Trumpian Trade Tribulations! The Triumph of Travesty over the Truth!

Aahh the perils of a populist president.  But at least I can try to think of more words that start off with TR.* So yesterday Mr. Trump declared war on most of America and a few foreigners to support a few jobs in the solar cell and washing machine industries.  Let’s just review the standard economic reality of what this means, and then address why this happens, and what Christians should think about this.  So here is the pretty straight forward explanation of the economics, once one considers not just the initial effects, but also the unintended consequences.

  1. The near term and only certain effect is to increase the price that every American has to pay for washing machines and solar cells.  The tariff will not be swallowed completely by the company, but the price will increase potentially up to the tariff itself, depending on consumers’ willingness to adjust their consumption choices.  So effect #1–we’ll pay higher prices.
  2. Effect #2 is that the quantity of foreign washing machines sold will fall (which is the intent of the tariff), leaving foreigners with less $$, meaning they will not be able to buy as many of our exports.
  3. The industries that will be hurt by reduced sales of exports are precisely those that are the most efficient; the companies benefiting from our tariff are our most inefficient.   So we harm the winning industries to help the losing industries.
  4. This does not yet address the fact that countries that are slapped with a tariff will usually retaliate in some form or the other, resulting in further harm to our exporters.  In the WSJ report on this (gated), one new solar panel manufacturer may open a US plant based on the tariff (potentially creating 800 jobs), but the losses inflicted on other American exporters are estimated to be 23,000!  Yes, Mr. Trump really, really, really cares about American jobs.  Just listen to what he says, not what he does.
  5. The reward to the special pleading of those anti-competitive companies will be noticed by other domestic companies, encouraging yet further rent-seeking activities in totally unrelated industries, further consuming scarce social resources and increasing the Washington DC corruption.
  6. More entrepreneurs will be encouraged not to come up with innovative new ideas, but become cronies!

These effects are not likely (hardly) to be exhaustive, but are certainly reflective of some of the reasons why trade is a winner and hostility to trade a loser.  But I thought Donald Trump was always a winner?  Why would he want to lose this way?

This is the classic fallacy of composition in new guise: what is good for the individual is not necessarily good for the whole.  It’s true that as a whole country we lose.  But in a world of rationally ignorant people, support of special interest groups is very easy for populist politicians like Mr. Trump to exploit.  Everybody sees when free trade leads to uncompetitive firms shutting down, and can see that China (or you name the country) is to blame.  But the benefits of free trade are almost never shown to be from free trade itself.  As an export industry expands its production or opens a new plant, well, its just a good market.  No one sees the linkage to another country’s ability to purchase the export goods from the U.S. with its ability to sell us imports.  The linkage is undeniable to anybody that looks at it deeply, but whoever thinks about that?  After all, the super bowl is just over a week away.  And did you see the latest on facebook?

The greatest commandment is to love the Lord our God with all our hearts, souls, minds, and strength.  And the second is like it–to love our neighbor as ourselves.  But that suggests that we need to think with our minds to effectively love our neighbors, not simply with our hearts (although don’t lose the heart!).  That means that Bereans should be about trying to see the unseen as well as the seen as we advocate policies that affect our neighbors.   Using your minds is the best way to avoid being snookered by populist politicians.

 

* Ok readers, give me word suggestions that I should use Mr. Trump in the future that begin with TR.  I’m sure Mr. Trump’s trade salvo here will not be the last, and hence source of unending blog material!

25 thoughts on “Trumpian Trade Tribulations! The Triumph of Travesty over the Truth!”

  1. Not sure what else we could expect from someone who has demonstrated no clear commitment to any kind of consistent approach to economics. I hope we can weather this populism alright…

    Any thoughts on the rest of the world getting on with the TPP without us? I would have hoped that such a stable genius would salvage our multinational trade agreements instead of leaving us behind the curve as everyone else makes deals.

    Also, I’m partial to ‘troglodyte,’ though it might come across insulting.

    1. The Economist recently printed a piece (I’ve not been able to read it yet) declaring that Asia was becoming the leader in free-trade. Evidently, Canada has taken the place of the United States in TPP.

      1. Frankly, I think this is going to be one of the most significant failures of the Trump era: We are losing credibility on the world stage, and China is filling the void. Developing nations are looking for someone consistent with resources to help them, and China is taking our place. I don’t think the White House appreciates how much we rely on the good will of other nations to maintain our presence.

