Trump’s Trade Confusion

Trump himself has already undercut his national-security claim by exempting most major exporters of steel to the US. Canada, for example, is exempted on the condition of a successful renegotiation of the North American Free Trade Agreement,

.. effectively threatening the country unless it gives into US demands.

But there are a host of issues in contention, involving, for example, lumber, milk, and cars. Is Trump really suggesting that the US would sacrifice national security for a better agreement on these minor irritants in US-Canadian trade? Or perhaps the national-security claim is fundamentally bogus, as Trump’s secretary of defense has suggested, and Trump, as muddled as he is on most issues, realizes this.

.. As is often the case, Trump seems to be fixated on a bygone problem.

  • .. Recall that, by the time Trump began talking about his border wall, immigration from Mexico had already dwindled to near zero.
  • And by the time he started complaining about China depressing its currency’s exchange rate, the Chinese government was in fact propping up the renminbi.
  • .. Likewise, Trump is introducing his steel tariffs after the price of steel has already increased by about 130% from its trough, owing partly to China’s own efforts to reduce its excess capacity.

.. But Trump is not just addressing a non-issue. He is also inflaming passions and taxing US relationships with key allies. Worst of all, his actions are motivated by pure politics. He is eager to seem strong and confrontational in the eyes of his electoral base.

.. what matters is the multilateral trade deficit, not bilateral trade deficits with any one country.

.. Reducing imports from China will not create jobs in the US. Rather, it will  for ordinary Americans and create jobs in Bangladesh, Vietnam, or any other country that steps in to replace the imports that previously came from China.

.. In the few instances where manufacturing does return to the US, it will probably not create jobs in the old Rust Belt. Instead, the goods are likely to be produced by robots, which are as likely to be located in high-tech centers as elsewhere.

.. the Republican Party, standing in solidarity with Trump, seems suddenly to have forgotten its longstanding commitment to free trade, much like a few months ago, when it forgot its longstanding commitment to fiscal prudence.

.. while Trump claims to be looking out for US industrial workers, the real winner from “successful” negotiations – which would spur China to open its markets further to insurance and other financial activities – is likely to be Wall Street.

.. The EU, for its part, seems highly concerned with protecting data privacy, whereas China does not. Unfortunately, that could give China a large advantage in developing AI.

.. In the years ahead, we are going to have to figure out how to create a “fair” global trading regime among countries with fundamentally different economic systems, histories, cultures, and societal preferences.

The danger of the Trump era is that while the world watches the US president’s Twitter feed and tries not to be pushed off one cliff or another, such real and difficult challenges are going unaddressed.