With Donald Trump insisting that tariffs are the royal road to regaining the American economy’s dynamism, the debate is returning about whether a version of protectionism can be the way to address the existing problems of economic stagnation in several developed economies.
The argument is familiar: an economy like the American one has a consumer dynamism that exceeds domestic production and is therefore constantly able – and needs – to absorb the trade and production surpluses of other countries that have every reason to plan their economies based on increased exports to the United States. If tariffs are imposed, this will ensure that part of the increased American demand will be forced to turn to domestic production and thus the United States will acquire not only consumer dynamism but also productive dynamism. In some cases, tariffs are presented as the epitome of a new “virtuous” economic cycle: American households will be pressured to produce more, in order to consume more, and so on.
However, this argument runs up against a series of data. In Trump’s first term, the tariffs he imposed did not lead to an increase in industrial production or improve the US trade deficit. Some research claims that statistics show that in the period 1963-2014 in 151 countries the statistical correlation that emerges is that between increasing tariffs and declining output. Nor is the historical argument invoked by Trump, namely that tariffs helped the US become richer in the late 19th century, valid, because in practice they did not help it avoid a serious recession between 1893 and 1897.
Nor does it seem to be true that one of the reasons cited by tariff advocates is that countries like China are suppressing domestic consumption to increase investment so that they can export to markets like the United States. And this is because statistics show that the annual growth rates of consumption in China in recent decades remain much higher than in the United States.
Similarly, the insistence that what favors countries like China is that they tend towards saving and not towards consumption is not true, because to a large extent what explains the decline of the American industrial base had to do with the fact that they did not have the same rates of productivity growth as other countries.
In reality, what happened and countries like China or Germany were able to have such export performances compared to the United States had not to do with the fact that they were suppressing consumption, but with the fact that they were able to have more competitive products, through critical technological breakthroughs and greater increases in their productivity.
And of course, the reason the US imports industrial products, instead of producing them itself, has less to do with the fact that it does not impose tariffs and is therefore flooded with imports. It has more to do with the strategic decisions of American businesses themselves, which, considering that they have lost the competitiveness game, prefer to invest a large part of their considerable liquidity in the financial sector rather than in productive investments within the US. And this will be very difficult to reverse with the imposition of tariffs.
Ultimately, what the supporters of tariffs seem not to understand is that the policies that have historically been able to boost domestic production or stimulate industrial activity have not had to do mainly with tariffs, but with other more active interventions: the degree of planned investment in research and in the training of specialized personnel, in the way government spending is directed and how the banking system operates, in whether productive or financial investments are prioritized, whether the state assumes a more strategic role. That is, in strategies that go far beyond the simple “economic automation” that if the prices of imports increase, domestic production will increase. Especially when the US is now realizing that there are entire sectors that it will be very difficult to rebuild or in which it has a real production deficit. Whatever tariffs are imposed…
