Reference News website reported on April 9 that the British "The Economist" weekly published an article titled "President Trump's Foolish Tariffs Will Ultimately Trigger Economic Disaster" on April 5. The full text is excerpted as follows:

If you haven't noticed that America is being "plundered, robbed, ravaged, and extorted by all kinds of countries," and if you also haven't noticed who is mercilessly depriving America of its "prosperous opportunities," then congratulations, your insight into reality is stronger than that of the American president. It's hard to say which of the following two things is more unsettling: the fact that this leader of the free world is spouting nonsense about the economy, or that on April 2, Donald Trump, driven by his delusions, announced the greatest shift in U.S. trade policy since the early twentieth century, thereby committing one of the most profound, harmful, and unnecessary economic mistakes of modern times.

Inversion of historical interpretation

When delivering a speech in the White House Rose Garden, the president announced the imposition of "reciprocal tariffs" on almost all U.S. trading partners. The overall tariff rate in the United States will suddenly rise above that of the Great Depression, returning to levels from the 19th century.

Trump called this day one of many important days in American history. There is some truth to this statement. His so-called "Liberation Day" marks the complete abandonment of America's commitment to the world trading order and the enthusiastic embrace of protectionism. For the countries suffering from this president's foolish and barbaric actions, the question lies in how to mitigate the damage.

Almost every sentence Trump said this week—whether about history, economics, or trade details—is utterly absurd. His interpretation of history is inverted. He has long praised the era of high tariffs and low income taxes at the end of the 19th century. But in fact, authoritative academic studies show that those tariffs hindered economic development. Now he adds another bizarre view, claiming that the elimination of tariffs caused the Great Depression of the 1930s, and that the Smoot-Hawley Tariff Act came too late to reverse it. In reality, the impact of tariffs on the Great Depression was far worse, just as tariffs today will inevitably harm all economies. It was only after eight decades of arduous trade negotiations that tariffs were reduced, allowing the economy to flourish.

"Crazy actions"

In the field of economics, Trump's assertions are naked nonsense. The president claims that to reduce America's trade deficit, tariffs must be imposed. He believes that a trade deficit means wealth "flowing out to foreigners." However, every economist under the president should have told him that America's overall trade deficit exists because Americans have chosen to save less than they invest. And importantly, this persistent reality has not hindered the U.S. economy from developing faster than any other G7 country over the past 30 years. These new tariffs he has added cannot eliminate the trade deficit. Insisting on achieving bilateral trade balance with every trading partner is madness—just like believing that if Texas insisted on achieving trade balance with the other 49 states in the U.S., Texas would become richer, or requiring a company to ensure that each supplier also buys from it.

Trump's understanding of trade details is also unbearable. He claims that the new tariffs are based on an assessment of the tariffs a country levies against the U.S., along with currency manipulation and other alleged distortions, such as value-added tax. But it seems that officials determine these tariffs using a formula that divides the proportion of the U.S. trade deficit relative to imported goods by two, resulting in numbers for each country—this is almost equivalent to taxing people based on the number of vowels in their names, at random.

This series of foolish actions will cause unnecessary harm to the U.S. Consumers will pay higher prices, and choices will be fewer. While increasing the cost of components for American manufacturers, it will also shield them from foreign competition, inevitably leading to complacency. Nike, which has factories in Vietnam (with a tariff of 46%), saw its stock price fall by 7%. Does Trump really think that life will get better if Americans sew running shoes themselves?

Countries should strengthen economic and trade cooperation

Other countries around the world will also be affected to varying degrees in this disaster and must decide how to respond. One issue is whether to retaliate. Politicians should proceed cautiously. Please forgive me for having a different opinion, Mr. Trump, trade barriers are like lifting stones to drop on one's own feet. Because retaliation is more likely to lead Trump to escalate rather than repent, it may make the situation worse—even potentially catastrophic consequences, like in the 1930s.

Government should focus on increasing trade between each other, especially in the service sector, which drives the development of the 21st-century economy. The U.S. accounts for only 15% of global import demand, and unlike in global finance or military spending, the U.S. does not monopolize global trade. According to calculations by the think tank "Global Trade Alert," even if the U.S. completely stopped imports, its 100 trading partners could recover all lost export earnings within five years according to current trends. The EU, the 12 member countries of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, South Korea, Norway, and other small open economies account for 34% of global import demand.

Should this matter involve China? Establishing a trade system that includes China is desirable. The EU should unify its investment rules so that it can reach agreements covering foreign direct investment. The EU should overcome its aversion to large trade agreements and join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, as it has mechanisms to resolve disputes.

If this path seems difficult, it is because economic integration has always been so. Setting up trade barriers is much easier and faster. Although the disaster caused by Trump is inevitable, it does not mean that his foolish actions are destined to succeed. (Compiled/Translated by Tu Qi)

Cover of the April 5 issue of the British "The Economist" weekly

Source: https://www.toutiao.com/article/7491235723912364556/

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