The US economy is flying, with the positive performance giving President Donald Trump grounds to claim that it’s all down to his policies. In the second quarter of 2018, US GDP rose by 4.1%, the biggest increase since 2014. Yet Trump has been criticised all over the world for having reintroduced import tariffs on Chinese goods initially, followed by those from Europe and Canada.

G20 united against import tariffs

The BRICS countries have maintained a united front against protectionism and trade war. China, Brazil, Russia, India and South Africa agree that they must “fight against trade protectionism together”, according to a statement published on the website of the Chinese Ministry of Economy. The BRICS “firmly support economic globalisation and multilateralism and clearly oppose unilateralism and the various forms of protectionism”. Pierre Moscovici, the European Commissioner for Economic and Financial Affairs, described the tariffs imposed on the EU by Trump as “inappropriate” and stated: “We believe that targeting us is, of course, wrong… and we must act with US as allies, not enemies.”

Rejection from the US Senate

In mid-July, even the US Senate attempted to admonish Donald Trump, passing a non-binding motion (by 88 to 11) requesting that the President obtain authorisation from Congress before imposing tariffs, invoking the spectre of national security. Just as was the case with steel and aluminium imports from the EU, Canada, Mexico and other countries.

The advantages of tariffs

But the equation that free market equals progress is not so certain. Since 1945, economic history shows that the great economic powers (UK, USA, Japan, Germany, France and China) have implemented protectionist economic policies, adhering to the idea that it is first necessary to develop economic sectors in a protected environment. Even today, exporter countries do not automatically have the best economies. Just look at the examples of Thailand and Nigeria: both export huge amounts, but there is no chance of either surpassing the United States, which imports more. Indeed, the USA’s trade deficit of $800 million is a problem. Foreign investment has supported American economic growth and boosted imports, particularly in the last decade – and a trade deficit has been the obvious result of this.

With that in mind, Trump’s reasoning is easier to understand. He wants to restore the US to the splendour and wealth of times gone by and become the dominant global power once again. And, as was done in the past, he wants to do this through protectionism, by imposing tariffs designed to discourage imports and boost internal production.

The risks of protectionism

Yet America is by no means fully innocent, with its tariffs of 350% on smoking tobacco and 130% on peanuts. The difficulty is this: protectionism is a divisive policy, not just on the international stage, but also within the country itself.

In May, over 1000 economists wrote to Donald Trump to challenge his protectionist economic policies and warn him against committing the same errors committed by the United States in the 1930s, which sparked the Great Depression. The letter contests the theory that the worsening of quality of life is due to the effects of the free market, instead pointing to this as the driver of growth. According to the experts, the level of prosperity in the USA is a direct benefit of international trade: “Protectionism could damage the country’s commitment to supporting international trade not just as a vehicle for increasing the wealth of the population, but also as a means for preventing conflicts, as has been the case since the end of the Second World War.”