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Opinion: Tariffs, Trade, and Trump – by Yosef Stein

Are global economics a zero-sum endeavor? Does one nation’s economic success spell disaster for the rest of the world? Is international trade a competition that must be won or lost? If you were to ask Donald Trump any of these questions, you would no doubt elicit an emphatic reply in the affirmative. The president’s speeches, Twitter feed and surrogates tend to focus on America’s “trade deficit” with a certain hawk-like focus, a focus that seems almost comical when viewed in its proper context, as we shall discuss herein.

First of all, what is a trade deficit, and why does it matter? A nation is said to have a trade deficit when its imports exceed its exports, meaning that it buys more goods from foreign countries than it sells to them. Similarly, a nation can have a trade deficit with a particular other country if its imports from that country exceed its exports to it. Trade deficits are a sign of the strength of a nation’s economy; after all, the most prolific importers of goods generally are those who have the most money to spend. Because America, as the wealthiest nation in the world, consumes far more products than its economy produces, our “trade deficit” is actually our saving grace. Without imports from other countries to plug the gap between production and consumer demand, millions of American consumers would be forced to compete for limited American products, driving prices skyward and resulting in a poorer economy with a lower standard of living.

However, Donald Trump sees things very differently, inexplicably viewing our trade deficit as a sign of weakness rather than as a key ingredient of our thriving free-market economy. Those familiar with the US political scene will be aware that the president routinely refers to trade in the context of winning and losing, as he has regularly since he launched his improbable campaign for the presidency nearly three years ago. On August 6, 2015, from the stage of the first Republican primary debate of the 2016 election cycle, Donald Trump uttered the following: “Our country is in serious trouble. We don’t win anymore. We don’t beat China in trade. We don’t beat Japan, with their millions and millions of cars coming into this country, in trade. We can’t beat Mexico, at the border or in trade. We can’t do anything right.” This sentiment – that trade is a competition and that America is losing it – is one which Trump has expressed with consistent regularity in the two-and-a-half years since.

In congruity with his long-stated belief that free trade makes America weaker, and spurred by the urging of his economically illiterate trade advisor Peter Navarro and incompetent Commerce Secretary Wilbur Ross, Trump ignored the counsel of conservative leaders, economists, and the corporate sector by unveiling new tariffs against steel and aluminum imports last Thursday. The new taxes on foreign metal imports, which are reminiscent of the similar steel tariffs put in place by President George W. Bush in 2002, are intended to preserve jobs in the American steel sector, which has been bleeding workers for several decades as American industrialism has been replaced by a 21st-century economy. By placing American steel companies at a competitive advantage over foreign corporations, Trump hopes to preserve an industry of barely 100,000 workers at the expense of hundreds of millions of American consumers, who will see increased prices on everything from automobiles to household appliances. And isn’t this the precise style of crony capitalism that Trump’s supporters decry? By attempting to wield government as a tool with which to choose the US economy’s winners and losers, Trump is following in the footsteps of his Democratic predecessor by removing America ever farther from the free-market ideals that made our economy great in the first place. (Incidentally, President Bush’s steel tariffs, which had a documented adverse effect on the US economy, were withdrawn the very next year. By some estimates, the tariffs cost the US economy hundreds of thousands of manufacturing jobs during their sole year of enforcement.)

Unfortunately, this is not the first time Trump has harmed the US economy by curbing the free flow of products to and from other countries. Last year, in one of his first official acts as president, Trump killed the Trans-Pacific Partnership (TPP), a trade deal negotiated by the Obama administration that would have improved the flow of trade between the US and 11 other countries. Trump argued that the trade deal, which ironically was supported by most Republicans and opposed by most Democrats, would have caused harm to several US industrial sectors by allowing American consumers to access less expensive imports from other countries – which of course would drive prices down and our collective standard of living up. President Trump chose to sacrifice the American consumer – and violate a basic tenet of capitalism – in order to appease his supporters in a small number of blue-collar industries. That’s not conservatism; that’s cronyism. The government has no business choosing winners and losers. (As an aside, the other eleven TPP member nations proceeded to sign an agreement that excludes the US, putting US businesses and consumers at a disadvantage with regard to purchasing products from other countries and selling our domestically-produced goods to other countries.)

Further solidifying the cronyism present in Trump’s new tariff policy, the president disclosed a slew of exceptions subsequent to the tariffs’ implementation. Canada, Mexico and Australia received the first exemptions from the new tariffs, and exemptions for numerous other allies are expected to follow. Additionally, the administration plans to offer specific exemptions of many steel and aluminum products that are not produced domestically in the US. While these are positive developments that will mitigate the effects and consequences of the “trade war” which Trump is imbecilically attempting to provoke (per his own admission), they also lay bare the president’s penchant for crony capitalism – as long as it suits him. For generations, conservatives have decried the notion that the government has the right to pick winners and losers in a capitalist economy. Trump’s dogged efforts to restrict free trade and hurt American consumers constitute just the latest instance of his bucking of conservative orthodoxy and embrace of big-government policies.

