Trump Is Losing His Trade Wars
S E E D E D C O N T E N T
For the reality is that Trump isn’t winning his trade wars. True, his tariffs have hurt China and other foreign economies. But they’ve hurt America too; economists at the New York Fed estimate that the average household will end up paying more than $1,000 a year in higher prices.
And there’s no hint that the tariffs are achieving Trump’s presumed goal, which is to pressure other countries into making significant policy changes.
What, after all, is a trade war? Neither economists nor historians use the term for situations in which a country imposes tariffs for domestic political reasons, as the United States routinely did until the 1930s. No, it’s only a “trade war” if the goal of the tariffs is coercion — imposing pain on other countries to force them to change their policies in our favor.
And while the pain is real, the coercion just isn’t happening.
All the tariffs Trump imposed on Canada and Mexico in an attempt to force a renegotiation of the North American Free Trade Agreement led to a new agreement so similar to the old one that you need a magnifying glass to see the differences. (And the new one may not even make it through Congress.)
And at the recent G20 summit, Trump agreed to a pause in the China trade war, holding off on new tariffs, in return, as far as we can tell, for some vaguely conciliatory language .
But why are Trump’s trade wars failing? Mexico is a small economy next to a giant, so you might think — Trump almost certainly did think — that it would be easy to browbeat. China is an economic superpower in its own right, but it sells far more to us than it buys in return, which you might imagine makes it vulnerable to U.S. pressure. So why can’t Trump impose his economic will?
There are, I’d argue, three reasons.
First, belief that we can easily win trade wars reflects the same kind of solipsism that has so disastrously warped our Iran policy. Too many Americans in positions of power seem unable to grasp the reality that we’re not the only country with a distinctive culture, history and identity, proud of our independence and extremely unwilling to make concessions that feel like giving in to foreign bullies. “ Millions for defense , but not one cent for tribute” isn’t a uniquely American sentiment.
In particular, the idea that China of all nations will agree to a deal that looks like a humiliating capitulation to America is just crazy.
Second, Trump’s “ tariff men ” are living in the past, out of touch with the realities of the modern economy. They talk nostalgically about the policies of William McKinley. But back then the question, “Where was this thing made?” generally had a simple answer. These days, almost every manufactured good is the product of a global value chain that crosses multiple national borders.
This raises the stakes: U.S. business was hysterical at the prospect of disrupting Nafta, because so much of its production relies on Mexican inputs. It also scrambles the effects of tariffs: when you tax goods assembled in China but with many of the components from Korea or Japan, assembly doesn’t shift to America, it just moves to other Asian countries like Vietnam.
Finally, Trump’s trade war is unpopular — in fact, it polls remarkably poorly — and so is he.
This leaves him politically vulnerable to foreign retaliation. China may not buy as much from America as it sells, but its agricultural market is crucial to farm-state voters Trump desperately needs to hold on to. So Trump’s vision of an easy trade victory is turning into a political war of attrition that he, personally, is probably less able to sustain than China’s leadership, even though China’s economy is feeling the pain.
So how will this end? Trade wars almost never have clear victors, but they often leave long-lasting scars on the world economy. The light-truck tariffs America imposed in 1964 in an unsuccessful effort to force Europe to buy our frozen chickens are still in place , 55 years later.
Trump’s trade wars are vastly bigger than the trade wars of the past, but they’ll probably have the same result. No doubt Trump will try to spin some trivial foreign concessions as a great victory, but the actual result will just be to make everyone poorer. At the same time, Trump’s casual trashing of past trade agreements has badly damaged American credibility, and weakened the international rule of law.
Oh, and did I mention that McKinley’s tariffs were deeply unpopular, even at the time? In fact, in his final speech on the subject, McKinley offered what sounds like a direct response to — and rejection of — Trumpism, declaring that “commercial wars are unprofitable,” and calling for “good will and friendly trade relations.”
Tags
Who is online
575 visitors
China's ''100 years of humiliation'' will not allow them to concede anything to the U.S.
Opinion, and simply bullshit. There are several difference in the new NAFTA trade agreement. The only reason it won't make it through Congress is the Dems; who don't want to give Trump a "win".
Like the old NAFTA deal had anything even remotely close to this. But the Dems and Repubs were upset when Trump tore it up. Now the Dems are suddenly ultra cautious and want to wait until Mexico passes and enforces new laws related to the deal? How was enforcing the old NAFTA deal working out for the US? Funny how the Dems sat idle for the POS trade deals Obama negotiated, The ones Hillary helped to negotiate while she was SoS; but turned against them when she was running for POTUS.
The left wing mainstream media is downplaying the accomplishments in the new deal. When the only question should, "Is it an improvement for the US over the old one?"
The farmers are not "winning", they are being bailed out with taxpayer dollars and Trump was very public about that bailout. Yet still it is not enough to cover the losses these American farmers are losing.
The workers in coal are still losing jobs with the biggest coal mine in the country shutting down. The companies like Carrier and Harley and several others that Trump used for photo ops have gone under, outsourced or relocated to foreign countries anyway.
Now that Trumpsters have filed their 2017 and 2018 taxes they find they are not "winning".
Add the explosive deficit Republicans and Trump are ignoring and the fact that Mnuchin just announced that the government will be out of cash very soon which means a bankrupt America, how is that "winning"? We are watching Trump totally dismantle America, financially and ethically.