Trump’s decision to slap a 25% tariff on imported steel and 10% on imported aluminium is just the latest example of this unpredictable US president’s attempts to maintain his populist appeal to what he considers to be his core blue-collar support base by adopting radical – some might even say jaw-dropping – policies.
His protectionist inclinations surfaced early during his presidential election campaign in 2016, with his protestations that he would be a staunch protector of the US’s traditional ‘rust-belt’ and ‘smoke-stack’ industries, such as steelmaking, oil production and coal mining.
He continues to see himself as a gallant campaigner for US workers, protecting them against what he claims are the tyrannies of an evil world, in which overseas nations in Europe, the Far East and elsewhere conspire to undermine US producers by dumping their cheap raw materials and manufactured goods in the US market at the expense of domestic jobs.
Bluff or bluster?
We have yet to see whether these tariffs will actually be imposed as originally proposed, or are yet another example of Trump’s brio – or is that bluff and bluster? – as he seeks to capture headlines and keep people talking about him, while providing fodder for his dubious tweets.
But does this man ever think about the consequences of his actions and ill-considered outbursts? Most rational people would have realised by now that the haemorrhaging of staff from the White House over the past year or so was a clear sign that policy-making ‘on the hoof’ is not sustainable nor desirable. He may castigate traditional politicians and diplomats, but he surely needs to learn a little diplomacy.
Trade in commodities and goods these days is global. No, dumping of products subsidised for political or unfair trade advantage is not acceptable (although we have long seen double standards exercised by the US and EU in this matter). But isn’t that what the World Trade Organisation is there to adjudicate upon and ensure some element of reciprocity?
The proposed new tariffs on imported steel and aluminium might have been received well by some US steel and aluminium producers (although by no means all), but there have been howls of disapproval from US manufacturers of everything from cars to fast-moving consumer goods, such as canned food, drink and cosmetics, whose costs will soar were the tariffs to be imposed.
And that’s before any retaliatory action is taken by countries within the EU, China and elsewhere that are likely to be hit by the tariffs. Do we really need another global trade war? That’s not going to help anyone in the long term, surely?
As someone who has written about – and worked in – industries such as steel and aluminium production in the past, I appreciate how painful it can be when traditional heavy industry begins to suffer from damaging overseas competition.
New kids on the block around the globe can often produce materials more cheaply because of lower labour and raw materials costs, or because their equipment and processes are more modern and efficient than the legacy kit being used elsewhere. US and European steelmakers, for example, have had to maintain a lot of ancient equipment because of an inability to reinvest in modern systems and plant caused by low steel margins. It has been the reason over many years why bulk steelmaking has moved around the globe: initially from the industrialised west to nations in the Far East and then from country to country in the east, as lower-cost steel producing nations emerged to grab business from those they displaced.
But the answer is not protectionism of inefficient businesses. It just doesn’t work in the long term. Competition is good and it helps everyone improve and get better at what they do; whether that is by the adoption of more automation to reduce labour costs; increased efficiencies elsewhere; or by being more innovative and coming up with radical new and exciting products that people around the world want to buy.
Unfortunately, those businesses that cannot adapt go to the wall. It affects real people’s lives and livelihoods and, therefore, it is very painful. But it is inevitable. And it isn’t new, having happened again and again over centuries: whether that was through the 18th century agricultural and industrial revolutions in the UK, to more recent closure of swathes of Britain’s manufacturing factories during the 1980s. People are ultimately resilient. While not all, for sure, the majority learn to adapt and move on. And that’s where governments are meant to intervene – not there to predict the future, but to facilitate it.
Free trade: the best flawed system we have
Whether you like it or not, it’s part of the capitalist world in which we live, and Trump needs to understand that. Like democracy, which according to another famous quotation “is the worst form of government except for all those other forms that have been tried from time to time”, free trade is the best flawed system we have.
I recall many years’ ago as a young journalist, on visiting a UK carmaker, being lambasted for not driving a British car. I tried to explain that, at the time, mass produce British cars were not very good (not the term I actually used) and had a frequent tendency to break down – when they weren’t merrily rusting away, that is!
That was before Japanese carmakers such as Toyota and Nissan entered the UK and brought with them new approaches to manufacturing excellence, through methodologies such as lean manufacturing, continuous improvement and world-class manufacture. These approaches literally revolutionised the quality of UK-made cars. And Kaizen – the never-ending search for improvement – has now been widely adopted by manufacturers in sectors ranging automotive to food and drink manufacture.
Whether Toyota and Nissan continue to manufacture cars in the UK after Brexit is another matter, given the potential tariff and non-tariff barriers to trade that are likely if a deal isn’t negotiated before March next year, is another matter. But that’s a trade story for another day!