by Joe Walsh
Misinformed about the nature of basic economics as he’s been, though, the way Trump has acted on those beliefs about trade has bolstered the case that he’s a strongman whose behavior and personality directly affect the way he governs. Trade is one of the few domestic policies Trump can move just by pushing and pulling levers. On many, if not most, issues, presidents can only set the agenda; they work with leaders of their party in Congress to press a specific cause and then use their enormous political clout to try to get a bill across the finish line. On the rest, they’re supposed to operate within the constraints that Congress set for them and bureaucracy they oversee. Granted, it seems as though we’re always one executive order from federal health care policy swinging one way or the other, having DACA, or using billions of dollars of taxpayer money to build a border wall. But in theory, the president can’t create policy from whole cloth unless Congress tells him to.
On trade, presidents do have this kind of power. The Constitution gives the chief executive the ability to negotiate trade deals: “He shall have Power, by and with the Advice and Consent of the Senate, to make Treaties, provided two thirds of the Senators present concur.” And although it doesn’t grant a similar authority for something like—see if this rings a bell—dealing out tariffs as though they were Halloween candy, Congress, as it has done with so many other of its prerogatives, has passed legislation over the years to allow presidents to take punitive action against trading partners in certain circumstances.
This sure makes it sound as though Trump has a lot of room to pursue his trade goals lawfully—and he does, and he has. But what I’ve aimed to establish in this book—and what a lot of experts on this stuff who are way smarter than me have done in other forums—is that authoritarian behavior is sometimes about pushing the envelope, not breaking it. It’s not illegal for the president to say “I alone can fix it”; to say “I have an Article II, where I have to the right to do whatever I want as president”; to say that he has more expertise about a gumbo of unrelated issue areas than anyone else—including generals, if it’s the military, lawyers, if it’s the court system, or economists, if it’s trade. One of the textbook definitions of the word authoritarian is “showing a lack of concern for the wishes or opinions of others; domineering; dictatorial.” In a system of government in which power is dispersed among three branches and one of those includes 535 elected representatives of the people who are tasked with creating the laws, it’s awfully damn suspect that a 536th—the president—would be able to run a one-man show with the advice and counsel of only his “gut” and the lackeys who follow it.
Here’s how Trump puts this all into practice—walks the talk, so speak, and not in a good way.
First, there’s the “instinct.” He wrongly views international trade as a zero-sum game, in which two or more parties aren’t all capable of benefiting; instead, someone’s gain has to be someone else’s loss. “America’s relationship with China is at a crossroads. We only have a short window of time to make the tough decisions necessary to keep our standing in the world,” he wrote in Time to Get Tough (2011). “Roughly every seven years, the Chinese economy doubles in size. That’s a tremendous economic achievement, and it’s also why they clean our clocks year in and year out on trade.”2 Read that again—the fact that China had grown was the reason why the United States had been losing. It’s not as though Trump made that argument based on a concern about national security, as one of his top trade advisers, Peter Navarro, has flimsily done, or about a Communist government overtaking the influence of a democratic government in the twenty-first century. The argument instead is about “trade deficits” and another economy “cleaning our clocks” just because it’s doing well—the same type of perspective he uses for our relationship with Germany, Japan, or any other US trade partner whose markets have performed, for lack of a more descriptive word, “well.” (Remember his exchange with President Moon Jae-in of South Korea: “The United States has trade deficits with many, many countries, and we cannot allow that to continue. And we’ll start with South Korea right now. But we cannot allow that to continue. This is really a statement that I make about all trade.” All trade.)
“The problem is not just that [Trump is] ignorant of the economics (though he is); it’s that he appears to sincerely believe the proper way to evaluate whether a policy is working out for the US is to examine not whether it makes the US better off than it was but whether it leaves the US better off relative to other countries,” wrote Vox journalist Dylan Matthews.3 “The ‘great’ in ‘making America great again’ is ‘better than the rest,’ not ‘better,’ period.”
Second, there’s the implementation. A lot of the time, Trump’s bluster doesn’t make it beyond his Twitter feed or the TV cameras. But with trade, he can put it into practice, working a system in which Congress has provided him and his recent predecessors tons of leeway. In January 2018, he imposed tariffs on washing machines and solar panels by using a section of the Trade Act of 1974, which allows him to take action if the International Trade Commission—a federal agency that adjudicates trade disputes and provides expertise to the president and Congress—determines that “increased imports were a substantial cause of serious injury to domestic producers.”4 In March 2018, Trump instituted tariffs on most aluminum and steel imports, citing a provision of the Trade Expansion Act of 1962 that gives him such authority if an executive branch investigation of a specific import finds that it “is being imported into the United States in such quantities or under such circumstances as to threaten to impair the national security.”5 In May 2018, he extended those tariffs to Canada, Mexico, and the European Union, under the same authority.6 (Canada and Mexico were later exempted.) And throughout 2018 and 2019, he hammered China with several tranches of tariffs on goods that benefit from what the Trade Act of 1974 calls “an act, policy, or practice of a foreign country [that] is unjustifiable and burdens or restricts United States commerce.”7 He used the same reasoning to slap tariffs on $50 billion of Chinese exports in June 20188 and $200 billion in September 2018.9 In May 2019, US trade representative Robert Lighthizer previewed yet another round of action to come: “The President . . . ordered us to begin the process of raising tariffs on essentially all remaining imports from China, which are valued at approximately $300 billion.” (My emphasis.)10 Trump made the official announcement in August.
