Donald Trump’s 2016 presidential campaign swings throughout our country’s heartland successfully honed in on the loss of manufacturing facilities, the millions of jobs lost, and the difficulties encountered by the farming communities scratching out a living when competing with low priced imports. Trump pointedly identified our deficient balance of trade - a measure of the value of exports of goods an services compared with our imports from other countries - as the culprit. While no country escaped his wrath, China rose to the exalted position of being his primary target. He accurately indicated that it contributed 61% of our entire 2016 deficit.
Trump and his advisors argued that this deficit was concentrated in the manufacturing sector. They asserted that surging imports of low cost Chinese products had not only lowered the wages of our non-college educated workers, they also forced many industries into bankruptcy, which, in turn, led to a loss of somewhere between two and three million jobs during the preceding decades. The “balance of trade” talking point became a simple, convenient, be it unsophisticated populist theme that elevated Trump’s electoral chances. While many economists argue that the trade deficit is not economically significant as an indicator of economic health, and that a larger trade deficit could in fact be the result of a stronger economy, Trump would not let go, and installed the concept as a centerpiece of his economic policies.
As he complained that unfair trading practices were being used against us, Mr. Trump has used the “threat of tariffs” as a weapon to persuade competitors to help us reduce our trade deficit. This strategy did not work out as planned. Our balance of trade deficit with China was almost $44 billion higher in 2018 than it was the year before. Doubling down, Trump increased his aggressive posture against the second largest economic superpower in the world, in an attempt to force it to comply with his demands. On May 5th he announced that he would increase the tariff on $200 billion of Chinese goods to 25%, and threatened to tax the remaining $325 billion to the same percentage "shortly."
He mistakenly, or blatantly, asserted that the tariffs paid to the USA have had little impact on our product cost, claiming that they are mostly borne by China. The latter, in turn, retaliated by announcing plans to impose tariffs on $60 billion worth of American goods, specifically targeting commodities originating in states Trump won by significant margins in 2016. The trade war was on. Donald Trump was fulfilling election promises, making political points in an attempt to solidify his base, even though he clearly displayed his ignorance about how the economy works, and seemed untroubled by the consequences of his impetuous posturing.
Our president falsely claims that China pays the tariffs levied by his administration. In reality, companies like Ford, Walmart and others that import goods from China foot the bill - costs that are passed on to U.S. consumers. Economists calculate that the tariffs imposed on imports from China cost American consumers $68.8 billion last year alone. David Weinstein, an economist at Columbia University, estimates that the latest round of tariff increases will push the annual cost per household well above $800. Larry Kudlow, director of the "National Economic Council" concedes that both sides in the conflict will pay. "Both sides will suffer on this," he said on "Fox News Sunday" recently. "You've got to do what you got to do...The economic consequences are so small that the possible improvements in trade and exports and open markets for the United States, this is worth doing."
However, tariffs not only increase prices, they also kill jobs. "The Tax Foundation" calculated that in 2018 459,816 jobs were lost because of enacted and announced tariffs. The Washington based "Trade Partnership World Wide" estimates that job losses during a U.S.- China trade war would top 2 million if Trump imposes a 25% tariff on all Chinese imports.
Mr.Trump's celebrated constituency of so-called "Patriot Farmers," those still supporting him, but caught between a rock and a hard place, find themselves hoping beyond hope that he knows what he is doing. China's retaliatory tariffs effectively killed the market for domestic producers of agricultural products. A May 19 article in Newsweek quoted a Wisconsin farmer telling Fox News that suicides and bankruptcies in rural America are rising dramatically. A poll backed by the American Farm Bureau reported that 91% of respondents revealed that financial issues are impacting mental health, 87% of farmers fear losing their farms, and one third had sought mental healthcare. With Trump promising that "short term pains" inflicted on farmers are worth the "long term gains," farmers are asking: "How long is short term?" and "what does success ultimately look like?" Many are beginning to worry that other countries will permanently replace American suppliers. In response, Donald Trump offered another $16 billion bail-out package for farmers most hurt by the dispute - funds paid by the U.S. Treasury Department, not by China.
In addition to all this, economists suggest that these tariffs, if sustained, increase the probability of a recession, could shave 0.25 - 0.35 percentage points off GDP, and would more than cancel out all of the economic benefits of the 2017 tax law. Forbes Magazine, in its May 23rd issue, reported that the Japanese financial services company "Nomura Securities" offered 65% odds that 25% tariffs on additional $300 billion worth of Chinese goods will go into effects by the 3rd quarter of this year. In the mean time, Donald Trump is on record tweeting that he would be happy to leave tariffs in place indefinitely.
