Our Escalating Trade Wars

Our Escalating Trade Wars June 20, 2018

President Trump had announced the imposition of tariffs on $50 billion worth of goods imported from China.  So China retaliated by imposing tariffs on $50 billion worth of American goods.  So now the President has upped the ante to $200 billion.  China is saying that they will respond in kind.  So the President is threatening that if they do, they will face tariffs on another $200 billion.

This is President Trump’s style, which we have seen consistently in his rhetoric and now in his policies.  If someone hits you, hit back even harder.  This applies to anyone who criticizes him and to his diplomatic strategy.  He considers himself a master of “the art of the deal,” in the words of his book, and such tit-for-tat retaliation and all-in gambling are characteristics of his negotiation tactics.

We will see how well this works in the economic sphere.  Arguably, the ever-escalating threats from both sides did bring North Korea’s Kim Jong-Un to the summit meeting with President Trump, though the outcome of those talks is not yet clear.  Notice that despite his earlier hostile rhetoric against Kim, President Trump immediately softened his tone, to the point of seeming to praise the bloody tyrant.  So we shouldn’t necessarily take the President’s over-the-top rhetoric at face value.

But in the summit meeting with our G7 allies, President Trump’s tactics were not well-received.  While improving our relations with North Korea, the President hurt our relations with our allies, including Canada!

Though I posted about how hardly anyone talks about Hell anymore, I should have made an exception for the Trump administration and its consigning of Canadian prime minister Justin Trudeau to the everlasting fires.  “There’s a special place in hell for any foreign leader that engages in bad faith diplomacy with President Donald J. Trump and then tries to stab him in the back on the way out the door,” said White House Trade Director Peter Navarro, who added that the sentiment “comes right from Air Force One.”  In this case, what will incur eternal punishment is crossing President Trump.

But such fire and brimstone invocation of divine wrath, for which Navarro later apologized, was accompanied by the imposition of tariffs on Canadian steel and aluminum.  Canada responded in kind, so now the Trump administration has announced a 10% tariff on automobile parts and a 25% tariff on assembled automobiles.  Justin Trudeau, whom our president has made wildly popular, has said he will retaliate.  Canada is our largest trading partner!  Canadians are now organizing boycotts of American goods.

As that situation escalates, our other allies are on notice.  If we have a trade imbalance with other countries, they too will have to pay!  But are trade imbalances necessarily the fault of the countries?  Aren’t our businesses and consumers the ones buying from them?  Shouldn’t Americans be free to respond to market forces, such as lower prices?  Won’t Americans be the ones who pay for these tariffs, through either passed-along price increases or by being forced to pay for higher-priced alternatives?

Do protectionist economic policies ever achieve their goals?  Will they really protect American jobs if American exporters, including farmers and factory workers, lose their international markets?

Or do you think President Trump is just making threats to get concessions from these other countries, some of whom have trade barriers of their own?  If so, do you think his tactics will succeed?


Illustration by geralt via Pixabay, CC0, Creative Commons

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