So there you have it: with the power given to him by Congress, the president smacked pretty much the entire world with tariffs on aluminum and steel and hit virtually everything coming from China with a tariff. I don’t want to get into the merits and demerits of each and every tariff that Trump has levied. Trade is a complicated business, full of domestic and international governing bodies that monitor how world governments subsidize their exports, fool with their currencies, and act in other ways that could give them unfair legs up on the competition. China, no doubt, is a serial offender, and both Republican and Democratic administrations have made their case against the Chinese regime before watchdogs such as the World Trade Organization. All of that is well and good. But the sheer scope of what Trump has done was bound to produce some ill effects for Americans. Consider that, as the administration bragged, the tariffs on washing machines and solar panels were the first to rely on the relevant section of the Trade Act of 1974 in sixteen years; the tariffs on aluminum and steel were essentially worldwide until the government lifted them on Canada and Mexico in May 2019; and the combined tariffs on China, those in effect and those that were promised as of the time of this writing, apply to virtually all Chinese goods the United States imports. As the Congressional Research Service noted, “tariffs fell out of favor in international trade negotiations by the 1970s.”11 That they’ve come back in the United States with a vengeance is a shock to the world trade market.
How big a shock? Yuuuge. According to the nonpartisan think tank the Tax Foundation:
[T]he tariffs imposed so far by the Trump administration would reduce long-run GDP by 0.25 perc
ent ($63.13 billion) and wages by 0.16 percent and eliminate 195,600 full-time equivalent jobs.
If the Trump administration acts on outstanding threats to levy additional tariffs, GDP would fall by an additional 0.34 percent ($84.19 billion), resulting in 0.23 percent lower wages and 261,100 fewer full-time equivalent jobs.
Other countries have announced intentions to impose tariffs on U.S. exports. If these tariffs are fully imposed, we estimate that U.S. GDP would fall another 0.07 percent ($17.83 billion) and cost an additional 55,300 full-time equivalent jobs.
If all tariffs announced thus far were fully imposed, U.S. GDP would fall by 0.66 percent ($165.15 billion) in the long run, effectively offsetting almost 40 percent of the long-run impact of the Tax Cuts and Jobs Act. Wages would fall by 0.44 percent and employment would fall by 512,000.12
Other estimates by Moody’s Analytics13 and Deutsche Bank14 show similar consequences.
But wait a minute . . . how can this be? You see, tariffs are taxes on American consumers and businesses. Period. They make production more expensive—say, creating something that contains steel and aluminum, so that the higher cost of making the good is passed on in the form of either higher prices or reduced production. How this affects every family and every company naturally varies; some families and companies purchase products warped by tariffs more than others do. But take this sampling of just how unpopular the Trump administration’s strategy is among US industries.
Footwear, including NIKE and adidas:
Dear Mr. President:
As leading American footwear companies, brands and retailers, with hundreds of thousands of employees across the U.S., we write to ask that you immediately remove footwear from the most recent Section 301 list published by the United States Trade Representative on May 13, 2019. The proposed additional tariff of 25 percent on footwear would be catastrophic for our consumers, our companies, and the American economy as a whole.
There should be no misunderstanding that U.S. consumers pay for tariffs on products that are imported. As an industry that faces a $3 billion duty bill every year, we can assure you that any increase in the cost of importing shoes has a direct impact on the American footwear consumer. It is an unavoidable fact that as prices go up at the border due to transportation costs, labor rate increases, or additional duties, the consumer pays more for the product.15
The outdoor recreation industry:
Representatives from VF Corporation, Columbia Sportswear, Nester Hosiery, and NEMO Equipment met with lawmakers on Capitol Hill this week, letting them know just how hard the U.S.-China trade war is hitting their bottom-line.
“We want our message to get across that this is affecting American businesses, American jobs, American innovation and it’s just delaying all of that,” said Katie Kumerow, sustainability manager for Nester Hosiery, which manufactures specialty socks.
From September 2018 to July 2019, outdoor recreation businesses have paid $1.8 billion more in tariffs compared to the year ago period, according to new data released Thursday by the Outdoor Industry Association. This tariff increase is nearly triple what outdoor industry companies paid last year, according to the trade group’s latest data.
“Our growth is being hampered right now because we are not able to expand our workforce,” says Brent Merriam, Nemo Equipment Chief Operating Officer, who joined fellow association members on Capitol Hill Thursday.16
Tech:
The fight with China has had three broad effects, according to Chuck Robbins, the chief executive officer of networking equipment maker Cisco Systems, and the White House has no offsetting positives yet to show for this pain. Surprisingly, perhaps, companies such as Cisco have managed to resist most of the headwinds so far— but that may be changing.