Most of our allies agree that we need to do something to reign in China's irresponsible trading practices. However, the consensus is that coordinated action would promise far better results. Trump's gamble does not merit the consequences, intended or not.
Thursday, June 13, 2019
Wednesday, June 12, 2019
MR. TRUMP BEFUDDLES EUROPE
President Trump's European trip earlier this month was nervously anticipated to be an improvement over the experience of last year's visit, but still expected to contain some surprises and awkward situations, some potentially consequential, and some relegated to fodder for the talk show circuit. Some controversies already preceded the flight from Washington D.C.. Mr. Trump's ongoing feud with London's mayor Sadiq Khan had been in the headlines for days, and his characterization of Meghan Markle, the Duchess of Sussex, as "nasty," during an interview, rankled more than some royal feathers.
Helicopters transported Mr. an Mrs. Trump from Stansted Airport to Buckingham Palace, where they were received by Queen Elizabeth, Prince Charles and Camilla. Mr. Trump would later claim that they flew over thousands of cheering supporters in downtown London, not recognizing that these were actually protesters expressing their disapproval of his presence.
The pomp and ceremony at Buckingham Palace fit President Trump very well. He appeared coached and scripted, acting statesman-like. Trump, being Trump, was very pleased with himself. After the state dinner, he soon boasted about having had "automatic chemistry" with the queen. When asked during a Fox interview if he fist-bumbed the queen, he said: "I did not, but I had a great relationship, we had a really great time. There are those that say they have never seen the queen have a better time, a more animated time... We just had a great time together." (The Guardian, Jun. 7, 2019). Queen Elizabeth, who has met with 12 U.S. presidents since 1951, was predictably not asked for a comment.
After insulting Prime Minister Theresa May during their last visit, this year's face-to-face meeting was much more civil. Mr. Trump actually managed to compliment the outgoing P.M. on her negotiating efforts with he European Union. He did, however, all but encourage the U.K. to pursue a "no deal Brexit," a scenario British lawmakers adamantly oppose. He also strongly suggested that Nigel Farage, a supporter and leader of the recently formed "Brexit Party," should lead ongoing negotiations with the E.U.. And, while he continued providing unwelcome advise, he insinuated that former U.K. Foreign Secretary Boris Johnson, an old friend, should replace Theresa May as leader of the Conservative Party, and as Prime Minister. (To not hurt his chances of being elected, Mr. Johnson declined to meet with the president.) Finally, he proposed a post Brexit free trade agreement with the U.S., but stipulated that everything, including the popular British healthcare system, should be on the table. A deal breaker for anyone in the audience.
The interview with Piers Morgan for "Good Morning Britain" should probably never have happened. The president appeared very uncomfortable when Morgan asked him how he evaded the draft during the Vietnam war. Trump received four student deferments and two medical excuses for bone spurs. Trump's rambling explanation quickly made the news: "I was never a fan of that war, I'll be honest with you. I thought it was a terrible war; I thought it was very far away. You're talking about Vietnam. At that time nobody had ever heard of that country."
His televised pep-talk to Ireland's Prime Minister Leo Varadkar became another awkward moment. Referring to Brexit, a hot topic of significant concern in Ireland, Trump said: "I think it will all work out very well, and also for you with your wall, your border. I mean, we have a border situation in the United States, and you have one over here. But I hear it's going to work out very well here." Mr. Varadkar's retort that Ireland would like "to avoid a border or wall" did not seem to penetrate or resonate.
Aside from the state visit, the other featured objective of Trump's visit to Europe at this time of the year was to participate in the commemoration of the 75th Anniversary of D-Day at the "Normandy American Cemetery and Memorial" in Colleville-sur-Mer in France. President Trump managed to do a commendable job during the solemn and emotional ceremony. However, even here he managed to redirect attention onto himself. With the D-Day ceremony as a backdrop, and the 9,388 white crosses covering burial sites behind him, he inserted a sit-down interview with Fox News host Laura Ingraham, during which he blasted his political rivals at home. At some point he suggested that the officials attending probably did not recognize that he was the one holding up the entire ceremony just to do that interview. Even Ingraham admitted that that was fake news.
A final parting gift to the pundits surfaced during the family's trip home. Becoming aware that NASA planned to go back to the moon during he coming few years, something Trump actually proposed not too long ago, he flipped on his space objectives, tweeting: "For all the money we are spending, NASA should NOT be talking about going to the moon - we did that 50 years ago. They should be focused on the much bigger things we are doing, including MARS (of which the moon is a part). Defence (sic) and Science!" For some in the Trump entourage this may have counted as enlightenment. For many at home and abroad this tweet resembled pure nonsense.
