In Lebensborn, the second novel in the trilogy, The Addlestone Chronicles, I have James and Donald talking with their captor, Max Kingsley-Paige, who is a rogue MI6 agent. Max argues:
“It’s the working classes who’ve been the victims of this worldwide Depression. Advanced trading countries have adopted ‘beggar-thy-neighbour’ protectionist policies. The resulting tariffs and quotas are an illogical and self-defeating strategy designed to protect the rich and powerful domestic industrialists. Tariffs are simply a tax on domestic purchases passed on to consumers and reflected in higher prices. The direct consequence of these isolationist policies has been a resurgence of European fascism in Germany, Italy, Spain, Portugal, and here in Britain. Extreme nationalism has been the primary cause of all the wars in history. Can you disagree?”
In 1817, the English economist and parliamentarian David Ricardo published his theory of Comparative Advantage, which outlined the benefits of unfettered free trade. He demonstrated that countries should specialize in producing and exporting those goods for which they had a comparative advantage—not necessarily an absolute advantage—over other countries. They could then trade their surplus goods. This was a reaction to the British Corn Laws, which were tariffs and other trade restrictions on imported food and grains that operated between 1815 and 1846.
Ricardo demonstrated that free and unfettered trade would raise world wealth for both the importing and exporting countries. Ricardo’s model was abandoned in the late 19th century when the US introduced the highest average tariff rates on manufactured imports in the world. These protectionist policies were later abandoned by Franklin Roosevelt in 1933 as part of his New Deal programme to ameliorate the effects of the worldwide Depression.
The only circumstances in which tariffs were subsequently introduced were to protect an infant industry or to discourage a trading country from dumping products on US markets in order to destroy domestic competition and gain monopoly power in the US market.
Trump has threatened to impose 25% across-the-board tariffs on all goods coming from Mexico and Canada, along with a 100% tariff on all Chinese imports to the US. He fails to understand—or simply ignores—the immediate impact of this effective tax on US consumers in terms of inflation, employment, and growth in US GDP.
As of November 2024, annual US imports from Mexico exceeded US$480 billion, while imports from Canada totaled US$436.6 billion in 2022, with oil being the top imported good. Trump views tariffs as a source of government revenue, which he believes will allow him to further cut income taxes for the rich.
While in the long run there might be some switching to domestic suppliers as a result of the increase in the retail price of imported goods, in many instances this is not possible in the short or even medium term. How would the US satisfy its domestic demand for coffee and avocados, for example?