Trump tariffs: Who will have the last laugh?

Mr Trump may temper his approach from time to time, but to think that he will change his basic philosophy is delusional

- TT RAM MOHAN

U.S. President Donald Trump's tariff policy caused stock markets to tumble and sent shock waves through the world's political capitals. Commentators warned of stagflation in the U.S. and a collapse of global economic growth. Mr. Trump has since announced a 90-day pause on reciprocal tariffs on all countries except China, which faces a tariff of 125 per cent.

However, the baseline tariff of 10 per cent remains. So do the tariffs of 25 per cent on aluminum and steel imports, and on the automobile sector. The relief over the pause on reciprocal tariffs is understandable. But there's no getting away from the fact that the baseline tariff of 10 per cent is way above America's earlier average tariff rate of 2.8 per cent.

The period ahead promises an answer to a most fascinating question. In matters of economic policy, what matters more—the instinct of the charismatic politician or the theories of academics? Will Mr. Trump prevail in his attempt to restore manufacturing to the U.S. and reduce America's chronic trade deficits? Or will he leave behind a legacy of economic ruin?

In addressing these questions, it's useful to examine some of the propositions one hears in public discourse.

(1) Mr. Trump is just a crude, bullying politician who acts on impulse and not through rigorous reasoning. He understands little of economics.

Crudity and bullying are hardly novelties in a President of the United States. The notion that Mr. Trump is an uninformed person is ridiculous. You don't become a billionaire and President of the United States twice—the first time without any experience in politics—by being a country bumpkin.

Economists Arthur Laffer and Stephen Moore, who have been advisors to Mr. Trump during his two presidential bids, have together authored a book,