As many people have been pointing out, Trump’s decision to cancel cost-sharing subsidies for health plans is a rare policy trifecta: it raises prices, reduces the number of people with insurance, and costs taxpayers money. Nor is there evidence of any political strategy worthy of the name. This is policy driven by sheer spite: Trump can’t get what he wants from Congress, so he’s going to punish innocent people.
There are many lessons to be drawn from this sorry spectacle, but here’s one point I haven’t seen people making: my estimation of the odds that Trump will blow up the North American Free Trade Agreement have just gone way up.
Until now, I’ve been fairly complacent about NAFTA’s fate. It’s not that I imagine that Trump, or for that matter any of his senior advisers, has any understanding of what NAFTA does or the foreign-policy implications of tearing it down. But I thought sheer interest-group pressure would keep the agreement mostly intact. Thirty years of US-Mexico economic integration — because the process began before NAFTA, with the big Salinas trade liberalization — have created a deeply integrated North American manufacturing system. The US imports a lot from Mexico, but it exports a lot too, and much of the trade is in intermediate goods — Mexican components assembled into U.S.-assembled cars, U.S. textiles used to produce Mexican garments, and so on.
Decades of investments, not to mention choices by workers about where to live and what skills to develop, have been based around the assumption that this system will continue. So breaking it up would be hugely disruptive, and the losers would include major industrial players who tend to have the ear of even Republican administrations. So I thought we’d likely get a few cosmetic changes to the agreement, allowing Trump to declare victory and walk away.
But look what just happened on health care. Never mind the millions who may lose coverage: Trump demonstrably doesn’t care about them. But his decision will also cost insurers and health care providers, the kind of people you might expect him to listen to, billions. And he did it anyway, evidently out of sheer spite — perhaps made more intense by his sense that his presidency is rapidly failing.
So is it safe to assume that he won’t screw over much of U.S. manufacturing in the same way? At this point, the answer has to be “no.”
Look, at this point reasonable people are worried, I think rightly, that Trump’s rage and spite might lead him to start a war. So why not worry that he’ll start a trade war instead (or as well)?
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