Donald Trump’s trade policy makes literally no sense

The president has reignited his trade war with China – but he clearly doesn’t understand even the basics of how trade works.

Sign Up

Get the New Statesman's Morning Call email.

Donald Trump is talking a lot about trade. The president has reignited his trade war with China, increasing tariffs on around $200bn of Chinese imports, and attracting retaliatory tariffs on billions of dollars of US exports to China.

Determined to show his base he’s putting America first, Trump is tweeting out his masterplan day after day, explaining that the tariffs are raising billions, are great for America, and will lead to great results.

While the president’s words and actions are spooking the markets – which are down across the world in response to concerns of the trade row – they’re also showing a new truth in US politics: what’s actually being said or done doesn’t matter anymore. All that matters is who’s saying them.

Trump explains the logic of his actions like this: he is increasing the tariffs – a tax levied at the border when goods are imported – on a broader range of Chinese goods, because he thinks the country is unfairly undercutting US producers.

This will, he says, raise billions of dollars in revenue “from China” – he insists it won’t come from US consumers – which he will then use to buy up food from US farms and “ship it to poor & starving countries” as humanitarian assistance. He then says this arrangement is better than any trade deal could be, but adds that he still wants to negotiate a trade deal anyway.

Just on Trump’s own logic, this is a very strange plan. Trump is telling his Conservative base he is imposing tariffs because Chinese firms are undercutting US firms, but that those tariffs won’t increase prices.

He’ll then use the money they raise not on US citizens – not on cutting the deficit, or funding infrastructure, or even social security – but on buying up US agricultural produce to send overseas as foreign aid, a policy widely hated on the US right and preferred by the US left.

He’s then saying that despite believing this is a brilliant plan, he will end it, and voluntarily give China a better deal with regard to the US than his tariff arrangement does – not so much putting the US first as putting China first.

Just on the basis of its own logic – without a single external fact or expert assessment – Trump’s plan is inconsistent to the point of total incoherency, politically muddled and designed against the interests of his base, and in general a mess.

If voters really made their decision based on policy, it is hard to see how this would appeal to anyone. This becomes even more true when you let a little reality enter into Trump’s trade plan.

Given that trade is – directly or indirectly – what keeps most of us fed, clothed, and in work, it’s probably worth letting a bit of reality in to see what’s so wrong about Trump’s plans here, though.

The US has some legitimate grievances when it comes to China and trade: it is not alone in being worried about China subsidising its industry to undercut producers in other nations, or about Chinese firms stealing intellectual property from the Western companies they manufacture for, or multiple other practices.

However, consumers in the US, like elsewhere, are fans of the low prices that Chinese manufacturing enables – and any politician seeking to substantially raise the price of consumer goods, especially after a decade of low wage growth, would be unpopular, and would be making their voters poorer.

This makes tariffs a risky option, but also a strange choice for President Trump: the whole point of tariffs is to make Chinese goods more expensive, with the idea that this will make consumers and importers switch their supply either to US goods, or to goods imported from somewhere else.

It’s this price rise that means the tariff is paid by whoever buys the eventual product, rather than “China” – given both commodities and mass-manufactured goods work on low margins, no manufacturer can afford to absorb a 15 per cent tariff increase (at least not for long), so the final price just goes up.

If you used to pay $10 for a shirt and now you pay $11, you’re the one paying Trump’s new tariff – not anyone in China. In practice, there’s been a little bit of pain on both sides, but it’s simply not true that raising tariffs won’t eventually raise prices and cost US consumers.

When Trump boasts about tariffs, he boasts about taxing his political base more highly – and they cheer him on.

Even stranger is Trump’s claim that he’ll use the “billions” he’s raising from China on humanitarian aid – in the form of shipping US agricultural produce overseas. This is a much less efficient form of aid than funding projects directly in countries, and one which could push up US food prices, if he were actually doing it on any major scale.

It would also be an odd choice, given you don’t have to look overseas to find “poor & starving” people: one in eight Americans struggles to feed themselves or their family – that’s 40 million people, including 12 million children. It’s not especially clear why the “America first” is apparently worried about hungry people across the world, but not in the USA.

Finally, if tariffs are so great, why not just stick them up and leave the table? Most trade experts say the benefits of trade deals like in striking up terms on which to trade, matching food standards, ethical standards, and a level playing field – with tariffs acting as the leverage for both sides to cooperate.

Trading under a deal therefore works better for both sides, and leads to much more mutual trade than trying to work without one – which usually leads to long border checks, and numerous other issues.

Few trade experts would ever say no deal is better than a deal. Trump’s bizarre position therefore goes against the overwhelming consensus – but then he says despite having that view, he still wants a deal. Why?

Two years into the Trump presidency it’s all too tempting to just shrug and say this doesn’t matter: he says nonsensical and untrue things all the time. But Trump is no longer a brash real-estate trust-fund kid – he is the President of the USA, the world’s biggest economy, and the man with more control over the world’s economy than perhaps any other.

That he will pursue a destructive and incoherent policy, in public, showing he doesn’t understand even the basics of it, should be a matter of international alarm and attention. It should spook the markets more than it does. It should be a major issue for voters, whether right- or left-leaning.

Instead, there will be silence. Trump’s critics have bigger problems with the president than his policies. Trump’s fans will stick with their guy. And the actual matter of the mechanics of how the world works will go cheerfully ignored.

The trade row, more than anything else, shows us definitely US politics have reached the stage where who is talking matters far more than anything they actually say. Perhaps we should all watch it on mute.

James Ball is an award-winning freelance journalist who has previously worked at the Guardian and Buzzfeed. He tweets @jamesrbuk