One effect concerns sales to customers in China. US policy was meant to open the market more to American tech companies, but if anything it has had the opposite effect.
Cisco’s sales to Chinese telecoms groups had already been sliding for years, but big state-owned enterprises have now shut the door in the company’s face. “We’re being uninvited to bid, we’re not even being allowed to participate any more,” Mr. Robbins complained this week.
A second hit has come from the penal tariffs on imports into the US. . . . for suppliers of data centre technology such as Cisco, a recent increase in imports tariffs to 25 per cent has already started to bite.17
These examples could continue for a while, especially when it comes to how foreign governments, in particular China, retaliate against the United States. It’s been touch and go for our farmers, for instance—things got so bad that the Chinese regime announced in August 2019 that the nation wouldn’t buy any U.S. agricultural products, to counter Trump’s proposal of the latest, $300 billion slate of tariffs on China’s exports to the United States. The president of the American Farm Bureau Federation called it “a body blow to thousands of farmers and ranchers”—who, he added, were “already struggling to get by.”18 That’s partly reflected by how much US agricultural exports to the mainland have declined in recent years. They peaked at $29.4 billion in FY 2013. They were down to $23.8 billion in FY 2017, which overlapped Trump’s first year in office.19 They declined to $16.3 billion the next fiscal year, when the trade war began; a May 2019 forecast from the Department of Agriculture projected them to be just $6.5 billion in FY 2019.20 The word crippling doesn’t even begin to describe the situation.
Although China pledged to reopen its markets to US agriculture throughout the latter part of 2019, pending negotiations with the Trump administration—which included a pledge to lift at least some tariffs on Chinese goods—a load of damage had already been done. Which brings us to . . .
Third, the delusion. You’ve almost certainly heard the president’s quote that “trade wars are good, and easy to win.” Here it is in context: “When a country (USA) is losing many billions of dollars on trade with virtually every country it does business with, trade wars are good, and easy to win. Example, when we are down $100 billion with a certain country and they get cute, don’t trade anymore—we win big. It’s easy!”21
Nahhh. It’s really not, [commander in] chief. Trump is saying that if the United States happens to be importing a higher value of products from countries than our producers are exporting to them, we ought to instigate a trade war with them—which includes the US government doing something like hiking tariffs on them, to which they respond by imposing tariffs or other punitive measures (say, quotas) of their own on US goods, to which we respond, to which they respond. . . . He seems to think that the United States is destined to win such exchanges by default. (After all, he defines “winning big” as “not trading anymore.”) How? How will “we win big,” much less do it easily, in such a circumstance?
The answer is that we won’t. I’ve already documented some of the numbers that show why. Though they deviate from one another around the margins, the takeaway is unambiguous: we’re losers as a result of the trade war Trump has launched on multiple fronts, from Asia to Europe. Because he’s a strongman who never owns up to any wrongheaded decision or failure, however, what you hear from him is that actually, this playing tit for tat with world economies has been an unqualified success. In other words, what you hear him do is lie.
Take how he’s framed the farm bailouts that became necessary specifically because of the trade war. In July 2018, the USDA announced an $11 billion–plus “trade aid” package to farmers to offset the cost of tariffs on China to US agricultural producers. Ten billion dollars of the money was in the form of direct payments, and $1.2 billion went toward buying the surplus products that hadn’t been sold to the Chinese.22 Less than a year later, Secretary of Agriculture Sonny Perdue announced a second round of subsidies, valued at $14.5 billion and $1.4 billion, respectively.23 There are all sorts of things about this financial assistance to comment on: its merits, its effectiveness, its fairness, how it far exceeds the typical farm subsidies that the government doles out annually. But let�
�s start with how the assistance was framed. Secretary Perdue said, “The plan we are announcing today ensures farmers do not bear the brunt of unfair retaliatory tariffs imposed by China and other trading partners.”24 The words “unfair” and “retaliatory” right next to each other? That’s peculiar. Look, I get that the Trump administration’s perspective was that China was already in the wrong—and it’s not incorrect about that, on many levels—and so the United States taxing the Chinese into oblivion was merely “getting even.” But what the hell did Team Trump expect to happen in response to a scheme to slap tariffs on almost everything the United States imports from China? Something, to borrow a word, that was “easy” to overcome?
The rhetoric progressed from rationalizing to whitewashing. Just look at how Trump characterized the second round of aid, in May 2019: “Your all time favorite President got tired of waiting for China to help out and start buying from our FARMERS, the greatest anywhere in the World!”25 But China had already been buying loads of US agricultural products. As recently as 2017, it was the second-largest export market for US food and agriculture.26 Until the trade war, it bought 60 percent of US soybean exports. It’s not as if it hadn’t been an active player in the United States’ farm industry prior to Trump’s election—and it’s not as if Trump is due credit for fractionally solving a problem of his own making.
One “tweet storm” in particular, from May 2019, shows how outdated, if not completely bunk, economic thinking has become US policy under Trump. This gonzo theory of economics sounds as though it’s from some alternate—or alternatively factual—reality. Let’s flag especially troublesome comments with numbers in parentheses and describe them afterward.