It would seem that for the Republican Party, an incompetent, erratic kleptocracy might just be the best form of government.
Or at least it was until March 1, 2018, the day Trump signaled his intention to impose across-the-board import tariffs of 25% on steel and 10% on aluminum. That decision, notes Pat Roberts, a Republican senator from Kansas, “is not going to go down well in farm country.”
.. His worry now is that Trump will pursue “a trade policy that will basically result in all the benefits of the tax reform being taken away by higher manufacturing costs being passed on to consumers.”
.. In the end, American consumers will pay for Trump’s tariffs. Such broad protectionist measures will affect every sector of US manufacturing in one way or another, and manufacturers certainly will not eat the full costs of higher-priced steel and aluminum inputs.
.. So, Trump has essentially proposed a new tax on US consumers and export industries, the costs of which will be borne largely by his own supporters in the American heartland and Rust Belt.
.. It turns out that Trump’s decision was taken against the advice – indeed, over the objections – of not just his
- chief economic adviser, Gary Cohn, but also his
- national security adviser, General H.R. McMaster, his
- treasury secretary, Steven Mnuchin, and his
- defense secretary, James Mattis.
On the other hand, Secretary of Commerce Wilbur Ross apparently favors the tariffs. But it is not at all clear why. The Department of Commerce itself surely recognizes that more Americans benefit from lower steel and aluminum prices than from higher prices.
Another supporter of the tariffs is Peter Navarro, who was recently promoted to Director of Trade and Manufacturing Policy and Director of the White House National Trade Council. That comes as no surprise. Navarro has written a number of alarmist books about America’s trade relationship with China, including one titled Death by China. Nevertheless, Navarro has not yet been able to explain how creating a larger domestic steel industry through tariffs will yield a net benefit for the US economy.
A final key supporter of the tariffs is US Trade Representative Robert Lighthizer, who formerly worked as a lawyer for the steel industry. As with Ross, it is not entirely clear what Lighthizer is thinking. He has to know that Trump’s tariffs will have little to no chance of boosting the US steel and aluminum industries without also imposing substantial costs on the economy. Doesn’t he realize that his own reputation will ultimately depend on whether the administration has a successful trade policy or an obviously stupid one?
Why China could win the West’s stupid — and pointless — war over steel
This month, President Trump tweeted, “If you don’t have steel, you don’t have a country!” Sounds great, but maybe he should try that line on his friend Benjamin Netanyahu, the Israeli prime minister. Israel doesn’t have any steel mills, but it certainly is a country, focused instead on developing the technologies of the future, not of the past.
.. the world is leaving the Industrial Age and entering a Digital Age of equal significance. The steel mills and coal mines of the past will not shape our future. Instead, efforts to harness control of digital technologies will be the new global race — and one that the West simply can’t afford to lose.
Beijing will be receptive to demands to cut back China’s overcapacity in steel production, as this will benefit the Chinese as well. Producing excessive amounts of steel is costly. But whether China will be ready to agree on the rules of the new global digital order is far more questionable — and far more important.
.. The United States and Europe would work out issues such as technology controls, data trade rules, free data flows and intellectual property rights. There are policy differences on some issues between America and Europe — notably privacy — but the two sides share much in the way of common interests and values. Yet, instead of trying to capture the future by agreeing on digital issues, there is a risk of the allies being trapped in a steel conflict, which bears virtually no relevance to the economic order of tomorrow.
.. The only likely victor in all of this is China. The more that the West divides itself on the issues of the past, the more China will gain leadership on the issues of the future.
China to Target Trump’s Base in Tariff Response
Beijing prepares to deliver pain to President Trump’s support base, including with tariffs targeting agricultural exports
China is preparing to hit back at trade offensives from Washington with tariffs aimed at President Donald Trump’s support base, including levies targeting U.S. agricultural exports from Farm Belt states, according to people familiar with the matter.
The plans are part of a strategy that has taken shape in recent weeks as China seeks to avert tariffs by warning of possible repercussions and offering incentives to the U.S., including better access to China’s markets, especially in the financial sector.
China’s President Xi Jinping has taken this carro
.. China is likely to target U.S. exports of soybeans, sorghum and live hogs
.. The U.S. is among the top suppliers of these products to China, which imports around a third of soybeans that the U.S. produces
.. Any duties to be levied by China on those products would depend on how broad-based the U.S. tariffs are on Chinese imports, and plans could change based on what the Trump administration proposes, these people said.
