
Since Trump first started uttering statements in public, he has been obsessed with tariffs. Over the past 40 years or so, the obsession has gradually turned into a mania.
Any country that had a trade surplus with America was ripping her off, such was Trump’s understanding of economics. And even countries like Britain that had a trade deficit with America were plotting to turn it into a surplus so that they too could start ripping America off.
The only way for America to protect herself against such predators was to hit back with punitive tariffs, thereby making America great again. Entreaties by conservative economists, such as Milton Friedman, were falling on deaf ears.
He and his University of Chicago colleagues were arguing that a country’s economic strength is defined by her imports, not exports. It’s when the former exceed the latter that a country has a favourable trade balance.
After all, if a butcher can afford to spend more on vegetables than a greengrocer can spend on meat, which one is doing better? Those bastards who are ripping America off, that’s who. No rational arguments could dislodge Trump sitting astride his idée fixe.
During his first term at the White House, when Trump was still compos mentis, he introduced a 25 per cent tariff on steel imports and declared victory: he saved 2,000 American jobs. Happiness all around; tariffs had done their job.
So they had, but that wasn’t quite the job Trump had in mind. True enough, 2,000 jobs of steel workers were saved. And then what happened?
A tariff is a tax imposed on both foreign exporters and domestic consumers because it makes the goods, in this case steel, more expensive. The trouble is that 80 times more Americans were (and continue to be) employed in steel-using industries than in steel-making ones. The cost of doing business went up in those industries, and redundancies ensued.
Some 77,000 of them, which equalled a net effect of 75,000 American jobs sacrificed at the altar of Trump’s mania. Now, Trump may be becoming deranged, but not so much that he has forgotten Einstein’s caution that, if you continue to do the same thing over and over again, you can’t expect different results.
In his current tenure, the president has taken those wise words to heart and refused to do the same thing over again. Rather than persevering with 25 per cent tariffs on steel, he has doubled them to 50 per cent. And now the new generation of Friedman’s colleagues at the University of Chicago are again warning that the measure will harm US consumers and cost US manufacturing jobs.
General Motors has already announced closure of plants in Maryland, Michigan, Ohio and Ontario, citing steel tariffs as part of the reason. Trump has winced at that development, yet has so far failed to do anything about reversing his bungling raid on the economy. But don’t despair: these days the Donald reverses his decisions as often as he brushes his dentures.
At the same time, he has announced his “Big, Beautiful Bill” of sweeping tax cuts accompanied by only token reductions in public spending. This is another crazy idea, and if he wants to find out how crazy, he ought to study Liz Truss’s tenure as Britain’s PM and why it only lasted 49 days.
This is something that even his closest acolytes know. In fact, when Elon Musk left DOGE the other day, he correctly stated that a bill can be either big or beautiful, but not both. Economic experts – but what do they know, eh? – are confidently predicting that any attempt to put this bill into practice will add four more trillion to the already existing national debt of 36 trillion, while pushing annual deficits over seven per cent of GDP.
No wonder credit rating agencies have stripped America of its top AAA rating, and investors are now charging five per cent interest on America’s borrowing. This can only rise if Trump persists in his amateurish bungling, and America is already paying a trillion dollars a year to service her national debt.
Musk cuts a frustrated figure. Say what you will about him, but he can add up with the best of them. Unfortunately Musk found out the hard way that his mathematical ability counts for nothing when it comes to negotiating his way around the political Beltway.
He took his job at the Department of Government Efficiency (DOGE) fully intent on fulfilling his task of cutting two trillion a year off public spending. Alas, Elon had to discover that, for all his business acumen, when it comes to DC politics he is a rank amateur.
He, and his former boss Donald, should read the book The Triumph of Politics by David Stockman, Reagan’s head of OMB. He too attacked a similar task, albeit it with smaller targets, only to find himself buried under an avalanche of Washington mandarins.
Stockman realised it’s impossible to introduce large tax cuts without similarly huge cuts in spending. These he was unable to achieve, but neither Musk nor, more important, Trump learned from that experience.
As a result, Musk claims only $175 billion in savings, but even that amount doesn’t stand up to scrutiny. The actual figure is probably half that but, even if Musk’s sums are correct, considering the gargantuan size of the federal budget, $175 billion falls within the range of a rounding error.
Many years ago, there was an exhibition of amateur art at the V&A. The clever poster advertising it said, “Noah’s Ark was designed by an amateur. The Titanic was designed by a professional.” I’m sure the headline worked as a way of drawing punters in, but the implied idea manifestly doesn’t work in politics.
Expertise gained in making cars, launching rockets or, for that matter, manipulating the US bankruptcy laws to one’s benefit doesn’t translate to the political arena.
This is a difficult idea to sell to today’s public paper-trained to believe that an expert in one area has to be an expert in all. Hoi polloi take on faith political ideas mouthed by various actors and pop stars whose credibility is boosted by the time they spend on TV screens.
Trump knows this, which is why he has successfully turned a negative into a positive, a standard weapon in the arsenal of any adman. Yes, I’m an outsider, he shouts at every turn. That’s why I can work miracles. I was on TV, wasn’t I?
Hence at least 20 members of his administration stepped into their jobs straight off the screens of Fox News and other media outlets. Most of them are puerile eccentrics, putting it mildly, who even lack the capacity to learn on the job, as Stockman eventually did. But then he was a bright young economist to begin with.
To be fair, Trump’s Treasury Secretary, Scott Bessent, is a grown-up economic professional and there are a few others. Yet their influence is negligible because Trump wants sycophants around him, not intelligent advisors. By all accounts, the latter have to turn into the former if they want to stay in their jobs.
One word out of turn, and their wildly erratic and unpredictable boss can sack them with the same ease he paraded in his TV show The Apprentice. Hence they wisely tell their boss things he wants to hear, pretending they don’t realise how deranged he is becoming.
The American presidential democracy can’t oust a bungling president as efficiently as Britain’s parliamentary democracy can get rid of a bungling prime minister. But it has other, mostly legal, ways to protect itself.
That’s why, as Tocqueville spotted with his eagle eye two centuries ago, political problems sooner or later become legal in America. The courts have already tried to stop Trump’s tariff madness, with him so far being able to slow them down with appeals. Yet it doesn’t take a genius to realise that legal challenges will be coming thick and fast.
And, if the Americans’ standard of living shows a decline, as most economists are predicting it will, after the mid-term elections Trump may become a lame duck president unable to push his madcap ideas past a hostile Congress and obstreperous courts.
That situation will be fraught with such dangers not only for the US but for the whole residually free world that it’s hard to wish for it. Yet we may have no choice.