Donald Trump has succeeded in forcing America’s democratic allies to their knees. His country must henceforth live with the invidious consequences of what he has done.
“It may be dangerous to be America’s enemy, but to be America’s friend is fatal,” to borrow a line from Henry Kissinger.
Vladimir Putin has strung Trump along for six months without paying a price. China has turned the tables, forcing the White House to hand over Nvidia H20 chips in exchange for rare earth magnets that Trump should have thought about before launching his trade war. Didn’t the US treasury secretary, Scott Bessent, say China was playing with a “pair of twos”?
Trump’s full viciousness is reserved for Canada, a Five-Eye and core NATO loyalist, so dependable that America can leave its entire northern border undefended. It is punished with 35pc tariffs, hit harder because it dares to differ on the Middle East, though the effects will ricochet straight back into the US economy.
US-aligned Taiwan gets 20pc and a landing ban in New York for the country’s president as Trump curries favour with Xi Jinping. The Swiss get 39pc for failing to jump smartly to attention.
Brazil is outraged by 50pc tariffs explicitly intended to subvert the Brazilian judiciary and rule of law. Years of diplomatic effort to lure India into the Western camp are squandered by petulant 25pc tariffs plucked out of thin air and a burst of hectoring posts of Truth Social.
There is hardly a better way to keep the unnatural but menacing “BRICS” confederacy alive as the epicentre of a new global power structure dominated by China. Trump is achieving the near impossible. He makes the predatory communist dictatorship of China look almost attractive.
And if I sound angry, it is because I am. Nobody will forget this disgraceful abuse of American power.
The average US tariff rate will settle near 20pc. This is comparable in nominal terms to the Smoot-Hawley tariff act of 1930 but tariffs were already high before that infamous bill and the US was then a closed economy. Imports were just 5pc of GDP. They are 16.4pc today and include critical components that keep the productive machine going.
“We’re looking at a shock to the economy seven or eight times as big as Smoot-Hawley,” said Paul Krugman, a Nobel laureate for trade theory.
Euphoric markets are wishing away the reckless demolition of a global trade system built, led, and painstakingly nurtured by the US for 80 years. “People just keep wanting to believe that Trump is making sense, that he isn’t as ignorant and irresponsible as he seems. But he is,” said Prof Krugman.
US economic growth slowed to 1.1pc in the first half of the year. You have to combine the two quarters because tariff “front-running” distorted the GDP data. The relevant metric is that real final sales are the weakest since 2022.
“We estimate that real personal consumption has now stagnated on net for six months, which rarely happens outside of recession,” said Jan Hatzius, the chief economist at Goldman Sachs.
If you think America is booming right now, you are looking a) in the rear view mirror, and b) at the wrong data. The next year will see a drip-drip of accumulating damage as stagflation hits with the textbook delay.
Trump’s tariffs are a tax on the US consumer. Maury Obstveld, ex-chief economist at the International Monetary Fund, says the pass-through from the Trump 1.0 episode was total.
“Not only did the prices of tariffed goods rise, they rose by the full amount of the tariffs. American households and businesses bore the entire burden; none was shifted to foreign exporters,” he said.
The well-informed are watching the US bureau of labor’s monthly index of pre-tariff prices for imports. This rose in June. It is the smoking gun that tells us who is really paying the tab. The Yale Budget Lab says consumers will face price rises of 40pc for shoes and 38pc for clothes.
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