It speaks volumes about protectionism that while the share prices of steel and aluminium makers rose on the news that President Trump is to place tariffs on imports (from exactly which countries he didn’t say), shares in companies which use large amounts of steel immediately plunged: General Motors by 3.7 per cent, Ford by 3 per cent. It is always the same with protectionism. Either Donald Trump hasn’t studied the effects of George W Bush’s experiment with steel tariffs in 2002 or he doesn’t care. On that occasion, while creaking steel companies enjoyed a temporary reprieve, the overall effect on the economy was hugely negative. According to CITAC – a US CBI – the tariffs went on to cost US industry as a whole 200,000 jobs – as steel-using companies found their input costs soaring. The results were so alarming that Bush lifted the tariffs after 18 months, halfway through their intended life.
None of this, however, is going to come as much comfort to Theresa May who today will make a speech portraying a future of a post-Brexit Britain that is outward-looking and eager to seize new opportunities to trade with the wider world. This speech will now be made against a backdrop of threatened trade war between the US and the rest of the world – something which Trump threatened often enough during his presidential campaign but until yesterday had made only a token gestures towards.
In one sense Trump has played into the hands of Remainers. To some it will look this morning far safer to be part of a trading bloc like the EU. If the world is going to sink into protectionism, it might seem that we are better off as part of a trading bloc. But then again the EU does not promise much hope. The first reaction of Commission president Jean-Claude Juncker was to threaten retaliation by means of tariffs on US goods – this before we even know if Trump plans to apply his tariffs to Europe or not.
There is an alternative: that with Trump’s threat of tariffs and the EU quickly slipping back into its own native protectionism there is a hole in the market for a western economy to stake out its territory as a champion of free trade. Why should the first reaction to the threat of tariffs to be to retaliate, rather than to emphasise the positive side? With US car-producers now hampered in their attempts to source quality steel at the lowest possible price, that puts UK car-producers (and other steel-using industries with US competitors) in a relatively advantageous position. If Trump wants to hamper his manufacturing industries, that will end up being his problem more than ours.
Theresa May’s Number 10 is not the most imaginative of places, but hopefully her speech-writers will be up to slipping in a few lines reacting to the Trump tariffs and promising to place Britain firmly as the international champion of free trade. That is going to be the way to take advantage of Brexit.