So I’ve decided to shoot myself in the foot. Now what?
President Donald Trump has decided to impose tariffs upon almost all the world, excluding Russia, Belarus, and North Korea. These tariffs start at 10% for ‘lucky’ countries like the UK and Brazil and escalate to a staggering 49% for Cambodia.
I’ll keep it plain and simple - this is a catastrophic decision. Whatever gains the U.S. has made through economic growth, energy independence and improved efficiency - including DOGE’s contributions, will be undercut by this policy. Trump has decided to raise a projected $700bn on American taxpayers.
The effect of tariffs is very clear. Unemployment will rise, productivity will fall, profitability will suffer, resilience to future shocks will be exposed and output will be hammered. Ultimately, they make the imposing country poorer. The below graphs demonstrate the economic reality of tariffs.
Adam Smith himself warned against such policies, writing “to prohibit a great people, however, from making all that they can of every part of their own produce, or from employing their stock and industry in the way that they judge most advantageous to themselves, is a manifest violation of the most sacred rights of mankind."
Trump has thus declared a trade war upon the American people, as much as he has on the world, raising the costs of prosperity and human flourishing for reasons that remain unclear.
The calculation for Trump’s tariffs are baffling. He took the trade deficit of the US with the country being tariffed, and divided it by said country’s exports to the US - a shockingly crude formula. To make matters worse, the White House has also thrown in such complications as “currency manipulation” and other trade barriers (sometimes seen as indirect taxes applied to all imports and products, such as VAT). This calculation is why trade behemoths such as Madagascar (!) have ended up with a 44% tariff, whilst Puerto Rico (a US territory) has been hit with a 10% tariff.
So… what now? It seems in the mania of Trump protectionism, the Liberal Democrats have lost track of their roots, proposing retaliatory tariffs (aka tax rises for the British people). This would be the wrong move. If your neighbour sets their house on fire, you should not take a match to your own. Keep calm and carry on is the mantra of the day, leveraging our good relationship with the US to work towards an exemption. Retaliatory tariffs will create further impositions upon us.These tariffs are absurd and an affront to global prosperity. The UK will suffer from this, but we must keep true to Adam Smith:
"The case in which it may sometimes be a matter of deliberation how far it is proper to continue the free importation of certain foreign goods is, when some foreign nation restrains by high duties or prohibitions the importation of some of our manufactures into their country... Revenge in this case naturally dictates retaliation... But the recovery of a great foreign market will generally more than compensate the transitory inconveniency of paying dearer during a short time for some sorts of goods."
Maxwell Marlow
