President Trump, fearful that the world is “laughing at us,” appears to take trade policy as a matter of national pride, economics be damned. But why shouldn’t the rest of the world respond to his bullying in terms of pride as well, damning economics in turn?
Commerce Secretary Wilbur Ross may be right that, as the result of a 25 percent tax on foreign steel, an American consumer purchasing an American car would pay a “tax” of only $175; from an American perspective, that additional cost might well be acceptable if it saved a steelworker’s job or two. But suppose a European consumer decides, as a matter of countervailing pride, to purchase a Fiat instead of a marginally preferable Ford?
Multiply the loss of that sale across tens of thousands of consumers in dozens of sectors in 100 countries worldwide, and the impact on our economy could be enormous, all without any government going toe-to-toe with the United States in a trade war. This will not end well, nor should it.