It’s all about the power — and the cronyism.
Almost exactly one year has passed since Donald Trump declared, “I am a Tariff Man.” Uncharacteristically, he was telling the truth.
At this point I’ve lost count of how many times markets have rallied in the belief that Trump was winding down his trade war, only to face announcements that a much-anticipated deal wasn’t happening or that tariffs were being slapped on a new set of products or countries. Over the past week it happened again: Markets bet on an outbreak of trade peace between the U.S. and China, only to get body slammed by Trump’s declaration that there might be no deal before the election and by his new tariffs on Brazil and Argentina.
So Trump really is a Tariff Man. But why? After all, the results of his trade war have been consistently bad, both economically and politically.
I’ll offer an answer shortly. First, however, let’s talk about what the Trump trade war has actually accomplished.
A peculiar aspect of the Trump economy is that while overall growth has been solid, the areas of weakness have come precisely in those things Trump tried to stimulate.
Remember, Trump’s only major legislative accomplishment was a huge tax cut for corporations that was supposed to lead to a surge in investment. Instead, corporations pocketed the money, and business investment has been falling.
At the same time, his trade war was supposed to shrink the trade deficit and revive U.S. manufacturing. But the trade deficit has widened, and manufacturing output is shrinking.
The truth is that even economists who opposed Trump’s tax cuts and tariffs are surprised by how badly they’re working out. The most commonly given explanation for these bad results is that Trumpian tariff policy is creating a lot of uncertainty, which is giving businesses a strong incentive to postpone any plans they might have for building new factories and adding jobs.
It’s important to realize that Trumpian protectionism wasn’t a response to a groundswell of public opinion. As best as I can tell from the endless series of interviews with white guys in diners — who are, we all know, the only Americans who matter — these voters are driven more by animosity toward immigrants and the sense that snooty liberals look down on them than by trade policy.
And public opinion seems to have become far less protectionist even as Trump has raised tariffs, with the percentage of Americans saying that free trade agreements are a good thing as high as it’s ever been.
So Trump’s trade war is losing, not gaining, support. And one recent analysis finds that it was a factor hurting Republicans in the 2018 midterm elections, accounting for a significant number of lost congressional seats.
Nevertheless, Trump persists. Why?
One answer is that Trump has long had a fixation on the idea that tariffs are the answer to America’s problems, and he’s not the kind of man who reconsiders his prejudices in the light of evidence. But there’s also something else: U.S. trade law offers Trump more freedom of action — more ability to do whatever he wants — than any other policy area.
The basic story is that long ago — in fact, in the aftermath of the disastrous Smoot-Hawley tariff of 1930 — Congress deliberately limited its own role in trade policy. Instead, it gave the president the power to negotiate trade deals with other countries, which would then face up-or-down votes without amendments.
It was always clear, however, that this system needed some flexibility to respond to events. So the executive branch was given the power to impose temporary tariffs under certain conditions: import surges, threats to national security, unfair practices by foreign governments. The idea was that nonpartisan experts would determine whether and when these conditions existed, and the president would then decide whether to act.
This system worked well for many years. It turned out, however, to be extremely vulnerable to someone like Trump, for whom everything is partisan and expertise is a four-letter word. Trump’s tariff justifications have often been self-evidently absurd — seriously, who imagines that imports of Canadian steel threaten U.S. national security? But there’s no obvious way to stop him from imposing tariffs whenever he feels like it.
And there’s also no obvious way to stop his officials from granting individual businesses tariff exemptions, supposedly based on economic criteria but in fact as a reward for political support. Tariff policy isn’t the only arena in which Trump can practice crony capitalism — federal contracting is looking increasingly scandalous — but tariffs are especially ripe for exploitation.
So that’s why Trump is a Tariff Man: Tariffs let him exercise unconstrained power, rewarding his friends and punishing his enemies. Anyone imagining that he’s going to change his ways and start behaving responsibly is living in a fantasy world.
Why Trump Was Right to Call Terrorists ‘Losers’
Economists routinely talk about how this or that policy — on trade, taxes, whatever — creates “winners and losers.”
A big part of Donald Trump’s winning appeal in the 2016 election was that Americans were on the losing end of trade policy. Trump took it further, arguing that we don’t win wars or anything else anymore. Elect me, he promised, and you’ll grow tired of all the winning.
The logical and semantic inference of this rhetoric is that Americans, Trump voters, or the American military are losers.
.. “loser” is one of Trump’s favorite insults.
.. a lot of the people attracted to Islamic extremism are losers in all the meanings of the word.
- .. Omar Mateen, the avowed disciple of ISIS who killed 49 people at a nightclub in Orlando, was a screw-up and school bully who dreamed of becoming a police officer but ended up a very disgruntled security guard instead.
- The Manchester bomber, Salman Abedi, a college dropout, appears to have been a misfit.
.. Islamic terrorist organizations are hardly the only groups to recruit from the ranks of loserdom. Street gangs, neo-Nazis, and countless Communist fronts have been seducing resentful oddballs, outcasts, and misanthropes. It simply makes sense that such people would be attracted to such groups. Radical causes provide a sense of meaning, belonging, and importance to people who lack such things in their daily lives.
.. Osama bin Laden was the scion of a wealthy and prominent family. Ayman al-Zawahiri, bin Laden’s successor as the head of al-Qaeda, was from a successful Egyptian family of doctors and was himself a surgeon. They chose to become terrorists for ideological reasons. Subscribing to a doctrine first explicated by Sayyid Qutb, an Islamist intellectual, they believed that the true faith was losing the battle with the forces of modernity and the West.
Trump got a lot of things right
Consider the Trump themes that resonated deeply with tens of millions of Americans:
- We don’t win anymore.
- We have no strategy to fight our enemies.
- Our allies aren’t paying enough freight.
- Defense cuts and feckless leadership are projecting American weakness.
- Trade deals help only some Americans.
- Washington doesn’t work.
Separate the bill of particulars from Trump the person, and the reality is, these complaints make sense.
.. Congress can take on the hard challenge of getting workers the skills they need to compete in today’s economy. It can take on the special interests in universities, schools and unions that oppose these changes and the fancy pants who sneer at the need for vocational and technical skills, which could better prepare workers for advanced manufacturing. It can work with states to expand apprenticeship and other work-based learning programs. It can offer the long-term unemployed living in areas with limited job opportunities assistance to move to cities with tighter, stronger labor markets.
The Coming Anti-National Revolution
I think the next such revolution, likely sometime in the twenty-first century, will challenge the economic implications of the nation-state. It will focus on the injustice that follows from the fact that, entirely by chance, some are born in poor countries and others in rich countries. As more people work for multinational firms and meet and get to know more people from other countries, our sense of justice is being affected.
.. Thomas Paine’s pamphlet Common Sense .. The idea that hereditary monarchs were somehow spiritually superior to the rest of us was decisively rejected. Most of the world today, including Britain, agrees.
.. Thomas Paine’s pamphlet Common Sense,
.. We also need to protect the losers to foreign trade in our existing nation-states. Trade Adjustment Assistance (TAA) traces its roots in the United States back to 1974. Canada experimented in 1995 with anEarnings Supplement Project. The European Globalization Adjustment Fund, started in 2006, has a tiny annual budget of €150 million ($168.6 million). US President Barack Obama has proposed to expand the TAA program. But, so far, this has meant little more than experiments or proposals.