Trump lies about 'fair' and 'balanced' trade

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Under the guise of restoring "fair" and "balanced" trade, U.S. President Donald Trump signed a memo on Thursday instructing his team to investigate plans for new reciprocal tariffs on every country taxing U.S. imports. "I think our country is going to be flooded with jobs," Trump said after signing the memo.

The Trump administration has long regarded tariffs as the master key to revive the U.S. economy. But reality bites.

To begin with, tariffs, instead of creating jobs as Trump is expecting, could generate layoffs. Competitive prices of imported goods mean that American manufacturers will have to pay more for raw materials and parts needed for production before products are fully assembled.

"The supply chains involve shipping parts back and forth over the border five times, six times, seven times… If every time a part crosses the Canadian border it gets taxed at 25 percent, that will add up really quickly," said Christopher Conlon, a professor of economics at New York University. He warned about costly supply chain workarounds, using Trump's tariffs on Canada as an example.

Soaring costs along the supply chains could also force American manufacturers to scale back production. This will inevitably result in fewer shifts and thus higher risks of jobs cuts. In addition, rising production costs will be transferred to retailers and eventually to ordinary American consumers. This is already happening as the U.S. struggles with its inflation.

The total direct cost of import taxes on Chinese, Mexican and Canadian goods represent an extra tax of more than $1,200 per year for a typical American household, CNN quoted Peterson Institute as saying, and reciprocal tariffs could add to that amount. Soaring costs would inevitably result in weakened sales, and ultimately contribute to production slowdown – a synonym to layoffs.

"More than 550,000 workers at car dealerships representing international brands risk losing their jobs if the industry falters due to the tariffs," the American International Automobile Dealers Association said in a statement. And small businesses are particularly vulnerable, with 37 percent believing tariffs will have a negative impact, according to the U.S. Chamber of Commerce.

And don't forget retaliatory measures from targeted countries. For American companies relying on overseas markets for survival, retaliatory tariffs may cripple their production capacity. This would put American jobs at risk, contrary to Trump's unrealistic wish of creating more jobs. According to U.S.-based think tank Tax Foundation in a report released this week, the retaliatory tariffs will "reduce full-time employment by 27,000 full-time equivalent jobs."

Tariffs will "have the effect of depressing U.S. economic growth, contributing to a higher rate of inflation, and those effects will be worse if the other countries retaliate in kind," according to The Guardian, quoting Marcus Noland, executive vice-president of the Peterson Institute for International Economics.

Apart from self-inflicted harm to U.S. interests, Trump's reciprocal tariffs also threaten to undermine the rules-based international trading system. Threats of tariffs result in rising distrust in international cooperation and thus cause more uncertainties in the global business environment.

"A reciprocal tariff system would mark a sea change in how the U.S. approaches trade, and would erode one of the fundamental tenets of the global trading system that the U.S. shaped after the Second World War," Bloomberg said in an article.

Open trade has repeatedly turned out to be a key driver of global economic growth. Reciprocal tariffs, by contrast, increase unnecessary costs and slow down trade volumes. Instead of being a master key to solve American problems, tariffs act as a drag not only on the U.S. but also on global growth. Developing countries are particularly vulnerable. These countries rely on exports for income and reciprocal tariffs will them hit hard.

The Trump administration should be clear about the harmful impact of these tariffs. But Trump still has the gall to brag about the necessity of tariffs to protect so-called "fair" and "balanced" trade. As a businessman-turned-politician, Trump's repeated tariffs threats may be part of his efforts to trigger talks with other countries. After all, Trump, since his first term in office, has demonstrated to the world his unrivalled skills in bargaining for the best.

Whatever motives lie behind Trump's reciprocal tariffs, protectionism is a dead end. Removing trade barriers and creating more favorable conditions for open trade should instead be the primary consideration for Trump as the President of the world's largest economy.

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