Donald Trump may have changed some laws of politics, but the laws of economics are much more stubborn, says former UK Prime Minister David Cameron. In particular, Trump’s tariffs will increase the chances of a US recession, Cameron adds. “I don’t think you can rule it out.”
The US leader hiked tariffs on steel and aluminium imports on Wednesday. Canada — the US’s biggest foreign supplier of steel and aluminium — imposed C$29.8 billion ($27.61 billion) in retaliatory tariffs on the US effective Thursday morning.
“When you introduce, for instance, steel tariffs, you might get a short-term ‘sugar rush’ of protecting steel jobs in your own country, but you tend to put up the prices for your manufacturers, for your car-makers, for your ship-builders, for others down the line,” says Cameron.
Speaking at CNBC’s inaugural Converge Live summit at Jewel Changi Airport, Cameron adds: “Fundamentally, Donald Trump has changed some of the laws of politics; I don’t think he can change the laws of economics. The laws of economics are, on the whole, that tariffs lead to higher prices, less trade, less productivity, less economic growth and therefore, less prosperity to share around.”
The US may end up hurting its own economy, says Cameron. “It’s not always the first round of tariffs that does the damage; it’s the retaliation and then the tit-for-tat. The more you have that, the more you dislocate trade flows, the more you put up inflation. The more inflation rises, the higher interest rates will rise [and] the more you’ve got dangers of recession.”
Still, Cameron acknowledges that the Trump administration may be eyeing a “more fundamental, long-term change”. Citing comments by US Treasury Secretary Scott Bessent, Cameron believes the current Republican administration is trying to “re-industrialise America”. “They’re talking about a long-term lower dollar. These are huge structural issues, which would take a long time.”
See also: EU targets €26 billion of US products in tariff retaliation
Has the US ‘de-industrialised too much’?
In the March 13 fireside chat with CNBC, Cameron identified as a “free-trader”. His fear, however, is that Trump views trade deficits with other countries as “ripping off” the US.
See also: Ray Dalio cites 1930s Germany to assess unfolding trade war
“If every country in the world has a surplus, who would have the deficit? Mars? Jupiter? So, I don’t think that view of the world is right,” says Cameron, who led the UK from 2010 to 2016.
That said, Trump has a “real and understandable concern” that “America has de-industrialised too much”, adds Cameron. The Briton’s take, however, is to “go after the causes”. “Let’s train our people better. Let’s encourage firms to invest better. Let’s have better schemes for young people coming out of education, making sure they can do the jobs our economies are creating.”
Cameron, who was later Foreign Secretary in Rishi Sunak’s government from 2023 to 2024, worries about Trump’s “tariff approach”. “Ultimately, I think it will put up inflation, [which] will lead to higher interest rates, [which] will hit global growth; and I think it’s going to undermine the relations between a lot of countries.”
Cameron, echoing points from the UK’s Conservative Party, blames the rise of populism in the US and Europe on immigration that has “been too high for too long and not sufficiently controlled”.
Another factor is an “economic dislocation” where globalisation “has been good for most countries and most people in most places, but not for every place and not for every person”, says Cameron without elaborating.
“Combined with the cultural dislocation of mass migration, amplified by social media… [this] has upended and disrupted our politics. So I think what you have to ask is: Which countries are trying to address the causes of populism, rather than just dealing with the consequences?” he adds. “Unless we deal with these causes, unless we get proper control of immigration, unless we put our countries back to work properly, we’re going to keep having these populistic surges that upend and make our politics more difficult.”
‘Unblocking things’
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Trump is using “quite startling” language and approaches and quite a lot of awkward and difficult things have been said, says Cameron.
Some believe Trump is attempting an “unblocking” strategy to deal-making, he adds. “Through his actions — whether on tariffs, Ukraine or perhaps on the Middle East — the activity and the action are unblocking situations in a way that will be long-term beneficial. If that’s the case, great, we need that, and we should make the most of it. It is difficult, though, when you’re trying to respond to this.”
If Trump’s approach of “upending things” can resolve geopolitical gridlocks, the world’s leaders must “try to build that relationship with Trump” in order to “influence the outcome of these discussions”, says Cameron.
He even praises the current UK leader, who leads the Labour Party. “I think, actually, Keir Starmer is doing that well in terms of how he tries to engage with Trump and tries to impact his approaches.”
Pax Americana
The relatively peaceful, rules-based order following World War II does not only benefit “small countries like Singapore or medium-sized powers like Britain”, says Cameron. “I would argue, actually, [that] it has benefitted the United States.”
Many Americans feel they have “paid a higher price” for being “the world’s policeman”, but they have also benefitted from Pax Americana, he adds, pointing to Europe and Japan’s post-war growth and their relationship with the US.
“Yes, it does look like we are going to be seeing a very different world. My plea would be, yes, change is needed, but don’t throw the baby out with the bathwater,” says Cameron. “Perhaps America did de-industrialise too much, that globalisation went too far; too many jobs were lost, too many communities were affected. But don’t throw all the benefits of free trade and globalisation out with the bathwater. Make sure you course-correct rather than fundamentally change things.”
