Barack Obama has lost it. Not the Democrat nomination – he remains the favourite in that increasingly bitter battle; no, what he has lost is the aura of invincible charm which had hitherto repelled all incoming fire, like some invisible force-field.

That has disappeared with the publication of his remarks to a private dinner for wealthy Democrat donors in San Francisco about his difficulties in attracting support from the blue-collar vote in the de-industrialising Midwest. That sophisticated audience laughed – it's on tape – when he told them how such people found it hard to buy the message of "a 46-year-old black man named Barack Obama".

Oddly, it was not this explicit imputation of racism against people whose votes he had failed to capture which has caused Obama the biggest problem. It was his follow-up remarks: "They get bitter, they cling to guns or religion or... anti-trade sentiment as a way to explain their frustrations".

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The most extraordinary thing is that Obama has actually been pandering to the "bitterness" he identified – the "anti-trade sentiment". In the rust belts of Ohio and Pennsylvania the Senator from Illinois has lost no opportunity to blame America's economic woes on the free-trade treaty with Canada and Mexico (Nafta) – which had been enacted by President Clinton.

Obama is one of three Congressional sponsors of "The Patriot Employer Act", which seeks to give preferential tax status to American companies that choose not to invest overseas. His anti-globalisation rhetoric goes far beyond criticism of free-trade deals such as Nafta. Obama told voters in New Hampshire:"I would stop the import of all toys from China". China supplies 80 per cent of the toys sold in the US, so that's one heck of a pile of embargoed fluffy bunnies.

Obama's electoral calculations, at least, are rational: recent polls suggest that three quarters of voters believe that international trade has "made things worse for Americans". So as not to appear "protectionist" – perish the thought – Obama graciously concedes that "not every American job lost is due to trade". Not every job? The true figure – according to the apolitical US Council of Economic Advisors – is that only 3 per cent of US job losses can be attributed to "outsourcing".

Other figures which are never discussed are those measuring the "insourcing" of jobs, when companies from foreign countries have invested in the US. The value of those investments has been staggering – the biggest secret in a debate conducted (at least in the Democrat primaries) at a shocking level of ignorance.

The two Democrat candidates have made frequent attacks on the multi-billion dollar US trade deficit with Canada and Mexico: what Mrs Clinton and Mr Obama never acknowledge is that almost 95 per cent of the growth in that deficit since 2000 is entirely attributable to oil and gas imports. Are they seriously suggesting that America would be better off buying oil from countries without preferential trade status, such as Chavez's Venezuela or Ahmedinejad's Iran?

In fact, over the past year America's trade deficit has narrowed by $50bn (£25bn), as her exports have risen faster than imports; aided by the dramatic fall in the value of the dollar, international trade is helping the US to fight recession.

This would be especially appreciated by the Chairman of the Federal Reserve, Ben Bernanke: Dr Bernanke made his name as an economist specialising in the causes of the Great Depression – which you might think is just as well, given the role which history (or rather President Bush, which is not quite the same thing) has allotted him.

Dr Bernanke's dramatic cuts in interest rates demonstrate that he has no wish to repeat the errors of the Central Banking authorities of 1929, who tightened monetary policy in the teeth of a recession; but the Fed Chairman has no power to prevent a repetition of the other disaster of that era, created entirely by politicians – a protectionist trade policy. This was a policy solely designed to preserve American jobs: it slaughtered them.

The Smoot-Hawley Tariff Act of 1930 was named after its two Republican sponsors, and passed by President Herbert Hoover, who ignored a petition against it signed – remarkably – by 1,028 economists.

As Bernanke has written: "Although we economists are indeed a contentious bunch, one proposition commands almost unanimous assent. That proposition is that free trade among nations promotes economic prosperity."

With shattering predictability, America's trading partners retaliated against the Smoot-Hawley Act with import tariffs against US goods. By 1933 US imports had plunged by two thirds – and exports by a similar amount. The economy of a great trading nation all but vaporised, as a domestic stock-market led recession was transformed into a worldwide Depression.

John McCain is not quite of an age to recall all that personally; but it must help to have been born in the 1930s – he is absolutely not prepared to pander to protectionism in the manner of his competing Democrat opponents. Not only has he refused to appease such "anti-trade sentiments", he has been courageous in tackling them head on.

This week McCain travelled to recession-hit Youngstown, right in the heart of the old Ohio steel-producing belt – where Clinton and Obama had been most strident in their anti-free trade rhetoric—and told a town hall meeting: "The biggest problem is not free trade, but our inability to adjust to a new world economy. I can't look you in the eye and tell you that I believe those jobs are coming back... [but] protectionism and isolationism have never worked in American history."

Reporters described McCain's speech as "risky". Indeed it was – he will need to win the support of such town hall meetings to secure the Presidency. It was a demonstration of pure political courage – something which Barack Obama has yet to provide: I can't find a single speech of his – brilliantly constructed and delivered as they are - in which he did anything of the kind.

Thus Obama has a bit of a laugh with a well-heeled bunch of business folk in San Francisco about the "anti-trade sentiment" and insularity of the Midwestern industrial working class; meanwhile he tells those "anti-trade" blue-collar workers that he agrees with them – something must be done about those Mexicans and Chinese "taking American jobs". My guess is that the real Obama is the San Francisco one: recall how one of his most senior advisors told the Canadians not to worry about his anti-free trade rhetoric – it was just campaign trail stuff.

The trouble is that Barack Obama has now promised Americans that he will legislate in an attempt to prevent their jobs being lost to foreign competition. If he does not do so as President, they will feel betrayed. If he does so, it will be an even bigger betrayal.

d.lawson@independent.co.uk

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