The biggest shift in American politics has nothing to do with Stormy Daniels or Michael Cohen, Fox News or golf courses. Indeed, its author is not Donald J Trump. Yet the implications stretch far beyond this year’s presidential elections, and affect countries across the world. The era of free trade is dying, and the man bringing down the guillotine represents the party that in the past three decades has been evangelically pro-globalisation: the Democrats.
Last week, Joe Biden imposed tariffs on a range of Chinese-made goods. Electric cars produced in China will now be hit with import tax of 100%, chips and solar cells 50% and lithium-ion batteries 25%. These and other tariffs on goods worth an estimated $18bn a year amount to a rounding error in the giant US economy. And in an election year, Mr Biden, who hails from Scranton, Pennsylvania, is fretting about support not only in his home state but across the country’s industrial heartland, gutted by decades of free trade.
Yet, what matters is not the what or the why, but the who. When, in 2019, Donald Trump hit Beijing with tariffs across $300bn of goods, his Democrat rival tweeted: “Trump doesn’t get the basics. He thinks his tariffs are being paid by China. Any freshman econ student could tell you that the American people are paying his tariffs.” Mr Biden vowed to repeal them. Five years later, they not only remain in place, but he is piling on more.
For the best part of 40 years, free trade and free finance were so orthodox among Democrats and Republicans that they were key to what’s been dubbed the Washington consensus. It was Bill Clinton who signed into law the Nafta deal with Mexico and Canada, and who successfully lobbied for China to join the World Trade Organization (WTO). Now his successor has turned towards subsidies for American clean-technology businesses and protectionism. This is as significant a shift in US foreign policy as Nixon flying to Beijing.
The classic case for free markets is that they lower prices and force businesses to sharpen up. Tony Blair thought that “the competition can’t be shut out; it can only be beaten”. From now on, the WTO and other global institutions that safeguard competition may need to show greater flexibility. But as the economist Ha-Joon Chang notes: “All of today’s rich countries, including Britain and the US – the supposed homes of free trade and free markets – have become rich through combinations of protectionism, subsidies and other policies that today they advise the developing countries not to adopt.”
Perhaps the more pressing question is whether the US can catch up. The Chinese now dominate the production of electric cars and have the lock on battery production. But few Chinese vehicles are sold in the US. Mr Biden could have concentrated on the installation of green technologies and retrofitting homes – jobs that cannot be traded away.
Free trade is no longer seen as an economic inevitability, but what it always was: a political choice. That comes too late for many. Interviewed by the Observer last Sunday, the singer-songwriter Richard Hawley recalled his boyhood in Sheffield, as it was hollowed out by global market forces. “As a steelworker’s son, who watched my father’s entire generation get thrown on a scrapheap, I was determined never to work for the man. Never … Thirty-four years in the steelworks and you get treated like that at the end?” Quite.
