It takes quite a lot to make you feel sorry for the Swiss but US president Donald Trump has managed it, imposing 39 per cent tariffs on its exports for a reason no one can entirely fathom.
He’s also turned his import tax scattergun on Brazil and India, but his most extraordinary recent act is the ad hoc 15 per cent quasi-export tax on chipmakers Nvidia and AMD’s sales of semiconductors to China.
The wrongly-named “reciprocal” tariffs Trump announced on April’s so-called “liberation day” were always risible, but the deficit-based formula that generated them was at least vaguely related to their stated aim of reducing trade imbalances. The transmutation of those tariffs and others into a Christmas tree on which different parts of the administration and Trump himself have hung their geopolitical and commercial whims has demolished any sense of coherence.
The Brazil tariffs were imposed to support former president and fellow conservative election-truther Jair Bolsonaro, while India’s punishment supposedly reflected its purchases of Russian oil, despite Trump’s apparent closeness to Russian president Vladimir Putin.
The chip export levy makes no sense. If Trump is trying to deprive China of advanced technology, a 15 per cent charge won’t remotely do it; if he wants to raise revenue, then by definition it will only work if it doesn’t deter Chinese buyers. And by his own logic, hampering exports will increase, not reduce, trade deficits.
The administration has entertainingly claimed its campaign of ad hoc coercion is a coherent philosophy for running world trade. US trade representative Jamieson Greer recently called it the “Turnberry system” after the Scottish hotel where Trump put together a typically vague and nonbinding tariff agreement with the EU. (Of the “Mar-a-Lago Accord” to realign currencies, which Trump’s tariff policy was supposed to catalyse, there was strangely no mention – how quickly these plans for a fundamental global economic reordering change.)
Did the EU have its hands tied before striking a trade deal with the US?
Coherent it is emphatically not, especially since it’s not clear what’s agreed. No one believes Japan will finance a $550 billion (€470 billion) sovereign wealth fund. The United Kingdom is still waiting for the relief on tariffs for its steel exports, supposedly agreed in May.
Nor are Trump’s antics conspicuously a success for the US economy. The financial markets have been (perhaps naively) sanguine about growth, and Tuesday’s inflation data was benign. But the job market, gross domestic product and forward-looking survey-based measures of output are all looking pretty shaky.
As such, it’s not exactly providing an inspiration to others to follow. Unlike former US president Joe Biden’s industrial policy, which heavily subsidised green tech, Turnberry Trumponomics has essentially no tribute acts among governments abroad, and not just because hardly any other country has the market power to force similar concessions from trading partners.
One view is that Trump is turning the US-China relationship with politically driven interventions. But China’s industrial policy is far more deliberate and precise than Trump’s practice of basing policy on the last person he spoke to. The rising Chinese dominance of global electric vehicle production reflects an industrial policy stretching back more than 20 years, including targeted R&D spending and consumption incentives.
Critically, it also created a ferociously competitive domestic market out of which emerged a handful of world-beating champions like BYD. It didn’t happen because a car executive buttonholed Hu Jintao at a golf club some time in the 2000s and persuaded him to give their company a tax credit in return for flattery and a few million in campaign contributions.
Certainly, governments (and companies) are leaping to offer Trump whatever they can afford to keep him happy, whether substantive or symbolic. But there doesn’t seem to be much sign of relations between those countries themselves being conducted in the same way.
If you were keen to make an optimistic case for the world trading system, you might well argue that Trump’s tariffs are hitting a sweet spot of malign incompetence in moderation. His trade policy is probably bad enough to discredit protectionism and push the US towards the margins of the global economy, but so far it’s not destructive enough to actually trigger a serious world economic slowdown reminiscent of the 1930s or even the late 2000s. It’s a cautionary tale but not a catalyst for global disaster. It’s a bit like Brexit on a much bigger scale.
Trump’s assault on the independent institutions that underpin the US economic system, including the Federal Reserve and the statistical authorities, is, of course, much more serious. Subverting the Fed and causing it to fly blind without reliable data will be far more dangerous than clowning about with tariffs. But so far, Trump’s trade follies are testing the resilience of the system without fundamentally destroying or remaking it. – Copyright The Financial Times Limited 2025