To be sure, there are losers in a capitalist free-trade economy as well. For instance, American steelworkers stand to lose from steel imports, as American companies have proven unable to keep up with the competition in the steel industry (as well as in several other industrial fields). However, competition is a crucial feature – not a bug – of capitalism. It’s what keeps the cost of living down, spurs innovation, and enhances efficiency and productivity. Competition is what has created the most prosperous nation in the history of mankind, which we are fortunate enough to live in. The fact that we aren’t the most efficient steelworkers in the world should not cause us to resort to the primitive theories of protectionism and isolationism; it should encourage us to trade with those who can produce such materials less expensively, while doubling down on the many, many fields where the skills of the American worker are unsurpassed by those of any other nation on Earth. That’s not to say that American steel-mining companies should shutter their doors, but nor should the government intervene and modify the rules of capitalism on their behalf, hurting billions of others around the globe. As Winston Churchill so eloquently put it, “The inherent vice of capitalism is the unequal sharing of blessings. The inherent virtue of socialism is the equal sharing of miseries.”

As evidenced by the globally-synchronized economic and stock market growth over the last several years, international economics are not a zero-sum game. A rising tide lifts all boats, as the saying goes. When we purchase a product we need from another country, both nations benefit. When we sell a product to another country, both nations likewise benefit. Hence, the trade war that Trump is attempting to instigate – whereby other countries will restrict free trade in response to our tariffs – will have no winners, only losers. The first loser will be the American consumer (that’s you), but the economic carnage won’t stop there. Millions of Trump-supporting manufacturing workers will be hurt above all when manufacturing costs go through the roof and many lose their jobs. Economic growth will be stifled. We’ll have more of products we don’t need and less of products we do need.

The good news is that Republican Senator Jeff Flake has introduced a bill to prevent Trump’s tariffs from taking effect, and his proposal has widespread support from many members of both parties. In the likely event that Flake’s bill fails to become law, however, welcome to the trade wars. Let’s hope that Congress puts a stop to this madness before Donald Trump manages to reverse the last decade of global and domestic economic gains.

[TLS welcomes your opinions by submitting them to letters@thelakewoodscoop.com]

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There are 15 Comments to "Opinion: Tariffs, Trade, and Trump – by Yosef Stein"

  • Concerned Reader says:

    Your assertions are not totally true, because Chinese government subsidizes its many industries with the use of currency and oil manipulation. Our country does not do this. Furthermore, the cost increase of metal on a $40,000 car is about $112, which will improve the dying metal industry. American manufacturing companies can’t compete with the production costs of china or mexico thus the trade deficit. Which causes the American market to be over-saturated with Chinese knockoffs.

  • tomatoface says:

    #1, the tariffs are obviously large enough to discourage imports.

  • roger green says:

    wow! how fortunate are we,the readers of the lakewood scoop,to have such brilliant advisors like yosef stein.its really a shame that our nation is burdened with such moronic people like donald trump,’illiterate’ peter navarro, and ‘incompetent’ wilbur ross.for the sake of our nation and indeed the world I think we should selflessly agree to donate yosef stein to the world so he can save us all from these ‘nebs’!!

  • Jose Garcia says:

    I agree with #1. China manipulates it’s trade when and how it sees fit by artificially lowering prices. This gives it an unfair advantage, essentially insulating itself from the eb and flow of healthy competition by devaluation. The only way to combat this unfair advantage is with the pressure of tariffs

  • Moshe Kalish says:

    It’s very unfortunate but this article while sounding intelligent is full of misinformation and straight out ignorance. Why should the United States be different then all of the other nations of the world who impose steep tariffs on U.S goods!?? It’s true in a perfect world no tariffs are a good thing but the U.S needs to level the playing field with their trade partners. What the writer of this article fails to point out is what an absolute disaster NAFTA is and was for the U.S worker! Millions lost their Jobs because of this trade deal and had TPP been passed had Hillary won millions more would have been kicked to the curb! The reason that we are importing so much from other countries is not because of the quality of their goods; it’s because they don’t have to follow the same laws and regulations we have here in the States. These trade deals are all in favor of the poorer countries and are very disadvantageous for the U.S worker. It’s funny this author accuses Trump of “crony capitalism”for opposing trade deals that are in favor of the CRONIES!!!! Were was he during the eight years of Obama when he was constantly favoring big corporations over the U.S worker!?? I see from the picture of the writer that he is a young man so this may explain some of his ignorance on the issue. I truly urge him to look into the matter more and be more honest when publicly taking shots at the president.

  • Enlightened Reader says:

    Some of the comments here truly baffle me; they seem to conveniently select tidbits of information and take them completely out of context. While I disagree with certain points in this article, I agree in the larger context of tariffs being harmful and having adverse effects on our society. The quote by Churchill regarding socialism seems legitimate in theory, but when unearthing the many facets beneath the issue, is is apparent that capitalism has its own set of faults as well. Despite my opinion on those issues, this article is brilliantly written and pinpoints the many inconsistencies within the Trump administration.
    I think it would be beneficial for fellow commenters to thoroughly analyze this piece and take into account the complexity of the issue. Tariffs and other issues regarding importation are not black and white or so easily defined either. Humbly recognizing that there is authenticity in this author’s words and that he’s not aiming to belittle anyone will definitely allow for a more productive, insightful discussion.

