Trump’s Hammer

What is a ‘trade war’? At this point, it might be better to ask what trade ‘peace’ might look like. This is not the same thing as ‘globalisation’ or ‘free trade’. It’s a legal idea, not an economic one: non-discrimination, or equal treatment. Import duties and other trade barriers in one country, whatever their extent, should affect all other countries equally (‘most favoured nation’ treatment); internal taxes and regulations should not discriminate between internal and foreign trade (‘national treatment’).

Pinning these fuzzy definitions down in practice is complicated. A lot of the international trade jurisprudence conducted through the mechanisms of the World Trade Organisation involves investigating whether trade discrimination between states is occurring or not, and deciding what remedies might be appropriate. Accusing other states of trade discrimination, while justifying your own as self-defence, is one of the regular duties of trade negotiators the world over.

In the text of the General Agreement on Tariffs and Trade, the 1947 treaty that serves, in modified form, as a foundation for today’s WTO, carve-outs from the broad principle of non-discrimination are limited, and require specific justification. The European Union is compatible with the GATT thanks to Article 24, which permits customs unions and other preferential agreements that allow select countries to trade more freely with one another than they would on WTO terms (provided they do not erect new discriminatory trade barriers against outsider states). The Generalised System of Preferences, a set of tariff reliefs offered by the rich world to developing countries, was a partial and ambivalent victory for the Third Worldist campaign for a New International Economic Order, launched at the UN Conferences for Trade and Development in the 1960s and 1970s.

For a long time, trade experts have worried that carve-outs could undermine the foundational principle of non-discrimination. In 2008, Jaghdish Bhagwati described that decade’s rush of preferential trade and investment treaties as ‘termites in the trading system’. They exploited poorer countries and hollowed out non-discrimination by enabling states to conduct bilateral side-deals that bypassed stalled WTO negotiations, leaving outsiders to trade at a disadvantage. In the 2010s, the US flirted with preferential trade deals to contain China’s growing weight in foreign investment and export markets. During the first Trump term, and under Biden, it largely gave up on such efforts. Priorities switched from geo-economic bargains with allied states to direct trade conflict with China. At the same time, the US hobbled the WTO’s dispute resolution mechanism by blocking appointments to its Appellate Body, supposedly as a prelude to reform.

Last Wednesday, 2 April, Donald Trump’s ‘liberation day’, nonetheless marked a new departure. There’s not even a pretence at playing by the rules anymore. This was a carnival of trade discrimination: open, delirious, triumphant. The husk of the WTO system, chewed up for decades by termites of all shapes and sizes, has been whacked with a large hammer. It is unlikely to be replaced by an orderly transition to geopolitically aligned trading blocs. Some of the United States’ closest allies are now being hit with the biggest tariffs.

More striking still is the gratuitous punishment meted out to some extremely fragile economies, not least in South and South-East Asia: 49 per cent for Cambodia, 39 per cent for Bangladesh, 44 per cent for Myanmar days after it was hit by its biggest earthquake in a century. Not all the targeted countries have significant exports to the US, but the open disregard for the old verities of ‘trade and development’ still matters. Those that have cultivated a dependence on the US market – such as Vietnam (46 per cent) – are unlikely to profit, at least in the short term, from their sudden and unexpected ‘liberation’ from established, export-oriented growth models.

Economists looking to understand the likely impact of the latest round of Trump tariffs have done what economists tend to do: reached for the averages. Take the tariff rates for all the different countries, weight the average by how much the US imports from those countries, reach a percentage and plot it on a graph to show the historical trend line. The result of this procedure – that the average trade-weighted US tariff rate is set to return to where it was around 1909 – makes for an arresting statistic. But it’s also a strangely comforting one, suggesting that we’ve been here before.

Yet tariffs looked nothing like this in 1909 – not in the US, not anywhere. They were organised primarily according to the goods they were levied on, not the states they were directed against. They were also largely set by legislatures, not executives. In 1909, even the most aggressively protectionist states – like the US – had single, national tariffs, hedged around with surcharges on rivals and discounts for clients. States such as France and Spain developed elaborate mechanisms to allow them to negotiate trade deals without compromising their prized ‘tariff autonomy’: the ability to set rates nationally, independently of what any other country was doing.

