Trump takes the 'free' out of free trade

December 2, 2024

👋 Welcome to Trendlines. The secret password is "brain rot."

I am Boston Globe financial columnist Larry Edelman, and today I look at how Donald Trump is disrupting global trade.

Plus: the "Hard Fork" guys rank history's most iconic technologies.

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Let's make a deal — or else

“Speak softly and carry a big stick.” That’s something Theodore Roosevelt, our 26th president, liked to say. His big stick? The US Navy.

Donald Trump, the 45th president and soon-to-be No. 47, prefers to speak loudly while wielding his cudgel of choice: trade tariffs.

Global trade, in his view, is a zero-sum game of “let’s make a deal” in which he gets to call all the shots. But the last time the country retreated behind high trade barriers, with the Smoot-Hawley tariffs in the 1930s, it was a disaster that deepened the Great Depression.

While a depression may not be in the cards today, economists warn that Trump’s strategy could spark inflation while prompting retaliation from some countries and a rush by others to get on his good side.

🗞️ The news

In recent weeks, Trump has threatened sweeping tariffs targeting countries like Mexico, Canada, China, and the nine countries in the BRICS group (including Brazil, Russia, India, China, and South Africa).

• He said he would impose a 25 percent tariff on Mexican and Canadian goods until those countries curb fentanyl trafficking and illegal migration.
• He also said he'd increase current tariffs on Chinese imports by 10 percentage points, also to combat drug trafficking.

⁉️ Why it matters

This aggressive stance represents a significant break from the post-World War II era of free trade, where tariffs were used to address unfair practices like dumping.

Trump’s vision, however, is to use tariffs as a blunt instrument to protect American industries, encourage domestic manufacturing, and fund government revenue.

Pros & cons

Proponents argue this protectionist approach could revitalize US manufacturing, reduce economic inequality, and address trade deficits.

• Tariffs could deter companies from offshoring production, boost wages, and protect key industries tied to national security.
• Some economists see merit in addressing the downsides of unfettered globalization, including the erosion of industrial communities.

However, critics warn of significant downsides.

• Broad tariffs could spark inflation, as higher import costs for goods like cars, electronics, and food trickle down to consumers.
• Retaliatory measures from targeted countries could harm US exporters, and supply chain disruptions could cripple industries reliant on international integration, like automotive manufacturing.
• Moreover, a selective tariff system could foster corruption, as politically influential groups and foreign governments vie for exemptions.

💡 Final thought

Whether tariffs will deliver on Trump’s promises remains to be seen, but the approach underscores a broader shift in US economic policy away from global integration toward “America first” self-reliance.

It’s unconventional trade policy but textbook Trump: talk loud and carry a big stick.

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🤖 The Closer

Everyone likes a good list.

Here's one from "Hard Fork," the technology podcast from The New York Times. For their latest episode, hosts Kevin Roose and Casey Newton ranked the "100 most iconic technologies" in history. Their top 10:

1. Fire

2. Electricity

3. iPhone

4. Printing press

5. Penicillin

6. Television

7. Airplane

8. YouTube

9. The atomic bomb

10. The transformer

Lower in list you will find email, LSD, cuneiform, the umbrella, and concrete. Two glaring omissions, IMHO: Google Maps and slip-in sneakers.

Thanks for reading. I will be back on Thursday. Oh, and don't forget, it's just 23 days until Christmas and Hanukkah, and 24 until Kwanzaa. No pressure.