What economic thinking went into the Trump tariffs announced last week? None at all. In fact, the economists (“economists”?) who currently have his ear seem to regard their job as being to confirm the wisdom of whatever he decides to do. Peter Navarro:
My function, really, as an economist is to try to provide the underlying analytics that confirm his intuition. And his intuition is always right in these matters.
.. Sometimes, however, rates were negative: if you put a tariff on parts but not on cars, you were actually discouraging auto assembly.
.. But still, the key point is that even while embracing protectionism, Trump is imposing negative protection on a lot of manufacturing. That’s hardly the story he wants people to hear – and he’s almost surely doing it by accident, out of sheer ignorance (because his “advisers” aren’t in the business of, you know, giving advice).
And this is how we risk a trade war?
Après Cohn, le Deluge?
Trump’s top economic adviser departs, and the administration’s grown-ups worry.
Mr. Trump’s washing-machine and solar-panel salvo was to be followed by a focus on China’s unfair trade practices, namely intellectual-property theft. The president would announce narrowly targeted trade actions against that country, while holding aluminum and steel tariffs in reserve. All this would be choreographed around renegotiation of the North American and Korea-U.S. free trade agreements.
.. Mr. Ross took advantage of the situation last week to get the president’s ear, and back we were to the days of Mr. Trump spinning out on the advice of the last person in the room.
.. few know that he spent this past weekend talking the president down from an even more Planet Mars idea from Team Ross —to set tariffs closer to 50%.
.. Mr. Ross (a former steel executive) and the nativist Peter Navarro have driven out their biggest free-market opponent, increasing their ability to wreak harm on the economy.
The voices of those who actually understand economic policy are greatly diminished, as evidenced this week by the administration’s endless loop of fact-free and near fantastical claims about the effects of the tariffs.
His shabby treatment has more than a few of the grown-ups now actively considering their own exit plans. It’s one thing to do battle daily; it’s another to watch months of work get flushed on a whim, and get publicly branded a “globalist” to boot. Mr. Cohn’s top deputy, Jeremy Katz, departed just as soon as the tax deal passed, and watch for other Cohn staffers—many of them important free-market voices—to follow.
.. Imagine a Trump presidency without Mr. Kelly, H.R. McMaster, Jim Mattis, Don McGahn, Mick Mulvaney, Kevin Hassett. Consider, too, that no one as good is likely to replace them—now having seen how the White House works.
And don’t forget congressional Republicans, whom Mr. Trump has potentially set up for a midterm rout.
Many are furious that he has forced them to call him out, splitting the party. But they are also legitimately fearful the tariffs will spark trade war and destroy tens or hundreds of thousands of jobs, neutralizing the benefits of the hard-won tax reform.
The economy is the best thing Republicans have going for them in November, and the Trump-Ross-Navarro trio just embraced the only policy that could kill it.
Just how bad it is will depend hugely on Mr. Cohn’s successor.
.. Besides, who in his right mind would even want the job?
Trade Wars Are Destructive. Of Course Trump Wants One.
.. as with so many other policies he has supported, he appears to have little understanding of this one.
.. Many White House aides, including Mr. Trump’s chief economic adviser, Gary Cohn, appeared to be caught off guard by the decision; on Wednesday, Mr. Cohn had warned that he might resign if Mr. Trump went through with the tariff plan.
.. The stock market fell sharply after the announcement because investors feared that the move was the first of several that could result in escalating disputes
.. The steel and aluminum tariffs are ostensibly aimed at punishing China, which has been driving down prices for those commodities by producing far more metal than the world can use. But Mr. Trump’s move will have a limited effect on China because much of the steel and aluminum the United States imports actually comes from allies like Canada, Brazil, South Korea and Mexico.
.. the move could hurt American businesses that use these metals, including auto and construction companies
.. If Mr. Trump were truly interested in getting China to reduce its excess production, he would have worked with the European Union, Canada, Japan, South Korea and other countries to put pressure on Beijing. Those nations tend to be closely aligned with the United States and have also been hurt by China’s mercantilist economic policies.
.. threatening to retaliate forcefully against the new Trump tariffs. They could do so by bringing cases against the United States at the World Trade Organization, or by doing what Mr. Trump did and unilaterally imposing new tariffs on American exports like soybeans and Boeing planes.
.. Canada imports more American Steel than it exports to the United States, giving it the ability to hurt the very industry Mr. Trump claims to want to help.
.. Chrystia Freeland, says Canada buys about half of American steel exports.
.. for every new job at a steel mill or aluminum smelter that is created by this trade decision, the country could lose as many or more jobs at businesses that use those metals, which will now cost more. This is one of the reasons that trade wars are, in fact, not easy to win.
.. Mr. Trump clearly sees trade as a zero-sum game.
.. He and some of his most protectionist advisers, including Peter Navarro, think that if China and Mexico sell the United States more things than they import from America, they are winning.
Trump’s Tariffs Prompt Global Threats of Retaliation
The European Union detailed a three-step plan to penalize $3.5 billion of American trade — the same amount of European steel and aluminum the bloc estimates would be harmed by the planned tariffs. It proposed taxing American exports including bourbon, bluejeans, orange juice, cranberries, rice and motorcycles.
A European Union official said that the bloc had been preparing for the announcement for months and that everything was in place for a swift, proportionate response.
.. The measures were intended to put pressure on politically sensitive areas, trade analysts said. Harley-Davidson motorcycles are made in the home district of Speaker Paul D. Ryan, Republican of Wisconsin. Orange juice comes from the swing state of Florida. Restrictions on Kentucky bourbon could add pressure on the Senate majority leader, Mitch McConnell, who is from the state.
.. Retaliation could hit hardest in many of the rural communities that were strongholds for Mr. Trump. Farmers are among America’s largest exporters, and often become a target in trade spats
.. She said the agricultural community was “rightly nervous” about the prospect.
.. Canada and Mexico were America’s No. 1 and No. 3 largest agricultural markets in 2016, and South Korea is a major market for beef, corn, pork and fresh fruit
.. The United States exports cotton to Turkey and wheat and dairy to Brazil, other major suppliers of steel.
.. Peter Navarro, a top White House trade adviser, said he did not believe any country would retaliate, “for the simple reason that we are the most lucrative and biggest market in the world.”
“They know they’re cheating us, and all we’re doing is standing up for ourselves,” he added.
.. if the United States was willing to impose penalties like these on its close trading partners, other countries would be less eager to negotiate trade deals with the United States. “What is the benefit of having a special relationship?” he asked. “I think there could be a lot of unintended and unforeseen consequences.”