    2. I’m not so sure that Trump is so inconsistent in his economic approach. If you listen to his comments, you find pretty quickly that he wants to “win,” which in turn drives his whole line of thinking and transforms itself into an America First agenda. Specifically, he’s a businessman, so he’s focused on winning in the business world. On the domestic front, this plays out all right. We get deregulation, we get tax cuts, and we end up with a generally business friendly environment. On the international stage, it’s more problematic. He wants to “protect” American businesses from what he sees as unfair practices, he wants a weaker dollar to help spur exports, and he wants “fair” trade along with free trade. Trump is consistent when you get down to the core of it; he’s just not right all time.

      1. Except he didn’t want tax cuts. He said rich people would be paying more (and lied again). He has promised to simultaneously raise the minimum wage to $10 because that’s more fair, and leave it where it is because it’s too high, and also let states set their own minimum wage instead. He’s promised to entirely eliminate our trillions in debt in the next 8 years, while cutting revenue and leaving the military and welfare untouched. And we’re all gonna get healthcare apparently, so I’m not sure how that fits.

        He says a lot of things. I don’t see how there’s a consistent approach to them, except that they’re all populist. He doesn’t want free trade: He wants everyone to be buying more of our stuff while we simultaneously rely less on them. He wants to bring back heavy industry for some reason, when we really aren’t competitive in that field anymore. He’s gonna try and resuscitate coal somehow, even though the industry has been dying for a century. It’s not hands-off free market for him, it’s patronage to specific groups he likes, which is the opposite of a traditional conservative position.

        You’re right about deregulation, though. He’s pretty consistent there. But that’s not really a cohesive ideology.

      2. Didn’t want want tax cuts? I think you’re missing something; he had a plan out during the campaign for tax cuts, and his plan involved way more cuts than what we got. The top rate would have been 25% under his plan. Go check it for yourself if you don’t believe me. Look, you can be consistent on your goals and be flexible in the methodology; that’s not concerning to me at all. I think you’re just unwilling to give him any credit…which is fine. You’re entitled to just not like him.

        Again, I’m not saying all his goals are practical, but they are generally consistent with his message. Just because he doesn’t have a good plan for something doesn’t mean he’s inconsistent. And, if something comes along that changes his mind for the better, I don’t think we should be bemoaning that change. I’ll gladly take some flip-flopping on trade if it means he gives up on tariffs and quotas. Consistency shouldn’t be the metric by which we evaluate a Presidency. I want good results above all else, and if that means he has to break with his message, that’s perfectly fine with me. I think we’re having another one of our infamous “I mean, you mean” moments…

        Honestly, I think you just don’t like him and are unwilling to give him much credit. Which, again, is fine. He can be hard to like. Just don’t let it cloud your vision.

      3. Oh no, they definitely passed tax cuts. He’s definitely cut regulations. He’s also renewed the war on drugs (even though he told us he’d leave it to the states) and rolled back DACA and put down these new tariffs. He’s definitely done things. I’m giving him credit. It’s just that, as you also point out, these things are not necessarily predictable from his stated positions, and not all of them are good.. He’s just not at all consistent on what he wants. Or perhaps he is, and just tells people numerous contradictory things for tactical reasons, but you can hardly blame people for having a hard time knowing what he really thinks when he does this.

        I agree that he should do productive things. Unfortunately that means abandoning a huge portion of what he sold voters. It means dropping that stupid wall and these stupid tariffs and replacing Nikki Haley with someone diplomatic.

        He’d have to break with his message all the time. Which either means he shouldn’t have been elected in the first place because his message is a fundamentally flawed one that contradicts itself, or he should have just told us what he really wanted to begin with. I’m uncomfortable with tactical lying.

  2. I haven’t read the article yet.

    I was a little frustrated with the title, I felt like it was a little over the top with all the T words, then I read your first sentence. Them all being TR automatically made it better. Well done.

  3. Isn’t there a way to overcome these tariffs? Is there any legal recourse to render these ineffective? There cannot be very many people that truly believe these are good for all, so how can the people act against these terrible trade policies?

    I’d say troubling is a pretty good TR word to use for Trump related issues.

