It takes more than a tariff wall to make US manufacturing great again

More substantive policies are needed. The US must fashion its trade deals to work with other economies, not against them.

- Vikram Khanna

After all the high drama and bluster on trade during US President Donald Trump's first 100 days in office, US tariffs are headed down. The prospect of empty shelves on US stores, a bond market crisis and the threat of stagflation have brought home to Mr Trump and his fellow trade hawks that wide-ranging and draconian tariffs, especially on China, will backfire. We are entering a phase of trade detente. But despite such small mercies, US tariffs will almost certainly not go back to the pre-Trump era. The outcome of the trade deals between the US and its trade partners, about which there has been more talk than action, remains uncertain. Negotiations with China in particular are likely to be long and difficult. In the end it's safe to predict that America's overall effective tariff will be in double digits, rather than the 2.5 per cent that prevailed last year.

TARIFFS ALONE ARE NOT ENOUGH

But even then, tariffs can no longer be the centrepiece of the US strategy to bring manufacturing back home as the Trump administration imagined until recently. They will at best be one policy tool. Many other policies will be needed, and they will increasingly become the focus of attention as the obsession with tariffs starts to fade. What happens behind the US tariff wall will be more important to watch.

Some economies have used tariffs, sometimes successfully. But tariffs have worked only when they have been selective and temporary. For example, in the early years of their post-war industrialisation tariffs were imposed by Japan on cars and steel, by South Korea on shipbuilding and semiconductors and by Taiwan on textiles and electronics. Before it joined the World Trade Organisation in 2001, China had tariffs on machinery, telecoms and consumer goods.

But all those tariffs only served as scaffolding for many other policies that accompanied them and were arguably more important.