US trade policy will be catastrophic for countries whose economies depend on exports to grow.
President Donald Trump is showing America’s trading partners no mercy. If they export a lot to the US, it will tariff them back — by half. The rates are especially steep on many developing countries, with Vietnam, India, Thailand and Bangladesh all well over 20%.
The costs won’t be felt equally. Tariffs aren’t great for the US, but trade is still a relatively small part of its economy (less than 25%), and if there is a corporate tax cut, the costs to US consumers may not be as high as feared. But such high tariffs will be catastrophic for developing countries that depend on exports. The costs could be far worse than cutting foreign aid, including eliminating USAID.
Foreign aid does not have a great track record. Aside from its potential for corruption, it can distort economic decisions and actually set back economic development. If the goal is increasing growth and reducing poverty, export-oriented growth has historically been more successful. Opening up to trade encourages economic activity, increases inflows of foreign capital and promotes more investment and sustainable growth. The success of the so-called Asian Tiger economies, for example, was largely because of export-driven growth.
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Allison Schrager is a senior fellow at the Manhattan Institute and a contributing editor of City Journal.
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