Beijing is also weighing concessions including easing restrictions on foreign investment in securities firms and insurance companies, they said.
.. At the meeting, Commerce Ministry officials sought the companies’ views on the effects of scaling back U.S. agricultural imports, the people said. Since then the companies have been lining up alternatives sources—for soybeans, for instance, countries including Brazil, Argentina and Poland.\
.. At the same time, China plans to extend an olive branch to the U.S., which has been calling for better access to China’s markets. The opening could include scrapping foreign-ownership limits on Chinese brokerages and insurers, they said.
.. U.S. and other Western officials have often treated Beijing’s market-opening pronouncements with skepticism, saying hurdles have risen despite similar pledges in the past. Early last year, for example, it promised U.S. credit-card companies “full and prompt” access to China, but so far none has been given a green light.
.. The administration officials countered with a far-reaching proposal, the people said, for China to eliminate subsidies for state firms and take other measures
.. China has other measures besides agricultural tariffs in its arsenal, including
- diverting large orders for aircraft and other goods away from U.S. manufacturers and
- slowing the wheels of bureaucracy in approving operating licenses, or even
- targeting U.S. companies with antitrust investigations.
Why Donald Trump feels invincible
People who think they are invincible tend to find out that they are not in the harshest way possible.
.. one could understand Trump’s behavior if he was doing nothing but winning — except that he isn’t. Most of the coverage suggests Trump feels liberated in particular by his decisions to levy steel and aluminum tariffs and plan on a summit with North Korea’s Kim Jong Un. But let’s review those two moves. The former is bad policy and bad politics, and it failed to win the Pennsylvania special election for the GOP. The latter may or may not happen, but it is very likely to not end well.The best interpretive framework through which to understand Trump’s leadership is psychological rather than ideological. One would think that a president with historically low poll numbers, facing an investigation by special counsel Robert S. Mueller III of growing seriousness, heading (in all likelihood) toward a disastrous midterm repudiation that could lead to his impeachment, and presiding over an administration run on the management principles of Maximilien Robespierre might be acting out of desperation. On the contrary, White House insiders indicate that Trump’s increasingly flailing decisions are the function of a president gaining in confidence. Having decided that he has gotten the hang of the job, Trump has lost patience with opposition and constraints. He seems not frightened but giddy.
.. Trump feels he’s winning because he is not losing as much as everyone has claimed.
None of the crazy stuff Trump said or did — from boasting about the size of his nuclear button to firing the FBI director running the investigation into his campaign — merited more than a shrug from investors. And when the market finally did hit a turbulent patch, in early February of this year, it wasn’t because of anything Trump had done; it was triggered by a boring old economic indicator, an upbeat jobs report that made investors worry the Federal Reserve might raise interest rates. Even Trump’s globe-shaking announcement last week of big tariffs on imported steel and aluminum only had a temporary effect. Stocks initially plunged on fears of a disastrous trade war, but they recovered nearly all the ground they had lost in just three days, as traders figured Trump would water down the actual policy.
.. White House staffers have been counseling presidents against rash actions since the invention of White House staff. The way they do this is by warning of dire consequences if their advice is not followed.
Indeed, this was the tactic that Cohn and Treasury Secretary Steven Mnuchin used to try to forestall the tariffs.
Despite doomsaying
- predictions of a crashing economy if he was elected, the economy is still chugging along. Despite dire warnings that the
- tariffs would trigger a trade war and a global economic scare, that has not happened yet, either. Despite much clucking about
- the impropriety of shifting from “maximum pressure” on North Korea to a planned summit, no alliance has been torn asunder.
.. I am not saying any of Trump’s moves are great ideas. But they haven’t triggered immediately catastrophes either. If an adviser keeps warning you that bad things will happen and then they have not yet come to pass, you would start to doubt their worth as well.
.. If Trump thought about it he would probably realize some of his self-initiated moves, like
- firing James B. Comey, have been calamitous. And as White acknowledges, it is possible “Trump really does pose a massive systemic risk, and
- markets just can’t see it or can’t price it.”
- A botched summit could lead to war on the Korean Peninsula.
- All of Trump’s myriad miscues could come back to haunt him in the midterms.
But nothing bad has happened yet, so Trump will continue to feel emboldened. Essentially, he is acting like he is invincible. And people who think they are invincible tend to find out they are not in the harshest way possible.