In my review  of Trump’s first year as President of the United States, Inoted that the big fear that I and many others had, that he would actually implement the protectionism he campaigned on had been unfounded.

Unfortunately that has changed in the weeks since then and Trump has started slapping punitive tariffs on industry after industry. First it was solar panels and now he has turned to steel and aluminium.

This is bad news not just for the countries that export these things to America, but also for the U.S. Even in the unlikely scenario that other countries refrain from retaliatory moves, more jobs will be lost than saved.


Because first of all, many U.S. companies use these imported goods as input in their businesses, and they will of course then be less competitive and reduce their work forces.

And because will raise inflation and reduce capital inflows, interest rates will go up, reducing investments. Oh, and higher interest rates also raise the foreign exchange value of the dollar, increasing other imports and reducing exports.

And finally, retaliatory moves hurting U.S. exports have already been announced.

So, contrary to what Trump tweeted, the U.S. can’t win a trade war even if it has a trade deficit. All sides lose from a trade war.