Most controversial statements chronicled during Mr. Trump's European trip this time around are attributable to self-aggrandizement, and expressions of, mostly unwelcome, opinions fueled by narcissism and essential ignorance of the political facts and climate on the ground. I am certain that many in Europe anticipated much of this. If this was his objective, Mr. Trump did great job leaving much of the citizenry in host countries confused and bewildered.
Helicopters transported Mr. an Mrs. Trump from Stansted Airport to Buckingham Palace, where they were received by Queen Elizabeth, Prince Charles and Camilla. Mr. Trump would later claim that they flew over thousands of cheering supporters in downtown London, not recognizing that these were actually protesters expressing their disapproval of his presence.
The pomp and ceremony at Buckingham Palace fit President Trump very well. He appeared coached and scripted, acting statesman-like. Trump, being Trump, was very pleased with himself. After the state dinner, he soon boasted about having had "automatic chemistry" with the queen. When asked during a Fox interview if he fist-bumbed the queen, he said: "I did not, but I had a great relationship, we had a really great time. There are those that say they have never seen the queen have a better time, a more animated time... We just had a great time together." (The Guardian, Jun. 7, 2019). Queen Elizabeth, who has met with 12 U.S. presidents since 1951, was predictably not asked for a comment.
After insulting Prime Minister Theresa May during their last visit, this year's face-to-face meeting was much more civil. Mr. Trump actually managed to compliment the outgoing P.M. on her negotiating efforts with he European Union. He did, however, all but encourage the U.K. to pursue a "no deal Brexit," a scenario British lawmakers adamantly oppose. He also strongly suggested that Nigel Farage, a supporter and leader of the recently formed "Brexit Party," should lead ongoing negotiations with the E.U.. And, while he continued providing unwelcome advise, he insinuated that former U.K. Foreign Secretary Boris Johnson, an old friend, should replace Theresa May as leader of the Conservative Party, and as Prime Minister. (To not hurt his chances of being elected, Mr. Johnson declined to meet with the president.) Finally, he proposed a post Brexit free trade agreement with the U.S., but stipulated that everything, including the popular British healthcare system, should be on the table. A deal breaker for anyone in the audience.
The interview with Piers Morgan for "Good Morning Britain" should probably never have happened. The president appeared very uncomfortable when Morgan asked him how he evaded the draft during the Vietnam war. Trump received four student deferments and two medical excuses for bone spurs. Trump's rambling explanation quickly made the news: "I was never a fan of that war, I'll be honest with you. I thought it was a terrible war; I thought it was very far away. You're talking about Vietnam. At that time nobody had ever heard of that country."
His televised pep-talk to Ireland's Prime Minister Leo Varadkar became another awkward moment. Referring to Brexit, a hot topic of significant concern in Ireland, Trump said: "I think it will all work out very well, and also for you with your wall, your border. I mean, we have a border situation in the United States, and you have one over here. But I hear it's going to work out very well here." Mr. Varadkar's retort that Ireland would like "to avoid a border or wall" did not seem to penetrate or resonate.
Aside from the state visit, the other featured objective of Trump's visit to Europe at this time of the year was to participate in the commemoration of the 75th Anniversary of D-Day at the "Normandy American Cemetery and Memorial" in Colleville-sur-Mer in France. President Trump managed to do a commendable job during the solemn and emotional ceremony. However, even here he managed to redirect attention onto himself. With the D-Day ceremony as a backdrop, and the 9,388 white crosses covering burial sites behind him, he inserted a sit-down interview with Fox News host Laura Ingraham, during which he blasted his political rivals at home. At some point he suggested that the officials attending probably did not recognize that he was the one holding up the entire ceremony just to do that interview. Even Ingraham admitted that that was fake news.
A final parting gift to the pundits surfaced during the family's trip home. Becoming aware that NASA planned to go back to the moon during he coming few years, something Trump actually proposed not too long ago, he flipped on his space objectives, tweeting: "For all the money we are spending, NASA should NOT be talking about going to the moon - we did that 50 years ago. They should be focused on the much bigger things we are doing, including MARS (of which the moon is a part). Defence (sic) and Science!" For some in the Trump entourage this may have counted as enlightenment. For many at home and abroad this tweet resembled pure nonsense.
Most controversial statements chronicled during Mr. Trump's European trip this time around are attributable to self-aggrandizement, and expressions of, mostly unwelcome, opinions fueled by narcissism and essential ignorance of the political facts and climate on the ground. I am certain that many in Europe anticipated much of this. If this was his objective, Mr. Trump did great job leaving much of the citizenry in host countries confused and bewildered.
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