It impresses him among other things. The rates were based on the commercial deficit divided by total imports, multiplied by one hundred – with a minimum floor of 10%.
Dismissed by a detailed analysis or strategy, the calculation disregards variables, such as the complexity of global supply chains, commercial retaliation risks, exchange effects and even the level of tariffs from other countries. Closer to a napkin calculation than an economic policy, the method draws attention for its amateurism. Behind this superficial calculation, however, there is a well -structured ideology and already known here.
Trump’s view of international trade as a zero sum-where someone needs to lose to another win-is quite familiar to us Latin Americans. Interestingly, Trump recovers theories close to those defended by Cepal (Economic Commission for AE Caribbean) in the middle of the last century.
Trump and Cepal share a perception of commercial deficits such as direct symptoms of economic exploitation and structural weakness. While Cepal interpreted deficits such as evidence of periphery dependence on the industrialized center, Trump states that deficits are clear signs that other nations “take advantage of”. Both then propose the aggressive protection of national industry through customs tariffs, presented as tools to ensure economic sovereignty and national pride.
These ideas have already been widely tested in Latin America, with notoriously negative results. In Brazil, protectionist policies in the automotive sector have raised local vehicle prices by up to 30% compared to international competitors, severely compromising competitiveness, quality and population access to these products.
In the protection of electronic industry resulted in expensive and low quality products, feeding widespread smuggling and imports through the parallel market, with average price increases by about 4%, without improvements corresponding to quality.
Already in decades of protection of the textile industry led to technological obsolescence and the inability to compete internationally when the market opened, resulting in 14% drop in exports and significant loss of jobs between 2004 and 2007 – with other industries benefiting from opening.
It is nonetheless ironic that Trump chose precisely the symbolic ‘day of liberation’ to announce a measure that restricts free trade, thus reducing the economic freedoms of the Americans themselves. It is also a political rhetoric that constantly appropriates the language of freedom to justify protectionist actions. The concrete consequences are clear: increased inflation, lower population access to goods and services and potential commercial retaliation against US companies in the global market.
May the Latin American experience alert: Isolationist economic policies often lead to stagnation and not sustainable and inclusive economic growth. The richness of nations is born of open trade, constant innovation and competitiveness – the history has already proved with robust numbers, but Trump seems to be determined to ignore.
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