Whose Trade War Is Worse, Trump's or Biden's?

"It may win the Kewpie doll for Donald Trump's best bad idea. I'm referring to Mr. Trump's proposal for a universal 10% tariff on imports. If it had come from someone else, I might even suspect a subtle Nixonian scheme to save the global trading order.

As the Economist tells us this week, that order is rapidly sliding off a cliff, and Joe Biden's "Buy America" policies are no small factor, with consequences unlikely to be good.

If a tax must be applied, apply it at the lowest rate to the broadest base. 

This is the universal advice of economists. Compared with the selective tariff and subsidy regimes adored by the Biden administration and Mr. Trump in his previous guises, his flat and universal 10% import tax would divert less of America's skills and capital to inferior, lower-value opportunities.

It would generate less special-interest corruption. It would cause less damage to American living standards. It would do less harm to our global alliances.

It would also be too much to hope. Mr. Trump's economic thoughts were honed in encounters with Rona Barrett, Liz Smith and "Access Hollywood." The only press that paid attention to him when he was coming up was the gossip press and it shows. Mr. Biden is no better. He's hardly been a non-Trump when it comes to dispensing trade-distorting import restrictions and subsidies, witness his expected proposal next week to quadruple duties on imported Chinese electric vehicles.

When protectionism is out of the bag globally, when subsidies are being doled out to domestic industries, it whets the appetite of congressmen and lobbyists for more. Look out, world economy.

Historically inclined readers will already be thinking of the U.S. Smoot-Hawley tariff of 1930. This ghost the Economist summons in its account of rising trade limits, asset expropriations and investment restrictions around the world.

A more realistic scenario, in today's world, would have a Biden-Trump trade war simply accelerating the erosion of the open trading system created by the U.S. in the anti-Soviet era.

It would accentuate a pronounced Western trend toward less dynamism, less economic growth, greater bureaucratization, more paralysis in the face of chronic policy failures, more debt, generalized squalor in our cities, more systematic and multigenerational poverty among excluded social groups, less opportunity, etc.

Already seen is a decade-long slowdown in the fast-growing trade and capital flows associated with the world's postwar prosperity, the final chapter of which lifted a billion Asians to affluence.

But even if his goal were to curtail this slide toward more discriminatory, hectic and corrupt forms of protectionism, Mr. Trump would find little legal authority to impose a general and nondiscriminatory tariff; he and other presidents, in contrast, are absurdly supplied with legislative pretexts for favor-factory-style protectionism, the kind guaranteed to provoke tit-for-tat retaliation.

This isn't the 1930s but the risk goes up when nations are under internal stress.

This by now increasingly commands the attention of Xi Jinping. His motive against Taiwan would be to secure his primacy at home.

The link isn't automatic but the time to worry is now. "Put brutally . . . barring a political miracle, the whole world is in for the worst dose of economic nationalism that it has ever seen," warned a writer in the Atlantic Monthly in October 1933.

In the small favors department, any Trump trade folly at least could hardly be as gratuitous as the folly Mr. Biden seems determined to commit. 

Mr. Biden shows every sign of wanting to start a global trade war to protect the high-cost, uncompetitive green-energy industry he's been building at home with taxpayer dollars.

This green subsidy program, as any economist will tell you, will nonetheless have exactly zero effect on emissions and climate change.

When President Obama tried this, I wrote that the dumbest trade war is a green one. It hasn't gotten any less dumb." [1]

1. Whose Trade War Is Worse, Trump's or Biden's? Jenkins, Holman W; Jr.  Wall Street Journal, Eastern edition; New York, N.Y.. 11 May 2024: A.13.