The G7 Summit Highlights Western Leaders' Hypocrisy
But protectionism protects governments. While all of us lose, politicians often prefer things to get worse than lose control, and that is a relevant risk with China and Europe. The United States is carrying out an aggressive negotiation tactic and it can backfire.
Trump knows that tariffs hurt inside as well.
In 2001, Bush Jr. introduced tariffs on aluminum that destroyed thousands of jobs, and Obama’s constant protectionist measures led the country to the worst external sector growth data in decades. Putting the fist on the table and demanding that everyone remove their barriers can motivate everyone to blame their barriers to trade on the outside enemy. On the “protectionist” United States, and vice versa.
If the purported “free trade nations” don’t start some real free trade soon and the bickering escalates into a full-fledged trade war, those who will suffer the most will be the consumers all over the world.
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Daniel Lacalle is chief economist at hedge fund Tressis and author of “Escape From the Central Bank Trap,” published by BEP.