experience suggests, perhaps, otherwise.

On Wednesday United States Steel said it would restart a blast furnace in Illinois and call back 500 workers.

The same day, Century Aluminium in Kentucky announced plans to reopen lines at a smelter that had been working at a reduced capacity since 2015, doubling its workforce to 500.

Trump’s move could have short term gains for the US steel industry, but could also have painful long term lessons for the US economy as a whole. (Pic: AFP PHOTO)

But not all US industries will thrive under Trump’s mooted plan, which suggests he may be looking for an out sooner rather than later.

Industrial production requires steel, and a few blast furnaces and smelters taken out of mothballs will not be enough to produce the raw materials a new industrial revolution would require. And Trump’s goal of making America a dominant energy exporter would be hamstrung if pipelines and oil drilling equipment must suddenly be made in the USA.

But there’s another thing the critics have missed: whatever the benefits of free trade, Trump is not starting a tariffs war so much as joining a fight that has been going on for years. The EU, which threatened to retaliate against Washington (and which is notorious for its own external trade barriers), has been locked in a battle with China over its cheaply exported steel for years.

And Trump has a point when he targets China, which hardly competes on a level playing field. Wages and worker protections in China are nothing like what they are in countries like the US (or, for that matter, Australia).

But while Trump’s conflict of visions, pitting him as the saviour of the American worker against a globalised political class that looks out for itself rather than its citizens, has its appeals (and contains more than a grain of truth) trade conflicts are ultimately self-defeating, as Australia well knows.

Our two and a half decades of uninterrupted growth are in no small part due to the dismantling of high tariffs that protected our industries but ultimately left us unable to compete or innovate.

It’s a lesson America may soon wind up having to learn again, perhaps painfully, once short term gains wear off.

For Australia the lesson remains, particularly when it comes to Trump, keep paying attention.

Originally published as Why would anyone be surprised at Trump’s tariffs?