Singapore figured it had done a lot right in handling commercial ties with the US. Leaders emphasized the US’ surplus and put huge store in the nations’ two-decade-old free trade accord. When US President Donald Trump hit the city-state with a 10 percent levy, it was small comfort that the penalty was so much lower than that imposed on neighbors. How can longtime partners put a traditionally strong relationship back on track?
So, when former Australian prime minister Malcolm Turnbull was asked a similar question at a Nomura conference in Singapore last month, the hotel ballroom was all ears.
The challenge for negotiators is figuring out what the White House wants, Turnbull said.
It is not just about the levies themselves, it is the constant flux. Tariffs are on, then paused. They are ratcheted up, then dialed down. Even the rationale has shifted: In Trump’s first term, when Turnbull was Australia’s prime minister, the fixation was with trade deficits. Now, it is reindustrialization and generating revenue to offset tax cuts.
However, while all that might be true, it is missing a broader point. What if tariffs are as much about looking tough as achieving meaningful results? If that is the case, then there is little that the US’ partners can do to satisfy the US president’s demands — assuming they are even intended to be met, and that they would not change. The 90-day pause on so-called reciprocal tariffs ends in two weeks. We will find out.
Looking for logic might be missing the whole idea, according to a new e-book by Richard Baldwin, a professor at the International Institute for Management Development in Lausanne, Switzerland.
The duties reflect what the author describes as a “Grievance Doctrine.” Distilled into a word, trade policy is now about emotion.
Protectionism is aimed at satisfying the political demands of Trump’s supporters. Never mind the stated objective of making more stuff in the US. The key is understanding the performative role the barriers can play. They were not the means to an end, but the end.
“The act itself was visible, aggressive, and emotionally satisfying to a political base convinced that America had been cheated and humiliated,” he wrote in The Great Trade Hack: How Trump’s Trade War Fails and the World Moves On.
The actions were “emotionally coherent, but economically incoherent. And it’s why they will not achieve their stated goals,” he wrote.
Truly bolstering the middle class would require politically difficult investment in healthcare, education and affordable housing, Baldwin said.
Trump insists he is trying to help now work in service industries, not manufacturing. The tariffs would fail to diminish their sense of crisis and fuel demands for still more steps. “Tariffs are here to stay,” he wrote. “Not because they work but because they perform.”
So, does the rest of the world have an agency, or is it just dependent on US domestic drama? Hope sometimes springs from unlikely places. Turnbull went out of his way to praise former Japanese prime minister Shinzo Abe for his role in putting together a free-trade pact in 2018 that resembled the Trans-Pacific Partnership (TPP). Minus the US, that is. Trump withdrew from the TPP in one of his first acts in office in 2017.
Abe’s splash stemmed in large part from setting aside Tokyo’s historic protectionism. The potency lay in showing that Asia could lead without the US. It is not inconceivable the White House could climb aboard such a deal if they are depicted as winners — and isolate China. There could be some emotional satisfaction for the base.
Theater aside, the trade war is causing real pain. Singapore’s faith in trade as an engine of prosperity is undiminished, but it is warning of a downturn. Like-minded nations need to figure out Washington’s game and work around if needed.
There is scope for the EU to bolster ties with Japan, South Korea and the ASEAN. The EU aims to revive negotiations with Australia while also seeking a wide-ranging deal with India by the end of the year.
It would be ironic if the nations Washington used to lecture about free trade became bastions of a system the US has tired of.
Daniel Moss is a Bloomberg Opinion columnist covering Asian economies. Previously, he was executive editor for economics at Bloomberg News. This column reflects the personal views of the author and does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
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