The real and present danger of Trump playing TV bingo with the US economy

Threats, insults, and throwing Maga caps to the crowd masked the hard facts of America’s economic strategy being turned on its head, says Sean O’Grady

Donald Trump says that Americans have been “plundered”, “raped” and “scavenged” by “foreign cheaters” for decades. Such bizarre, violent language. So unpresidential. And plain wrong.

Some might wonder how the US – were his assertions correct – could have come to be the largest and most successful economy in the history of the world. Its citizens have never been richer. But this may not be the case for much longer.

Trump keeps telling folk that foreign countries pay tariffs. They don’t. American shoppers will. Will American shoppers see their Vietnamese-made Apple iPhones in Walmart go up by 46 per cent? Will people in those hard-pressed towns in the rust belt be made to pay more for a home made with Canadian timber?

The answer is “yes”.

Tariffs are a sales tax by another name, and a highly regressive one – there is no allowance made for people’s ability, or otherwise, to pay. Prices in America will go up, inequality will grow, and no one will be given back their “American dream”, as the president claims they will.

As stock markets plummet in the aftermath of Trump’s announcement, opinion polls suggest that Americans fear the consequences. They are right to do so. Trump, a man who once owned casinos, has thrown the dice on the greatest economic gamble since the Second World War.

The game-show-style presentation, as if it were a TV bingo show, should have fooled no one. The calculations of tariffs, non-tariff barriers and currency manipulations are entirely notional, to put it mildly. Trump knew what he wanted to do – like a gangster favouring his cronies and whacking his supposed enemies – and worked the percentage back from there. JD Vance got a presidential shout-out – “You are getting more confident!” – which carried a hint of menace.

None of it is rational. Why, he even hit the penguins in the Falklands with a 41 per cent tariff.

When it wasn’t the fault of malevolent “friends and foes”, it was because of that supervillain Sleepy Joe. Trump even chucked a Maga hat into the crowd for the autoworkers to scramble for. It was a typically narcissistic show, and a demeaning performance for all concerned. But at least he didn’t use his favourite word, “nasty”. Which he was.

At least the British breathed a sigh of relief that he wasn’t quite as nasty to them. Did Keir Starmer play a blinder? Everything is relative, but the fact that the UK got whacked for “only” a 10 per cent baseline Trump tariff, while the EU will see a 20 per cent tax on their (much more substantial) exports to the US, must be counted as a diplomatic triumph – of sorts. To some, it’s a Brexit boost. Until, in other words, the British realise that a manufacturing recession in what is still our largest trading partner is bad news indeed for the struggling British economy.

It could have been worse. But 2 April 2025 – “Liberation Day” or “Economic Independence Day”, as Trump has variously called it – is not a date that should be celebrated by anyone. In a world of deeply integrated and interdependent economies, it is a nonsense.

Characteristically, there’s a vindictive streak in the tariff schedules unveiled by the US president. The stratified approach, with its “reciprocal” tariffs, has two purposes. It is a mercantilist policy, whereby economic activity in America is set by one politician for his own social, political or eccentric reasons rather than by consumers and market forces.

As with so many things, Trump has decided that he knows better than the world’s automotive giants about how and where they can make their vehicles most efficiently.

Globalisation, along with complex but highly effective cross-border supply chains, is out. Things will be manufactured in America wherever possible, even if it’s more expensive. If, as it will, this adds costs, drives prices higher and reduces competition and quality, then that is secondary to the Trumpian vision of America making things again. He has little interest in the trade in services, which, for now, remain outside the scope of his economic rule by decree.

Second, he’s settling old and new scores. He said so himself, during his latest “weave” – how he was showing “great consistency”. Trump was born in 1947, and is a man who witnessed what Toyota, Honda and Nissan did to the US car sector in the 1980s. Many in those days blamed Japan’s own protectionist measures and currency manipulation for the “unfair” competition, and with some reason (allegations that are similarly levelled against China today).

As a TV celebrity, even then Trump complained about what was happening. He declared in 1989: “America is being ripped off. We’re a debtor nation, and we have to tax, we have to tariff, we have to protect this country.” He advocated tariffs of 15 to 20 per cent on Japan, South Korea, Germany and, a little oddly, Saudi Arabia. Now he’s president, he can do something about what he sees to this day as their “cheating”. (It wasn’t that big a surprise that Toyota got an uncomplimentary namecheck in the Rose Garden.)

It’s not too much of a stretch to see the new trade policy as a sort of Trumpian act of karma, and nowadays it’s applied to new perceived foes, such as Mexico, Canada, China and the European Union. For Trump, it’s the fulfilment of a lifelong dream.

Who knows where this will lead? The last time the US tried this policy, it exacerbated the Great Depression and was thus a strong contributory factor in the outbreak of the Second World War. The US Tariff Act of 1930 – better known as “Smoot-Hawley” after the two senators who sponsored the legislation – slapped substantial import taxes on the rest of the world. Retaliations and counter-retaliations followed, as did a series of competitive currency devaluations, and the next result was that world trade collapsed within a few years, the major industrial nations were mutually impoverished, and, soon enough, the trade wars led to the real thing.

In some ways, the world is worse placed than it was in the 1930s to withstand yet another shock. Do not forget that the coming trade recession follows the recent energy crisis, the huge debts run up by national treasuries during the pandemic, and the global financial crisis of 2008, in which the banks had to be rescued at what was, at the time, considered an exorbitant cost to the taxpayers of the West. The sense of jeopardy at this point should be palpable.

It is not going to be possible once again to borrow and spend our way out of a slump, because most of the advanced economies have already run out of “fiscal headroom”, to use the fashionable phrase.

As in the 1930s, countries are now having to divert precious economic resources into making armaments to deter or fight wars – guns before butter. Some $5 (£3.8) trillion has been wiped off the value of American shares since February.

We should be terrified. Maybe it’s what Trump wants us to be, the whole world watching him on TV signing off the executive orders in an economically lethal version of The Apprentice. He enjoys being theatrical, but this is a dangerous game, and history offers no comfort.

Within a decade of the Smoot-Hawley act, the world was at war. A century on, who can say that history won’t tragically repeat itself?