Could tariffs be the issue that finally separates Republicans from President Trump?
So far, conservatives have devotedly followed the president to a series of unlikely places. Evangelicals overlook his fornication; fastidious Buckleyites disregard his boorishness; foreign policy hardliners forgive his admiration for Russian President Vladimir Putin; Second Amendment devotees chuckle indulgently when he suggests seizing firearms without due process; fiscal hawks look away as he doubles the deficit.
This time, though, the anger has been nearly unanimous. More than 100 GOP congressmen have written to protest the steel and aluminum tariffs and, in private, it’s hard to find a single enthusiast for the policy. Conservative think tanks were immediate and unequivocal in their condemnation, led by the Heritage Foundation, which no one could accuse of having an anti-Trump bias.
Even within the administration, support has been perfunctory. Over lunch in D.C. last week, an official connected to the policy did his best to defend it to me, but it was clear that he, and pretty much the entire White House, had been blindsided.
The Republicans were not always free traders, but they have internalized the lessons of the past century. There was a broadly pro-trade majority in Congress before the 1929 Smoot-Hawley Tariff Act. The stock market responded negatively to every stage of the passage of that legislation. Then, on Oct. 23, 1929, it became clear that there was much more support in the legislature for protectionism than anyone had realized. The next day was the day of the Wall Street crash. The markets, it turned out, were right to panic. By 1934, global trade had declined by two-thirds from its 1929 level.
Tariffs incidentally hurt foreign exporters, but chiefly, they damage the country that applies them. As a tax on consumers, they reduce the amount that those consumers can spend on everything else. Although they might benefit one particular industry — almost by definition an old industry with lobbying pull and a unionized labor force — they inevitably do more damage to others.
There are, depending on how we do the counting, between 80,000 and 150,000 people working in the American steel industry. But there are 17 million people employed in sectors that use steel, notably construction, manufacturing, and cars. As costs rise, these downstream industries will lose many more jobs than are preserved in steel. George W. Bush’s 2002 tariff postponed a few job losses in the mills, but did so at the cost of 20,000 jobs elsewhere in the economy. It would have been far, far, cheaper to write every steelworker a check for not turning up to work.
Likewise with aluminum. Anheuser Busch, the St. Louis based brewery conglomerate that is, on some measures, the world’s biggest beer producer, says that “[t]he proposed 10 percent tax on aluminum threatens 20,000 U.S. manufacturing jobs that depend on the beer industry and raises taxes on American beer drinkers by $347 million per year. This tax hurts, not helps, American manufacturing.” The combined effect of the two tariffs, says a study, will be to preserve 33,000 jobs in steel and aluminum while destroying 179,000 elsewhere.
And that’s before we get to the international consequences: alienation of allies, retaliatory tariffs, loss of global influence — and, not least, the appalling precedent set by defining Canadian steel imports as a threat to U.S. national security.
The president assures us that “trade wars are good, and easy to win,” but his military metaphor is 180 degrees wrong. In a war, you blockade enemy combatants to make them poorer. A tariff, by contrast, is a blockade against yourself. As the nineteenth-century economist Henry George put it, “What protection teaches us is to do to ourselves in time of peace what enemies seek to do to us in time of war.”
Sure enough, others have announced that they will “retaliate” by hurting their own consumers. Jean-Claude Juncker, president of the European Commission, boasts that “we, too, can do stupid,” and promises duties on American vehicles, jeans, and bourbon. (“Hit the chevy with a levy, tax your whiskey & rye,” was how a chortling headline-writer in London’s normally staid City AM summarized his announcement.) In other words, the EU is effectively saying: “You wanna drop rocks in your harbors, Trump? Fine, we’ll drop bigger rocks in ours! How d’ya like that?”
The rational EU response would be to do the opposite: To reduce rather than increase barriers against U.S. exports. Europe might then finally outgrow its rival, as America languishes behind its blockades. Sadly, it is likelier that Washington and Brussels will seek to, in Juncker’s language, out-stupid each other. What a depressing outlook.
Daniel Hannan, a Washington Examiner columnist, is a British member of the European Parliament.
