Editorial | Be careful how we crow

While Jamaica ought not to deliberately jump into the middle of the tariff war Donald Trump unleashed on the rest of the world, Aubyn Hill would be advised to be circumspect about celebrating gains from collateral damage caused by the conflict.

Given Mr Trump’s record in abiding by trade deals, even those he negotiates, there is no certainty that anything agreed to will be adhered to and not unravel.

So, as Jamaica seeks to insulate itself from Mr Trump’s roller-coaster tariff policies, the island, with other members of the Caribbean Community (CARICOM), should seriously review Gordon Brown’s idea of creating an “economic coalition of the willing” to cushion the likely effects of the Trump project, and whether there is value, and space, in that coalition for poor countries of the Global South, like those that comprise CARICOM.

A fortnight ago, Mr Trump, the US president, announced a base tariff of 10 per cent on imports into the United States, but set much higher duties for several countries. China, America’s major economic and geo-political rival, is at the top with 145 per cent.

CARICOM countries, except Guyana (38 per cent), are to be charged at the base rate.

Mr Trump’s tariff scheme, which he hopes will lure manufacturing back to the United States, sent markets into a tailspin, wiping trillions of dollars from the value of companies, while pushing bond yields higher, with the potential knock-on of higher debt costs for the United States.

TRIGGER RECESSION

Faced with the market stampede and concerns that his tariffs could trigger a global recession, Mr Trump (who claimed world leaders were “kissing my a**” in a scramble to negotiate trade deals”) last week announced a three-month moratorium on the duties, to allow time for negotiations. China, which retaliated with higher tariffs on US goods, wasn’t included in the pause.

While Prime Minister Dr Andrew Holness initially seemed cautiously concerned about Mr Trump’s actions, his trade and investment minister, Mr Hill, appeared upbeat at the prospect of grabbing business and capital from other countries hit by the president’s tariffs.

On Wednesday, Mr Hill told reporters that Jamaica was exploring opportunities opened by Mr Trump’s scheme.

Companies, he said, were attracted by Jamaica’s geographic location, as they look to invest “nearshore and set up companies”.

Speaking of one potential business process outsourcing (BPO) company, Mr Hill added: “They’re going to deal with one of our high-level BPO operators here, and the proximity is great, especially at this time when the issue of tariffs is so much in the air.”

This newspaper hopes these talks go well and that Jamaica attracts a great deal of investment, leading to the creation of jobs and growth. But we offer two observations/provisos.

Those investments are preferable, and are more likely to be sustainable, if they come because of the country’s generally competitive business environment, rather than on the back of whimsical, hoodoo tariffs that cause havoc to the global trade system and unleash a global recession, which will disproportionately hurt poor countries. The logic of politics, economics, as well as the dynamics of trade, suggest that China – given its governance structure, its role as lender to trade-deficit countries, and as a manufacturer of critical goods – is better suited than most to ride out a trade war.

Second, Mr Trump’s mercurial character legitimately raises questions about the certitude of agreements he reaches with other countries.

TORE UP

In 2018, during Mr Trump’s first presidency, he tore up the North American Free Trade Agreement (NAFTA) between the United States, Canada and Mexico, claiming that it was unfair to the US. The new United States, Mexico and Canada (USMCA) agreement, which accounts for around five per cent of global trade, came into force in 2020. Its first formal review was scheduled for 2026.

Soon after his election last November, even before he assumed office, Mr Trump, without any sense of irony, was ranting about the USMCA. His complaints were the same as with NAFTA: about the partners’ trade surpluses with the United States. He has placed a 25 per cent duty on motor vehicles, as well as aluminium and steel from both countries.

Writing in the UK’s Guardian newspaper on Thursday, Gordon Brown, the former British prime minister, lamented that it seemed “barely credible that the world is being brought to its knees by one economy, outside of which live 96 per cent of the population, who produce 84 per cent of the world’s manufactured goods”.

“ … We need an economic coalition of the willing: like-minded global leaders who believe that, in an interdependent world, we have to coordinate economic policies across continents if we are to safeguard jobs and living standards,” Mr Brown wrote.

Recalling the response to the global financial crisis of 2008/2009, he argued that the world, “with or without US help”, should mobilise the resources of the World Bank and the IMF, “to help the most vulnerable, tariff-hit developing economies”.

He added: “Europe may be required to lead in another respect if the US’s willingness to act as a lender of last resort to the world is ever in doubt”.

Gordon Brown’s plea is for a return to a structured, rules-based global system – multilateralism – rather than one centred on whim, might and power. Indeed, the old arrangements were in need of reform, to take into greater account the concerns of smaller, poor countries.

But, on the fundamentals, Gordon Brown is right. Which is why this newspaper believes his ideas should be engaged.