US Presidential nominee Donald Trump likes to describe himself as “Tariff Man,” believing that imposing 60% levies on imported Chinese goods and up to 20% on everything else from any country will Make America Great Again.
His America-first philosophy is built on the premise that, before globalization, the country manufactured or farmed most of what it consumed, and can again.
Perhaps he thinks a homegrown watch manufacturing industry can be reborn, with 20th century marques like Timex, Bulova and Shinola or even more historic producers including Waltham Watch Company and Elgin revived into US-based manufacturers capable of competing with Rolex, AP, Omega or Japanese giants Citizen or Seiko.
Economists are lining up to attack Mr Trump’s proposed policy, and it is vanishingly unlikely that 20% tariffs will be imposed on Swiss, German or Japanese watches.
We await the result of the US election, and then we will see.
“While taxes on the British will be hiked to fill a supposed £40 billion black hole in the country’s finances, it is inconceivable Downing Street will risk headlines about handouts for shopaholic Sheikhs”
Absurd as the Trump tariffs sound, it should not be dismissed as beyond plausible, as a glance across the Atlantic will reveal.
Under the last UK government, during Boris Johnson’s term as Prime Minister, he unleashed a policy of almost equal stupidity; perhaps this why is sometimes called Britain’s Trump!
As part of a bodged Brexit agreement, he axed VAT rebates for overseas visitors while the whole of Continental Europe kept the perk.
This effectively makes watches 20% more expensive for tourists and even nudges Brits to board flights or trains to Paris to to shop for luxuries.
As I’ve argued before that the chances of Britain’s new Labour government — which is broadly aligned with Democrat thinking over here — reversing this policy are virtually nil.
Taxes on the British are expected to be hiked next week in a budget designed to fill a supposed £40 billion black hole in the country’s finances.
It is inconceivable in these circumstances that Downing Street will risk headlines about handouts for shopaholic Sheikhs in the upcoming budget.
But the British Chancellor should do exactly that, for precisely the same reason Donald Trump should not hit Swiss watch imports with 20% tariffs.
Both policies make goods more expensive in their countries, and rich people will do their shopping, particularly for hard luxuries like watches, elsewhere.
How much the wealthy change their shopping behaviour is hard to quantify, although studies have suggested Britain’s tourist tax has cost the country £11 billion in GDP and £2.5 billion in taxes, and evidence of how even small differentials of prices between countries are easy to find.
Look at the post-Brexit boom in Britain when the weak pound had millionaires flocking to to the country for bargains.
The same has been happening in Japan this year.
Or look at India where a cocktail of import taxes inflate the prices of luxury goods by up to 40%.
No wonder their billionaires, millionaires and even middle classes spend their weekends shopping in Dubai.
Rich people stay rich by making rational decisions and calculating the value of everything. They are mobile, not just as tourists but as business travelers, and they will adjust their shopping habits when prices and other incentives are taken into account.
For these reasons, Britain should scrap the tourist tax in next week’s budget.
A day of difficult headlines is a more than reasonable price to pay to remove barriers to growth of its economy.
To maintain such a damaging policy is as bad for Britain as Mr Trump’s tariffs would be for the United States.