James Campbell: The real reason Trump’s tariffs should be cause for alarm

US President Donald Trump’s steel and aluminium tariffs will hurt Australia but — for once — the old parents’ line “this is going to hurt me more than it hurts you” is actually true.

Sadly for Australia’s attempt to sidestep the Trump steel and aluminium tariffs, the crunch point in the negotiations arrived at exactly the same moment as a small surplus in our trade with the US.

This surplus it should be noted is almost certainly a temporary phenomenon, stoked by a sudden rush to the safe haven of gold – (why would people be buying that?) – and it will soon be back to business as usual with Australians maxing out their credit cards on iPhones, Disney subscriptions and Ford Rangers while we will sell them — less — glass, metals pearls and – more mysteriously — millions of cases of Yellow Tail.

Will these tariffs hurt us? Yeah, a bit.

But for once the old parents’ line “this is going to hurt me more than it hurts you” is actually true.

US President Donald Trump has made it clear he doesn’t care that the tariffs will make Americans poorer in the short-term. Picture: AFP

If this was just about propping up the US’s aluminium smelters that would be one thing.

But it isn’t.

It’s becoming clear it’s actually a small part of a policy of broadbased tariffs to be applied against America’s largest trading partners.

Whether or not this ends up as an attempt at full-blown autarky, only time will tell.

But in the short term it’s going to make Americans poorer.

Trump has made it clear he doesn’t care.

“Tariffs are about making America rich again and making America great again and it’s happening, and it will happen rather quickly,” the President told Congress last week.

“There’ll be a little disturbance, but we’re OK with that. It won’t be much.”

Clearly Wall St disagrees but that, too, it seems is all part of the plan.

What is really alarming is the paranoid worldview displayed by some of the people urging Trump on. Picture: AFP

Asked last week what he thought about the market sell-off the President said “I think it’s globalists that see how rich our country’s gonna be and they don’t like it.”

He might be right, of course, but as the economics journalist Noah Smith points out, history suggests otherwise: “a similar policy … kept Spain poor for 20 years after the end of its civil war. ‘Peronism’, which emphasises ‘economic independence’ and is sometimes compared to Trumpism, led to Argentina falling out of the ranks of rich countries and suffering macroeconomic instability for many decades. ‘Import substitution industrialisation’, which many postcolonial African and Latin American countries tried after they won their independence, is widely considered a colossal failure.”

And so on all the way back to the Ming Dynasty and Soviet Russia with both of which “doomed themselves by sealing themselves behind iron curtains.”,

But to me this isn’t even the scariest thing.

What is really alarming is the paranoid worldview displayed by some of the people urging Trump on.

In a widely quoted piece in USA Today last month, Peter Navarro, Trump’s Senior Counselor for Trade and Manufacturing – a man whose views on trade are, to quote his Wikipedia entry, “significantly outside the mainstream of economic thought” – explained his rationale for bringing aluminium smelting back home.

In 2018, he explained, Trump had acted to “protect American producers from a flood of unfairly priced imports threatening our national security” and was now taking action again to make sure the US “will no longer be a dumping ground for heavily subsidised and unfairly traded aluminum.”

Canada and Australia, along with the UK and New Zealand, are considered close enough to the US that it shares raw intelligence with us – but we’re not to be trusted over aluminium. Picture: Bloomberg

Navarro might have a point about heavily subsidised aluminium – Portland would close tomorrow if it had to pay the market price for its electricity — but “national security”?

Does the senior trade adviser to the President of the United States really regard America’s dependence on Australian and Canadian aluminium as a threat to America’s national security?

Think about it – our three countries, along with the United Kingdom and New Zealand, are considered close enough to the US that it shares raw intelligence with us – but we’re not to be trusted over aluminium.

Apparently so, for as Navarro adds, not only do our “heavily subsidised” smelters operate below cost, giving them an unfair dumping advantage, “Australia’s close ties to China further distort global aluminum trade”.

How this might be so, he doesn’t explain, beyond pointing out “China is the largest Rio Tinto shareholder.”

Strap in, it’s going to be a wild ride.

Originally published as James Campbell: The real reason Trump’s tariffs should be cause for alarm