Trump’s protectionism gives Europe the moral high ground

As world leaders gather in Davos, Switzerland for the annual World Economic Forum, a narrative has taken shape that Trumpism is leading to the decline of the United States’ diplomatic importance. Davos, after all, is a gathering of globalists who tend to favor free trade and open borders, the antithesis of what Trump stands for. The truth is certainly more nuanced than some hysterical American columnists are making it out to be, yet the United States is becoming more protectionist, and all things considered, France and Germany are right to criticize Trump’s economic policy.

At the World Economic Forum, French president Emmanuel Macron declared that “France is back. France is back at the core of Europe, because we will never have any French success without a European success.” There is some undeniable truth in that: France heavily relies on European consumers and investors, be it German airlines flying French Airbus planes or the London Tube being run by French-made Alstom wagons. France makes €82.6 billion ($102.5 billion) on tourism and exports €9.2 billion ($11.4 billion) of its agricultural production. Macron’s political adversary Marine Le Pen might be correct that France could technically rely on itself for its own consumption, but should it opt for total isolation it certainly wouldn’t be among the big global players.

The same thing can be said for any other European country: as European nations opened up to trade, they’ve seen more prosperity and have been less inclined to start trade wars, or actual wars for that matter. Brexit was a blow to the European Union as a political project, yet as of now, it seems like both Britain and the EU agree at least that trade relations are essential for everyone.

Donald Trump’s protectionism stands in stark contrast, not only to this European experience, but to years of American leadership. For decades, the United States has been a driving force for free trade because its leaders recognized that all parties involved benefitted from opened and enhanced trade relations. Yet for Trump, free-trade deals seem to be mostly a political tool, used to reward his friends with loyalty, as he did when he called for a “beautiful” trade agreement with the United Kingdom after Brexit.

Trump, who continuously invoked “the forgotten men and women” during his successful presidential campaign, needs to know that it’s especially low-income households that will suffer from his protectionism. Tariffs hurt the poorest of the poor. A recent research paper on American tariffs explains why:

It appears tariffs are imposed in a regressive manner—in part because expenditures on traded goods are a higher share of income and non-housing consumption among lower income households, but also due to explicit regressivity.

In plain English, tariffs fall disproportionately on those least able to afford them. The paper concludes that tariffs cost those who make the least about 1.5 percent of their disposable incomes, which is far more than the highest earners in society, for whom that number is less than 0.3 percent.

Not only is Trump’s mercantilism not good economics, it is also diplomatically unwise, as trade and geopolitical relations are linked. The president of the United States can say and do many things, but if he makes trade more difficult, he also seriously marginalizes American interests abroad.

This is not to say that confident Europeans aren’t considerably overestimating their momentum. Emmanuel Macron’s EU reform ideas haven’t found many supporters outside of Brussels, Angela Merkel still hasn’t formed a government after an election last September, Italy faces a major election showdown in March, and the United Kingdom and the EU have stalled Brexit trade negotiations by making them overly political.

It is certainly true that Europe is performing well economically, especially Central and Eastern European countries, most of which have seen GDP growth of more than 3 percent (Romania is currently at 6.4 percent). However, the idea that economic growth translates into support for a European superstate, as many EU elites do, is certainly a stretch. In fact, a 2017 poll shows that 66 percent of EU citizens are dissatisfied with the direction of the EU: 62 percent in France, 72 percent in Germany and 83 percent in Italy. In the same poll, 44 percent of Italians said they would vote to leave the EU outright. With one state out of the EU and others considering the same, it’s hard to imagine how European elites think their federalist agenda has been vindicated of late.

Yet despite all this, Trump’s protectionism has still given Europe the moral high ground, even if it’s just at Davos this weekend. The United States is at risk of ejecting itself from the world stage in pursuit of the vague slogan that is “America First,” despite free trade having long been at the core of America’s foreign policy. You don’t have to be a fan of Macron and Merkel (there are plenty of reasons not to be) to recognize this. The United States should step back and learn from the European experience that free trade is not a threat to local economies, that it indeed enriches society. Let’s hope that America will not learn this lesson the hard way through economic stagnation.

This article was first published by The American Conservative.

Thanks for liking and sharing!

About Bill Wirtz

My name is Bill, I'm from Luxembourg and I write about the virtues of a free society. I favour individual and economic freedom and I believe in the capabilities people can develop when they have to take their own responsibilities.

1 Response

  1. The future is unpredictable. Even more unpredictable is Donald Trump. Do is unpredictable the future of US economy and it’s major economic product, the overvalued US dollar. If Wall Street will crash, and with it also the dollar, the result will be unpredictable. What is predictable, US is in a phase of decline due to it’s political leadership, what used to be the most valuable asset that made US great in the past.

    In the last two generations, the US political system was not able to elect a political leadership, that was capable to lead the world and itself out of its major problems,

    A. the collapse of failed states worldwide, and the emigration waves that they cause,

    B. the global environment imbalance accumulation,

    C. the difficulty of  existing monetary system based on commercial banks creating debt money to react and adapt itself to new realities, caused by new technologies.

    D. The degradation of public investments and services, namely infrastructure, education, health in the US itself.

    Instead of all above, the US political leadership concentrates on insignificant local issues, like gun possession, abortion, immigration, and above all particular contingent interests of economic sectors, with opened doors in the corridors of politics.

Leave a Reply to EugenR Cancel reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s