History, wrote Karl Marx, happens first as tragedy, the second time as farce. That chronological order may currently be in the process of being reversed.
Two and a half years ago, new UK prime minister Liz Truss arrived in Downing Street with a theory of economic management that collided with the reality of unimpressed bond markets. Truss’s tenure, memorably compared to the shelf life of a supermarket lettuce, was brutally terminated by her own party in one of the more farcical episodes in recent political history.
The grenade thrown by Donald Trump last week into the global economy threatens to have more far-reaching consequences. Driven by Trump’s long-standing, unwavering faith in tariffs, and buttressed by a small band of ideologues who believe they can reshape the global economic order to their own liking, the damage already caused is considerable.
The abrupt pause announcedon Wednesday on most tariffs sent a wave of relief through international markets and changes the calculation for countries across the world. A more measured approach that limits further damage to their own economies is now likely.
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Also yesterday, America’s biggest trading partners in the European Union, confirmed levies will be imposed from April 15th on a range of US goods in response to tariffs on aluminium and steel that Trump had announced in March. That was a first riposte. But the 90-day pause offers the opportunity to agree a more long-term European strategy.
The further escalation between China and the US, with each country now imposing tariffs of 84 per cent and 150 percent respectively on the other, is now the focus of attention. Beijing clearly believes it can continue to pile pressure as the punitive US tariffs come into effect for American consumers. It certainly appears that pressure on bond markets impressed on the White House that Trump’s tragedy was on a similar trajectory to Truss’s farce.
Unlike Truss, though, the president is guaranteed almost four more years in office. For the moment, his dominance over his party remains unchallenged, although the first murmurs of dissent were audible this week among congressional Republicans and prominent donors. That may change if the issue is now reframed as a geopolitical struggle with the US’s main adversary.
Regardless of future events, the worldwide harm done already by this entire sorry episode is irreversible. Responsibility lies with an irrational president and his reckless administration. But it is now incumbent on responsible leaders to come together to mitigate the damage and present a common front for a more sane approach to international relations. Europe has the opportunity to take a lead in that process.