  4. What benefits are there from tariffs? Or is the whole new policy negative for the U.S.? With killing a bunch of American jobs, does this create more ingenuity in America to create products for lower prices? Are there any numbers on how high the tariffs are? Are they actually large enough to create such an effect on American jobs and the economy?

    1. Yeah, it’s a pretty bad idea that shows a lack of perspective. He doesn’t understand how large this industry is and how little this will do to help accomplish anything productive. I suspect it’s an attempt, in part, to protect coal, which has been dying for a century and is beyond his ability to save.

      1. Theophilus
        I doubt he actually thinks this will protect coal. Rather let’s remember the reason he is president (hint: not Russian collusion!). He is president because the populist, white, union base of the Democratic party in Pennsylvania, Wisconsin, Michigan and Ohio broke for Trump. Its not important to him that his actions actually accomplish anything, as long as those same voters perceive him as fighting for their interests. But this is no different than any other politician would do.

      2. Of course, the optics are the important thing, I’m not seeing anyone suggesting this will really accomplish much. I think it could be seen in a similar light in coal country though: Taking steps to hurt other energy sources, which have been driving down prices and hurting the industry. Can you explain how solar panel tariffs resonate with union guys? I’m not sure I follow.

      3. Just attacking Chinese imports (of what type doesn’t particularly matter) would be perceived as protecting American manufacturing jobs. I haven’t checked out the union reaction to this but a priori I think they’d be pretty pleased.

  5. Crony capitalism in overdrive.

    It was not enough that Energy secretary Rick Perry was trying to find federal SUBSIDIES for coal and, I think, nuclear energy. A disgusting abuse of federal government power, certainly.

    Now this tariff on solar energy, an industry which employs around five times more people than the coal industry does. And for what? To stop the clear trend towards alternative energy, the costs of which are Moore’s Law in action?

  6. When is the first Republican with a conscience and with PRINCIPLES going to leave the party and become an independent?

    Maybe we should place odds, no?

    1. Why would that matter? What benefit would that do? Do you have a similar challenge to Democrats? Seriously, let’s say I was a Republican officeholder. Why should I leave the party just because a Democrat takes over the party and is a populist? I would agree with you if you said, where are the Republicans that publicly condemn his trade policies. And they are few and far between right now. But especially in the Senate, I’m sure you’d like about 2 Republicans to leave. But would you be happy with that if they still caucused with the Republicans?

      1. I am not a Democrat. Democrats are not in power right now. You have raised, well, non-points.

        The issue is REPUBLICAN leadership under a REPUBLICAN president.

        And Republicans are not only NOT distancing themselves from the president, who has made a mockery of the party, but are actually embracing him and indeed enabling him. They are closer now arguably than ever.

        Wonder if any other Republicans have had a “date” with Stormy Daniels. I bet Steve Wynn has, lol. Not that it matters. But if it were a Democrat accused of such an act…

  7. Good article that highlights the key problems with Trump’s trade policies. I find it particularly interesting that his work to limit government involvement in other fields of the economy has not had such a beneficial effect that he realize perhaps implementing a tariff would not be good for America. Cronyism is very real.

  8. I hate to generalize the two political parties, but I think it is ironic that one of the usual knocks on the Democratic party is that they typically think with their heart and not their minds, yet here we have a Republican president – whose motives are mostly driven by the emotional charge of winning – putting a plan to action that logically doesn’t make much sense.

  9. Trump is a president that I truly do not understand. He insults people and says whatever he wants without caring about how it will be perceived. On the other hand, he is doing anything possible to make it look like he is fighting for what the voters want. This tariff will solve a small problem and in the long run cause a much bigger one.

  10. Now that Trump and the Republican right have flipflopped and taken a position against free trade, what party is now supportive of free enterprise? Hasn’t the Republican platform historically been rooted in free trade and limited tariffs in an effort for limited corporate constraints? This makes me wonder if trump is even in a political party or just simply fashioning one of his own. Maybe he could call it the Republican/Democratic Party. He is the furthest thing from predictable and doesn’t seem to represent either party well.

  11. Since I often hear positive comments about how Trump has knowledge of business that enables him to run the country well and help us “win”, I am left wondering why he doesn’t take into account that the tariffs will both leave foreigners with less money to import goods from us, and cost us thousands of jobs. It doesn’t feel like we are “winning” with this policy. What is Trump’s justification for this? Why bother trying to restrict the number of foreign washing machines sold?

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