National tariffs involved very, very long tables of commodities and the taxes levied on them: sometimes by percentage, sometimes with specific sums of money per a given corn bushel, beer barrel or iron rod. They were periodically revised in set-piece legislative debates, accompanied by acres of highly informed press coverage, furious debates among economists, and blue-ribbon commissions of officials and businessmen.

Nineteenth-century economic nationalism, in the US as in the French Third Republic, embodied a kind of democratic ideal. It proclaimed the ability of farmers, manufacturers and sections of organised labour – often from the provinces – to lobby for, and receive, the wages of political representation. Representation, in turn, functioned as an information-gathering system for the state. Industries argued for the level of protection they thought they needed, based on their knowledge of market conditions; politicians tried to give it to them.

Trade wars were frequent, but they looked more like they did under the first Trump administration: targeted at specific goods and specific countries, often as overtures to market-opening negotiations. Executives, first in Switzerland, Germany and France, then (by 1909) in the US, were granted limited powers by legislatures to levy retaliatory duties against foreign powers that they held to be guilty of trade discrimination. They could also negotiate – with somewhat more legislative input – preferential deals. National tariffs, however, were the baseline against which both trade wars and trade deals could be evaluated.

With Trump, there’s no baseline. The US has declared a universal trade war. Not by means of a new and more protective national tariff created through intricate legislative deliberation, but by a sweeping presidential assertion of economic emergency. Everybody is discriminating against the United States, Trump says, and always has been. The president’s power to respond is, consequently, unlimited. Nineteenth-century tariff levels are being implemented with the beefed-up trade powers of the 21st century’s imperial presidency. The US effectively doesn’t have a single national tariff anymore; it has something closer to 180 – one for nearly every jurisdiction in the world (including 10 per cent slapped on Heard Island and McDonald Islands, an Antarctic territory inhabited only by penguins and seals).

Except for a few gestures to steel and car production (members of the United Auto Workers were in attendance), Trump’s Rose Garden announcement made few references to specific industries that he thought that his measures would assist or create in the US. This isn’t surprising: the tariffs weren’t informed by any new research into the actual condition of US industrial sectors and the level of protection needed to revive or expand them. Trump claimed that what mattered in setting the ‘reciprocal’ tariff rate was instead the relationship between the US trade balance with a given state, and a mysterious calculation of the total extent of ‘tariffs … currency manipulation and trade barriers’ that a given nation had ‘charged to the USA’.

Online analysts quickly came up with a more likely story. The tariffs are what you get when you take the United States’ goods trade deficit with a given country, divide it by the total value of goods imported from the country, and cut the resulting figure in half. Screenshots circulating on X and Bluesky implied that the method was probably suggested to Trump’s team by ChatGPT or another large language model, which dutifully spat it out when prompted to come quickly up with a simple method for calculating reciprocal tariffs.

What sort of worldview does this calculating method suggest? Production and consumption are no longer perceived as a complex system of multilateral flows and global value chains, financed and organised by private actors (many of them American). Products are instead reduced, as crudely as possible, to a single country of origin. Relations of interdependence are redescribed as relations of domination. The US trade deficit is no longer evidence of the country’s ability to buy more from the world than it returns to it – a sign that it might, in the round, be profiting from the existing order of things. Instead, this administration sees the trade deficit as tribute paid to savvier, ‘tougher’ powers, who have colluded with a treacherous political class to reduce the nation to a condition of craven dependence.

From this perspective, any trade deficit with any country at all – no matter how poor or how small – is evidence of the ‘rape’ and ‘pillage’ being visited on the United States of Trump: the infinitely powerful, infinitely vulnerable father-hegemon, locked in a permanent trade war of all against one. ‘They do it to us, we do it to them,’ Trump says: or, to put it differently, what the US does is now determined by what others do. Trumpian protectionism doesn’t follow its 19th-century antecedents in building up tariff walls that define and cultivate an autonomous, self-asserting economic nation. It lashes out in all directions, dissolving its own coherence in a fruitless quest for recognition and obeisance. Threats and deals, deals and threats, with all the world – for ever. It’s like nothing anybody’s ever seen before.