Do tariffs work?

Who is next for a Trump tariff? Well, it appears that we know the answer for now at least. It seems that virtually every country that the United States has a deficit with has been targeted – with odd exceptions such as Russia. Morocco didn’t escape the economic tsunami released by the Trump administration. It has been hit by a 10% tariff, the same, as it happens, as the United Kingdom and rather less than the European Union, which is preparing to retaliate. Trade wars are economist’s worst nightmares and of course we have been here before, most notably in the deeply troubled 1930s. In 1930 US President Herbert Hoover introduced the Tariff Act. Hoover signed the act because many business leaders believed that cheap imported goods were threatening their businesses. It was also intended to boost American industries and jobs. Most economists believed that using a sledgehammer in this way was bound to be counter productive. They were proved right – the 20% tariffs deepened the recession and became a cautionary tale against protectionism. Now, you could argue that limited tariffs, especially when then there is dumping, as there has been in the international steel trade, are understandable. But taking a harder look at what has just happened is important.  

For when we learn how the various tariff rates were decided, it won’t just be the economists who will be troubled. Donald Trump’s long-term obsession with deficits; primarily deficits in exportable goods, because he has not factored in the service sector and has produced a formula that has baffled both with its simplicity and clumsiness. (How can you put tariffs on Netflix). 

For each country, the White House bean counters looked up its trade for 2024 and then divided that by the total value of exports. So, for instance the small Southern African country of Lesotho, who Trump recently belittled while cutting USAID by asking who ‘has heard’ of the country, is hit by 50% tariffs, principally because it exports diamonds and clothes to the US and is too poor to import much at all from the US. 

Morocco may have escaped the worst. But these are early days. Its automotive industry has grown rapidly, with exports reaching over $14 billion in 2023, making the country the largest car producer – and exporter in Africa. If Morocco is looking to be able to export more automobiles to the United States it may have to think again. 

Countries in Indo China which had been gearing up their economies to export goods to the US have been hit particularly hard. Cambodia & Laos have effectively been economically carpet bombed by the US this time around with 48% and 46% respectively in tariffs. Elsewhere, the new tariff regime threw up absurd anomalies. Norfolk Island, in the Pacific, was hit by 29% tariffs, some 10% more than Australia, which governs the island. This is despite there being no trading relationship at all. And then there are the sub–Antarctic Heard and McDonald islands, also hit by massive tariffs. The only inhabitants of these islands which take a fortnight to be reached by sea is a colony of penguins. Has anyone yet asked them what they think? 

*Mark Seddon is a former Speechwriter to UN Secretary-General Ban ki moon & former Adviser to the Office of the President of the UN General Assembly