US protectionist craze hasn’t done its economy any favours

Most worrying is what Maurice Obstfeld at the Peterson Institute recently called “a deep distrust of economic openness” – a bipartisan consensus that the open trade which has been nurtured by the US for the past seven decades is doing more harm than good to the nation.

Trade liberalisation is no longer recognised as a massive contributor to economic growth and poverty reduction worldwide, but perceived as a net negative that is harming US manufacturers and workers, as well as the country’s best interests.

As a Carnegie Endowment paper published in May concluded, “irrespective of whether prioritising manufacturing optimises American economic growth, there is strong political support for doing so.”

US Census Bureau data reveals that America’s global deficit in goods trade amounted to US$1.06 trillion in 2023 – down slightly from US$1.18 trillion in 2022, but sharply up from the 2016 deficit of US$750 billion.

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The Tax Foundation has estimated that Trump’s proposed new tariffs, which could raise up to US$500 billion, would in net terms lower gross domestic product by 0.8 per cent and cost around 684,000 full-time jobs. A 2022 Department of Agriculture study reported direct farm export losses in 2018 and 2019 of US$27 billion as a result of tariff retaliation in export markets.

These developments do not seem to concern the presidential contenders – nor the parties they represent. It would be an exaggeration to say we are returning to 1930s-style protectionism, because despite the US’ best protectionist efforts over the past decade, and all the talk of onshoring, near-shoring, friendshoring and fierce containment of China and its