Trump’s “Reciprocal Tariffs” Aren’t Reciprocal Tariffs
At The Spectator ($), I detail the (il)logic and perverse effects of President Trump’s latest tariffs, which really seek to tax trade deficits rather than retaliate to other countries’ protectionism:
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Given its substantial goods surplus with the U.S., China now faces an additional 34 percent tariff on top of existing duties, for example. But Trump’s approach isn’t limited to targeting geopolitical rivals; allies are in the crosshairs too. Japan is hit with a 24 percent “reciprocal” tariff, India 26 percent, and Vietnam a hefty 46 percent, all due to them importing fewer American goods than they export to the U.S.
Nor has the UK escaped. Mercifully for Keir Starmer’s government, America’s statistical agencies think the U.S. runs a goods surplus with Britain. Does this not, by Trump’s own logic, mean the States is taking advantage of the UK? Consistent logic would say so, but Trump doesn’t see it that way. Even for countries that America runs a trade in goods surplus with, like Britain, Trump has slapped on a minimum 10 percent tariff for good measure.
This trade deficit-correcting approach leads to bizarre outcomes. Goods from famously protectionist nations like Brazil receive the same 10 percent minimum tariff rate as products from the notably free-trading Singapore, simply because the U.S. runs a trade surplus with both. Even countries that the U.S. has free-trade agreements with, like South Korea and Australia, are hit with the 10 percent rate too, despite those agreements eliminating most tariffs. Meanwhile, Israel, a U.S. ally that dropped all its tariffs on American goods this week, faces a higher reciprocal tariff (17 percent) than Iran, a U.S. adversary.
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The piece also explains how Trump’s neo-mercantilist worldview goes far beyond the concerns some economists have about persistent, large U.S. trade deficits reflecting unhealthy global savings and investment flows. Indeed, the President doesn’t just think an overall U.S. trade deficit is a problem, he thinks trade (in goods only) should be balanced with each and every single country…
UK Planning Reform
In my column for The Times ($) this week, I cheer the Office for Budget Responsibility modelling how planning reform can boost Britain’s growth prospects—and urge the government to harness the analysis to go further:
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Where do those GDP gains come from? Over the first five years, it’s mainly from higher construction productivity. Easier permission means developers can shift building efforts to places where the price of new houses greatly exceeds the cost of building them. Extra development also increases the flow of housing services, meaning more housing space, in better locations. Over time, those output gains grow larger, as better-located homes allow workers to move towards more productive jobs and industries to cluster more effectively.
If anything, experts think the OBR may be undercooking this GDP boost too. Ant Breach, economist at the Centre for Cities, points out that the watchdog only examined residential development when analysing Labour’s policies. Yet the greybelt reforms and the designation of data centres as Critical National Infrastructure have already triggered, in his words, “a big boom in data centre investment in recent months”.
And there’s more reform to come. The OBR can’t yet chalk up how brownfield passports might spur urban development, or any upside of the Planning and Infrastructure Bill. Nor has it modelled expected changes to local planning committees — tweaks that could help cut through vetoes and speed up approvals.
Even on current policy, in fact, the upside of liberalisation may be somewhat bigger than the OBR presumes. Its modelling suggests current reforms will deliver 170,000 extra homes by 2029, cutting average house prices by 0.9 per cent. That price effect is consistent with the UK’s overall housing market over recent decades. Yet if more of this housing occurs in those supply-constrained, high-demand areas like London and Cambridge, then the impact on affordability and productivity would be far greater.
