Remember when Donald Trump declared that “nobody knew that health care could be so complicated”?
It was a rare moment of self-awareness for the tweeter-in-chief: He
may, briefly, have realized that he had no idea what he was doing.
Actually,
though, health care isn’t all that complicated. And Republican “reform”
plans are brutally simple — with the emphasis on “brutally.”
Trump
may be the only person in Washington who doesn’t grasp their essence:
Take health insurance away from tens of millions so you can give the
rich a tax cut.
Some
policy subjects, on the other hand, really are complicated. One of
these subjects is international trade. And the great danger here isn’t
simply that Trump doesn’t understand the issues. Worse, he doesn’t know
what he doesn’t know.
Continue reading the main story
ADVERTISEMENT
Continue reading the main story
According to the news site Axios, Trump, supported by his inner circle of America Firsters, is “hell-bent”
on imposing punitive tariffs on imports of steel and possibly other
products, despite opposition from most of his cabinet. After all, claims
that other countries are taking advantage of America were a central
theme of his campaign.
And Axios reports that the White House believes that Trump’s base “likes the idea” of a trade war, and “will love the fight.”
Yep, that’s a great way to make policy.
O.K., so what’s complicated about trade policy?
First,
a lot of modern trade is in intermediate goods — stuff that is used to
make other stuff. A tariff on steel helps steel producers, but it hurts
downstream steel consumers like the auto industry. So even the direct
impact of protectionism on jobs is unclear.
Then
there are the indirect effects, which mean that any job gains in an
industry protected by tariffs must be compared with job losses
elsewhere. Normally, in fact, trade and trade policy have little if any
effect on total employment. They affect what kinds of jobs we have; but
the total number, not so much.
Suppose that Trump were to impose tariffs on a wide range of goods — say, the 10 percent across-the-board tariff
that was floated before he took office. This would directly benefit
industries that compete with imports, but that’s not the end of the
story.
Even
if we ignore the damage to industries that use imported inputs, any
direct job creation from new tariffs would be offset by indirect job
destruction. The Federal Reserve, fearing inflationary pressure, would
raise interest rates. This would squeeze sectors like housing; it would
also strengthen the dollar, hurting U.S. exports.
Claims
that protectionism would inevitably cause a recession are overblown,
but there’s every reason to believe that these indirect effects would
eliminate any net job creation.
Then
there’s the response of other countries. International trade is
governed by rules — rules America helped put in place. If we start
breaking those rules, others will too, both in retaliation and in simple
emulation. That’s what people mean when they talk about a trade war.
And
it’s foolish to imagine that America would “win” such a war. For one
thing, we are far from being a dominant superpower in world trade — the
European Union is just as big a player, and capable of effective
retaliation (as the Bush administration learned when it put tariffs on steel
back in 2002). Anyway, trade isn’t about winning and losing: it
generally makes both sides of the deal richer, and a trade war usually
hurts all the countries involved.
I’m
not making a purist case for free trade here. Rapid growth in
globalization has hurt some American workers, and an import surge after
2000 disrupted industries and communities. But a Trumpist trade war
would only exacerbate the damage, for a couple of reasons.
One
is that globalization has already happened, and U.S. industries are now
embedded in a web of international transactions. So a trade war would disrupt communities
the same way that rising trade did in the past. There’s an old joke
about a motorist who runs over a pedestrian, then tries to fix the
damage by backing up — running over the victim a second time. Trumpist
trade policy would be like that.
Also,
the tariffs now being proposed would boost capital-intensive industries
that employ relatively few workers per dollar of sales; these tariffs
would, if anything, further tilt the distribution of income against
labor.
So
will Trump actually go through with this? He might. After all, he posed
as a populist during the campaign, but his entire economic agenda so
far has been standard Republican fare, rewarding corporations and the
rich while hurting workers.
So the base might indeed like to see something that sounds more like the guy they thought they were voting for.
But
Trump’s promises on trade, while unorthodox, were just as fraudulent as
his promises on health care. In this area, as in, well, everything, he
has no idea what he’s talking about. And his ignorance-based policy
won’t end well.
Posts
No comments:
Post a Comment