Now we know which economy is the gravest threat to the US after China: Lesotho. China currently has a combined tariff of 54 per cent under Donald Trump’s new plan. But Lesotho apparently deserves a “reciprocal” tariff of 50 per cent on its exports to the US, just ahead of the 49 per cent on Cambodia and 46 per cent on Vietnam, followed by 32 per cent on Indonesia and Taiwan, 26 per cent on India and 20 per cent on the EU. The UK gets away with 10 per cent.
What is perhaps most extraordinary about the overthrow of close to a century’s trade policy is that nobody, apparently, told the president that a procedure that puts Lesotho on the naughtiest step would make the US look ludicrous. But it did — and it did so because that procedure was ridiculous. Here was no subtle analysis of all those alleged tariff and non-tariff barriers from which, says Peter Navarro, echoing his boss, the exploited US has been suffering so terribly. No, it was far simpler and stupider. The proposed tariffs are proportional to the bilateral trade deficit divided by bilateral imports. The implicit assumption is that, in a fair world, trade would balance with every single partner. This is utter lunacy. Yet it has now become the intellectual basis of the trade policy of the world’s most powerful country — alas, poor thing, apparently victim of a global trade plot.
It is not just lunacy. It is wicked. Think of the history of US involvement in Vietnam. Yet now, the US has decided to try to halt its economic development. Vietnam is not alone in seeking to exploit the benefits of openness. Indeed, trade policy has converged on liberalism in emerging economies quite broadly. They were responding to a promise the US has now snatched away.