Trump And Trade: A Good Idea Gone Horribly Awry

One of the ways Donald Trump secured the Republican nomination for president, and ultimately the White House, was his opposition to other GOP contenders on Medicare, Social Security, healthcare, and the Iraq war.

While the other Republicans–Jeb Bush, Ted Cruz, Marco Rubio, John Kasich, et al.–proudly stood on their desire to slash and ultimately eliminate these “Socialist” programs, Donald Trump puffed out his chest and took traditionally Democratic positions on their preservation, expansion even.

These are the same stances that rocketed Sen. Bernie Sanders to popularity.

The difference is, Sen. Sanders has for decades argued for Medicare-for-all and an expansion to Social Security. Donald Trump, on the other hand, contradicted the other Republicans because of social welfare programs’ popularity with the majority of the American people, Republican and Democrat alike.

We now know this was all classic Trump opportunism.

If he ever had any sincere intention to expand Medicaid, Medicare, and Social Security, Trump quickly reversed course upon taking the oath of office.

But another issue that factored significantly with the American people, and the mainstream media virtually ignored, regarded trade.

Republicans own the “free trade” deals like the North American Free Trade Agreement (NAFTA), the Central American Free Trade Agreement (CAFTA), and Permanent Normal Trade Relations (PNTR) with China that have decimated the American manufacturing base.

The majority of Democrats have, by and large, opposed them.

Trump came in, again opposing his Republican competitors, by promising to “re-negotiate” these deals instead of lying about how they’ve strengthened the economy.

Sincere or not, Trump was at least correct about the damage these trade deals have done.

But everything Trump touches breaks.

The proof is in the methods by which Trump is enacting tariffs.

Prognostications both dire and encouraging have been swirling around Trump’s tariffs since late winter. Most are predicting the worst.

In June, the International Monetary Fund (IMF) warned about the instability Trump’s import tariffs would cause the global trading system, provoking other nations to retaliate, damaging the U.S. economy.

And, in fact, that is exactly what has been happening this summer, with China’s initial response of imposing a $34-billion tariff on imported Chinese merchandise.

On Friday, the Chinese government threatened an escalation to $60 billion if the U.S. does not back off after Trump threatened on Wednesday to raise from 10 percent to 25 percent a proposed tariff rate on $200-billion worth of Chinese goods.

But what about jobs?

If Trump creates the jobs he claims these tariffs will ensure, aren’t tariffs worth the temporary upset?

Perhaps, except due to Trump’s trade war, almost 500,000 more Americans will find themselves out of work.

Trump said:

“Now, thanks to our tariffs, our steelworkers are back on the job, American steel mills are back open for business. We are starting to set new records, and nobody believed it could happen this quickly.”

True, an 18% jump in prices has produced a boon for steel manufacturers, doubling profits.

But there is always a tradeoff. (Pardon the pun.)

Even if the steel industry boasts an increase of 26,000 jobs, 500,000 jobs will be lost in industries relying on steel and aluminum, equaling a net loss of nearly 470,000 jobs.

According to The Washington Post, Vice President Mike Pence’s own hometown of Columbus, Indiana would be one of the places tariffs hit hardest, because exports to other countries comprise half of Columbus’ gross domestic product (GDP).

Reuters reports tariffs on imported auto parts of up to 25 percent threatens to subject consumers to higher automotive repair costs, insurance premiums, and theft of cars for their parts.

In a jointly submitted comment to the U.S. Commerce Department, the American Insurance Association, National Association of Mutual Insurance Companies, and Property Casualty Insurers Association of America stated:

“The imposition of tariffs could likely lead to the filing of hundreds, if not thousands, of requests for rate increases by insurers with insurance regulators across all fifty states. Motor vehicle theft rates could well rise, as many stolen vehicles are sold for their parts.” 

The hardest hit, however, will the agricultural sector.

In an attempt to mitigate the hardship to soybean farmers, Donald Trump’s $12 billion relief plan proposes paying some farmers directly and buying food from others.

Trump’s tariff firestorm puts the United States in the position of being an unreliable supplier to the rest of the world, according to Scott Irwin, an agricultural economist at the University of Illinois.

Illinois, California, and North Dakota producers told Politico last week, the $12 billion package is the Trump administration’s way of admitting its trade battles with China, Mexico, Canada and others are inflicting damage.

The New York Times reported:

“The farm aid appeared calculated to show that Mr. Trump cares about farmers and is working to protect them from the worst consequences of his trade war. But the relief money, announced by the Department of Agriculture, was also an indication that Mr. Trump — ignoring the concerns of farmers, their representatives in Congress and even some of his own aides — plans to extend his tit-for-tat tariff wars.”

Vox reported five pieces of evidence Trump’s tariffs are not working “big time.”

Renegotiating our trade deals is not an inherently bad idea, but tweeting unilateral fiats is not the way to go about it. A responsible leader who cares about his country’s standing in a global economy with other nation-state partners establishes committees, consultations, and panels. He understands the truly monumental impact on global markets, jobs, and industry his policies will have.

This president may have run on the correct trade platform, but the United States is not the Trump Corporation, a family-run business with no board of directors where whatever impulses Trump had were met.

Image credit: The Talon

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