The risk of getting squeezed by Tariff Man Trump

Friday, 25 October 2024

In a recent AP-NORC poll, neither Trump nor Harris claims a clear edge on the economy, with around 40% favoring each candidate. Trump focuses on tax cuts and tariffs, while Harris prioritizes the middle class with higher taxes on corporations.

Josie Pagani is a commentator on current affairs and a regular opinion contributor. She works in geopolitics, aid and development, and governance.

OPINION: His name is Buddy. He’s an important figures in the US election.

Buddy is the star of an ad that, research says, might be one of the most persuasive this year.

We meet him watching Donald Trump tell his audience, “you’re rich as hell, and I’m going to give you tax cuts”.

Buddy tells the camera, “I’m not rich as hell”. He’s voting for Kamala Harris because, “I'm the one that really needs the break. Not the people that are already rich and have the money, the 1% don't serve anybody but themselves.”

The ad is reported to be one of the most effective of the year. How do we know? Because there are donors to the Harris campaign testing and re-testing ads. As few as one out of 20 tested make it to air. Her ad testing budget could be as high as US$700 million.

Telling voters Trump’s an awful person is almost totally ineffective, writes Josie Pagani.

Testing has revealed that telling Trump voters he’s an awful person is almost totally ineffective. They already know who he is and rationalise, like John Key does: “Sure he’s not a great guy but how ‘bout those tax cuts!”

There is an asymmetry about negative advertising. Trump’s most effective ads call Harris “failed, weak and dangerously liberal”. Attacks sway voters away from Harris and not away from Trump.

The decisive voters who could still change their minds are nearly all working class, like Buddy.

Trump is skewering Harris because those voters think he’s credible on making the economy work for them. He is promising an across the board 10% tariff on imports, using the proceeds to fund large personal income tax cuts.

Kamala Harris has a vast machine behind her campaign, exhaustively testing advertising to identify the most effective messages against Trump.

The tariff is being sold as a tax switch – “tax China to pay for your tax cut”. In swing states like Pennsylvania and Michigan, this is a powerful message.

I count myself as a supporter of free and open trade and I supported the Trans Pacific Partnership, which has not led to the gutting of our economy that its opponents warned.

Neither has the US’s failure to join it obviously been harmful for Americans. An irony of the election is that every statistical indicator says the Biden economy has thrived.

Kamala Harris has not made the mistake of responding to how people feel with statistics explaining why they are wrong.

Tariffs are a tax on imports. Trump wants voters to believe that the tax will be paid by foreigners like us, rather than consumers at the check-out in America. Kamala calls his plan a “sales tax”, and she's right. Not that she's a free-trader. She has promised to keep in place tariffs from the first Trump presidency.

Economists say that tariffs drive investment into less-productive protected industries instead of into more-efficient competitive exports. Misallocation of resources makes us poorer overall.

Trump’s enthusiasm for tariffs is just one troubling aspect of his platform for small, trading countries like New Zealand, writes Josie Pagani.

Economic theory assumes that individuals make rational economic decisions, so it has always been awkward that rational economic actors vote for trade protection.

But it’s easy to see the appeal if you consider what a promise to repeal a 10% tariff would look like. “We are going to increase your income taxes by $4000 a year so that China can sell more to you at the expense of your job.“ That’s the message Harris is battling by having Buddy say, ”Kamala Harris is gonna make billionaires pay their fair share and she's gonna cut taxes for working people like me“.

Tariffs will stay, although it will be much worse under Tariff Man Trump for us. He recently mused about 50% tariffs.

This is bad. Trade with the US is our fastest growing market. It surpassed Australia to become our second largest export market this year.

Canadian Prime Minister Justin Trudeau, centre, accompanied by two of his ministers addresses a media conference claiming a link between violent criminal activity in Canada to India. Such an episode highlights the risks of allowing the rules-based order to fail, writes Josie Pagani.

It's not just trade with the US that is threatened. The emerging world without rules is fraught for small countries.

Consider Canada’s scrap with India for a glimpse of the stakes in a contest between an international rules based order versus “might is right”.

Canada expelled the Indian high commissioner last week, and accused the Indian government of complicity in “homicides, extortions and criminal acts of violence” against Canadian Sikhs.

Sikhs want a homeland established in India. The nationalist Modi government does not. India strongly denies involvement in the assassination of a Sikh activist in Canada, but its complaints lack the credibility of the accusation.

In a just, rules-based order there would be consequences for India if it has violated Canada’s sovereignty and involved itself in murder.

In a “might is right” world, countries act with impunity. In that world, Canada has some power. New Zealand has little. We survived that world in the past by sheltering behind Mother Britain, and later the US.

Now imagine we have to survive that world when the US is imposing extortionate tariffs on our exports and Trump is demanding concessions.

A future in which we need trade and protection in a US bloc will not be easy or low-cost, and maybe not even possible.

It’s a world where we are Buddy and we’re not rich as hell.