Juan Pedro Marín Arrese | The sweeping tariffs on Canada, Mexico and China do not stem out of protectionism. In Trump’s mind they simply amount to massive destruction weapons aimed at waging wars without casualties. He aims to submit and bully every nation on earth be it a friend or a foe. For all we know that difference doesn’t really matter. The longstanding close alliance between the US and its northern neighbour has not saved the latter from the onslaught.
Trump has a hunch for tariffs. He staunchly believes they can upgrade the US economy, bringing manufacturing and jobs back home, while closing the huge gap in public finances. Both targets are highly delusive. Self-imposed autarchy can only fuel inflation and disrupt the economy. While targeted tariffs could in the long run bring back outsourced output, flat and high tariffs will lead to a stand-still and closures in many industries highly dependent on imported inputs.
While the impact on prices and output will represent a high bill, the worse may come from financial turmoil. As inflation expectations skyrocket, long-term interest will sharply rise dumping debt and hitting the financial system hard. A severe crisis might ensue. Investment will also drop due to higher credit costs and the widespread uncertainty triggered by such a non-sensical trade war.
Trump believes that tariffs can achieve his goal of taming the rest of the world. He holds a similar trust in this weapon as Napoleon did on bayonets. Yet, as Talleyrand rightly pointed to him, you can achieve everything with such weapons save for sitting on top of them. Trump will soon discover he cannot muster a new world order relying on tariffs. Let’s hope the backlash will convince him to pedal back before it becomes too late.