  • Entitlement society says:

    @Moshe Kailish

    Fight the facts and not the author. And what does age have to do with credibility?

    -Lower prices (ie. no tariffs) = more For your money. which raises the standard of living for every american. Put another way, in 2002 when similar tariffs were imposed it cost $30 million to the economy (source: usit.gov)

    -when Bush 43 imposed tariffs on steel in 2002 there were 200,000 jobs lost (source: tradepartnership.com)

    – the employment gained by steel manufacturers were lost by auto companies and companies that take raw steel and use it to manufacurer other parts out of raw steel. In fact Boeing is the largest importer of steel in this country and it employs lots of people.

    – and to argue in theory with you, @Moshe. ..the cost of American made goods will go up making our products more expensive on the global stage. Examples of companies that could lose out ..
    1. Boeing …
    2. car manufacturers
    3. Whirlpool
    The above, are major players on the global stage and an increase in steel prices will cost these products to go up as well. So now exports for American products can go down even more, especially if there’s a trade war.

    Also, trump said he’s willing to negotiate with each country. That sort of uncertainty is not healthy.

    And finally, America is moving from an industrial economy to an economy far greater.

  • TheDoctor says:

    Senator flake is an anti trumpster who compared President Trump to stalin on the Senate floor for his legitimate calling out of the media for their anti Trump bias and ignored the actual stalinistic acts by the previous administration in its spying on the media

  • Entitlement society says:

    Another fact is that
    1. we spend in excess of one trillion dollars a year on welfare.
    2. Aprox 25% of america is on some sort of welfare. Whos paying for all this? The government is spending more than it takes in? Answer: China or the trade deficit is obvious
    3. Bush’s & Obama’s stimulus cost close two trillion dollars and trump wants to spend two hundred billion that we don’t have on infrastructure. This will increase our deficit even more.
    Bottom line : there’s a deficit because so many are spending without producing.

  • NeoCon says:

    To #1 & #4: When China subsidizes their exported products, devalues their currency, or otherwise cheapens their products for world consumption, they are essentially taking money from their own citizens and putting it in our pockets by providing products at below cost. Whereas this is a predatory trade practice where the intent is to drive the competition out of business and then to jack up the price, not only is there no evidence of this intent, but historically it never works that way.

    To #4: Speaking of ignorance and misinformation –
    1) Most of “all of the other nations of the world” – and principally our main trade partners – do not impose any significant tariffs on U.S. goods at all; in fact, the opposite is the case, as our trading partners have threatened only now to impose them in response.
    2) There is no credible study supporting the idea that NAFTA and the like have cost the U.S. economy “millions” of jobs. It may be true that “millions” of specific job titles have been eliminated, but anything that is a net positive for the general economy like free trade means that growth in other areas of the economy more than compensate for what is lost. (Hey, have you noticed the unemployment rate currently in the era of free trade?)
    3) For better or worse, NAFTA, TPP, and practically all free trade agreements negotiated since the Clinton administration have included environmental and labor-safety provisions to require our trade partners to impose similar standards as our companies are required. Much of this is liberal overkill (especially the environmentalism), but in any case it is false to maintain that our companies are being unfairly disadvantaged in this regard. One of the chief positives of Pres. Trump and his administration had been to question and remove many of these unwarranted mandates; so the extent that our standards are too strict and cost our companies money and jobs, their continued modification and/or removal is the way to go.
    4) You obviously have no idea what the term “crony capitalism” means. Supporting free trade is basically getting out of the way and leaving American businesses alone to do what they are supposed to do – produce, employ, and make money. There is no “favoring” here because there is no artificial disruption of capitalism to tilt economic activity towards one participant or another.

    To #3: Great sarcasm there; but do you have anything of intelligence to add to the discussion of trade and tariffs? Do you know what those are?

    • roger green says:

      to # 10:I’m intelligent enough to know that I, you, yosef stein,and all the ‘brilliant’ commenters here know and understand a hell of a lot less about trade and tariffs than trump,navarro,and wilbur ross do!

      • NeoCon says:

        So if you don’t personally understand the issues involved, maybe stand to the side, listen to what is being said, and consider both positions based on their merits, as expressed here and elsewhere. For what it is worth, it would seem that the majority of “expert” opinion is against Trump.

  • The Man says:

    Roger, you admit that you don’t know much about tariffs or trade. Which is clear from your comments, which add no substance. Your mistake is assuming that the author and other commenters know as little as you do. Especially since their position is supported by economic experts across the spectrum, and yours is supported only by Donald Trump, Elizabeth Warren, and Bernie Sanders.

  • Wolf says:

    I’m not interested in a trade war. Anyone know’s how the last trade war ended (hint-1929-1933)

  • Entitlement society says:

    @ roger green

    History is smarter than Trump. And this is history repeating itself from 2002 Bush 43 steel tariffs that ended in 2003 because of its failure.

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