Trump’s Trade Policy Is His Worst Export
The latest news in Donald Trump’s multi-front trade war is focused on China, in the wake of the president’s decision (over the objections of most of his advisers) to impose a fresh round of tariffs on Chinese goods and China’s unsurprising threats of retaliation. As troubling as those developments are, we shouldn’t move too quickly past his other recent ill-advised announcements and their troubling implications.
Look, for example, at his effort to bend Europe to his will on trade policy, and his threatened import duties on French wine.
On July 26, Trump tweeted:
France just put a digital tax on our great American technology companies. If anybody taxes them, it should be their home Country, the USA. We will announce a substantial reciprocal action on Macron’s foolishness shortly. I’ve always said American wine is better than French wine!
— Donald J. Trump (@realDonaldTrump) July 26, 2019
The last statement certainly raised a few eyebrows, since Trump is a known teetotaler. The president addressed the inconsistency by stating that he doesn’t drink alcohol, he just “likes the way they look”. We’ll let that speak for itself.
As for the “if anybody taxes them, it should be their home country,” Trump ought to be reminded that all of the said tech companies have separate registrations in Europe, and are paying their duties in low-tax Ireland in most cases.
Taxing French wine is more than just going after a stereotype: The United States is France’s second export partner for spirits in the world. The move could be devastating for French farmers, and detrimental to the consumer choice of those who enjoy foreign drinks in America. The fact that protectionism has been intellectually bankrupt for centuries means little to Trump, who takes his clues on trade policy from brutish “gotcha” reflexes and the likes of Steve Bannon’s “economic nationalism”.
The larger problem is that Trump is not entirely wrong in his reaction to France’s digital tax. Paris has worked hard to figure out a piece of legislation that specifically targets what the French describe as GAFA: Google, Amazon, Facebook, and Apple. The companies “happen” to be American, and the tax “happens” to spare French tech companies. French Finance Minister Bruno Le Maire has been arguing for the tax on an EU-level as well, but has so far been held back by Germany, which feared retaliatory measures on its car manufacturers.
When Trump introduced tariffs on European steel and aluminium, the European Commission in Brussels reacted by putting tariffs on bourbon, blue jeans, and Harley-Davidson motorcycles. This sort of petty reaction isn’t much more intelligent than targeting Volkswagen or Château Margaux wines.
It didn’t use to be this way.
For the longest time, American representatives, senators, administrators, and presidents went to Europe to make the case for free trade. President Obama lead the charge for the Transatlantic Trade and Investment Partnership (TTIP), before it was laid on ice over environmental concerns. The U.S has free trade deals with Australia, Bahrain, Chile, Colombia, DR-CAFTA (Costa Rica, Dominican Republic, El Salvador, Guatemala, Honduras, & Nicaragua), Israel, Jordan, Korea, Morocco, NAFTA (Canada & Mexico), Oman, Panama, Peru, and Singapore.
But now Trump’s petty tariff-making has unfortunately been exported to Europe, where other leaders are mimicking the tactic for their own purposes. French president Emmanuel Macron wants to block a trade deal between the European Union and the South American Mercosur bloc, because of Brazil’s consideration to leave the 2015 Paris Climate Accord. This politicization of trade deals might have a more noble goal, but it isn’t different from Trump’s tactics.
In addition to a digital tax, the European Union in Brussels is now also considering a so-called “carbon border tax”, which would tax imports on a “carbon emissions adjustment” basis. The rationale here is that goods that weren’t produced inside of the EU would escape Brussels regulations, and should therefore pay the difference. The fact that once again, these products are likely going to be those goods that compete with European producers, makes the proposal another product of crony capitalism. Europe is learning from Trump, and it will hurt consumer choice and economic prosperity.
Trump is unlikely to learn the lessons. Let’s hope that more traditional Republicans can remind themselves what they used to stand for.