When the United States pushed to reduce tariffs and other trade barriers in the wake of World War II, much of the world followed its lead, embracing the argument from America’s leaders that increasing trade would increase prosperity.
Now, as President Trump pushes to reverse that history, raising new barriers to limit imports, it is increasingly clear that the world is no longer persuaded by America’s approach to economic policy. Other nations are not, for the most part, retaliating against the Trump administration’s policies by imposing higher tariffs on American goods. They also are not, for the most part, imposing higher tariffs on goods imported from countries other than the United States. The rest of the world is rejecting Mr. Trump’s protectionism.
Mr. Trump’s top trade adviser, Jamieson Greer, recently wrote in a guest essay for Times Opinion that the Trump administration is forging a “new global trading order.” In reality, the United States is walking out of the system it created. While other nations regret its departure, they are not inclined to follow in its self-destructive footsteps. Fears of a global trade war have not materialized because the leaders of other nations have recognized what Mr. Trump seems unable to grasp — that by raising tariffs, they would be hurting their own countries. The result, as the World Trade Organization reported last month, is that “a broader cycle of tit-for-tat retaliation that could be very damaging to global trade has so far been avoided.”
A sign of the folly of Mr. Trump’s trade policy is that it has inspired no apparent envy.
One reason that other nations are not raising their own tariffs is that Mr. Trump’s policies are not delivering the promised benefits. The president has long insisted that higher tariffs would protect American manufacturers from unfair foreign competition, leading American consumers to buy more goods produced in American factories, which in turn would expand domestic employment. But the number of Americans with factory jobs has declined by 28,000 since Mr. Trump took office. While the administration has cited some big, high-profile investments in new factories, the broader pattern is that companies are canceling or delaying their expansion plans. Spending on factory construction in the United States, a good indicator of the outlook for domestic manufacturing, declined in each of the first six months of Mr. Trump’s second term, ending a period of rapid growth under President Joe Biden.
Factories are long-term investments, and Mr. Trump has given companies little reason for confidence in his own constancy. Moreover, because he has imposed the tariffs by fiat, rather than obtaining congressional approval, what he has done can easily be undone by a future administration. And a federal appeals court ruled in August that many of the new tariffs are illegal. The Trump administration is appealing that decision to the Supreme Court.
Tariffs also are a double-edged sword for American manufacturers, raising the prices of imported materials and components. Many of the products “Made in America” include a significant share of parts and materials made in other countries.
As we wrote earlier this year, reviving domestic manufacturing is a worthy goal. The post-World War II expansion of global trade delivered on its promise of prosperity, but it also caused real problems in the United States and other developed countries. The distribution of benefits was uneven; millions of factory workers lost their jobs. Today, tariffs could be deployed judiciously to support the development of new industries and to protect critical technologies. Some of America’s trading partners have used tariffs to pursue these kinds of goals.
Mr. Trump, however, has raised tariffs indiscriminately. The average effective tariff rate for the United States has soared to 18.6 percent from 2.5 percent when Mr. Trump took office in January, according to the Yale Budget Lab. The new level is far higher than in any other developed nation. The Trump administration boasts that the tariffs are raising billions of dollars in new revenue — perhaps as much as half a trillion dollars per year. But American consumers are largely paying the cost of these new taxes. The tariffs could reduce the purchasing power of the average American household by $2,100 by 2027, the Budget Lab calculates.
Mr. Trump also has argued that tariffs will serve as a cudgel to secure concessions from trading partners, expanding access to foreign markets, and the administration has pointed to agreements with the European Union, Japan and several other nations. Some smaller countries have not even waited to get to the bargaining table to offer deals. After the United States imposed a 33 percent tariff on imports from North Macedonia, for example, the tiny Balkan nation announced that it would eliminate all tariffs on American imports in the hope of better terms.
The willingness of other nations to reduce their own trade barriers, however, actually reflects their continued commitment to the principles that Mr. Trump is rejecting. When Israel announced this spring that it was eliminating tariffs on American imports and easing other kinds of import controls, officials acknowledged that they were acting to appease Mr. Trump. But they emphasized that Israelis would benefit. “What is good for the U.S. is certainly good for the Israeli consumer,” Nir Barkat, the Israeli minister of economy and industry, said in announcing the policy. “Expanding imports from the U.S. will encourage competition, introduce new players into the market, and lower prices for the Israeli people.”
The most telling evidence that countries are not merely putting a brave face on a bad situation is that they are not raising tariffs on other trading partners. They are rejecting Mr. Trump’s approach to trade even in relationships in which they hold the upper hand. The European Union, to take just one example, has not only refrained from significant retaliation against the United States. It also has not emulated Mr. Trump by imposing tariffs on low-income Asian nations in an attempt to bolster the prospects of European manufacturers.
Instead, Mr. Trump has prompted a wave of efforts to negotiate lower tariffs for trade that does not involve the United States. South Korea is pushing to deepen economic ties with Southeast Asia. Canada has resumed long-stalled talks on a free-trade agreement with South American nations. And a number of nations, including India and Spain, are seeking to expand trade with China, undermining the strategic interests of the United States. Mr. Trump’s trade policies are causing our allies to become closer with our rivals.
Brazil’s president, Luiz Inácio Lula da Silva, summed up the prevailing mood after hosting a meeting of world leaders in July. “If the United States doesn’t want to buy, we will find new partners,” he said. “The world is big, and it’s eager to do business with Brazil.”
Other nations continue to pursue the example established by the United States decades ago because they continue to see trade, managed judiciously, as a path to greater prosperity. The Trump administration, by rejecting this global consensus, has damaged both the American economy and American global leadership.
Source photograph by serikbaib, via Getty Images.
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