Trump & Trade 2018

Written by  //  April 5, 2018  //  Trade & Tariffs, U.S.  //  No comments

5 April
Economist: Trump trade war will cost 190,000 jobs
(Axios) In addition to the multi-day bloodbath on Wall Street, the U.S.-China tariffs war will cost 190,000 American jobs thus far and shave a smidgen of GDP growth from the economy, projects Mark Zandi, chief economist at Moody’s Analytics.
What they’re saying: For months, President Trump has continued to gripe about the cost to U.S. workers of the U.S.-China trade imbalance. But, if Zandi is more or less right, the tit-for-tat trade attacks that he set off last week will cut close to a month’s average growth in U.S. jobs, and 0.14% from this year’s growth in GDP. “And the economic costs will mount quickly if the back-and-forth tariff hikes continue,” he tells Axios. … The soy bean example: As a window into why the economy will take this hit should the tariffs go ahead, look at soy beans. In a note to clients today, Goldman Sachs said U.S. soybean exports to China are worth $14 billion. To the degree the tariffs stay on, Latin American producers including Brazil, Argentina and Paraguay are likely to increase their planting, and potentially take away business from U.S. farmers.
Joseph Stiglitz: Trump’s Trade Confusion
US President Donald Trump’s recently announced import tariffs on steel, aluminum, and $60 billion in other goods that the US imports from China each year are in keeping with his record of responding to nonexistent problems. Unfortunately, while Trump captures the world’s attention, serious real problems go unaddressed.
(Project Syndicate) Even if Trump had no economists advising him, he would have to realize that what matters is the multilateral trade deficit, not bilateral trade deficits with any one country. Reducing imports from China will not create jobs in the US. Rather, it will increase prices for ordinary Americans and create jobs in Bangladesh, Vietnam, or any other country that steps in to replace the imports that previously came from China. In the few instances where manufacturing does return to the US, it will probably not create jobs in the old Rust Belt. Instead, the goods are likely to be produced by robots, which are as likely to be located in high-tech centers as elsewhere.
Trump wants China to reduce its bilateral trade surplus with the US by $100 billion, which it could do by buying $100 billion worth of US oil or gas. But whether China were to reduce its purchases from elsewhere or simply sell the US oil or gas on to other places, there would be little if any effect on the US or global economy. Trump’s focus on the bilateral trade deficit is, frankly, silly.
Predictably, China has answered Trump’s tariffs by threatening to respond to their imposition with tariffs of its own. Those tariffs would affect US-made goods across a wide range of sectors, but disproportionately in areas where support for Trump has been strong.

1 April
China Slaps Tariffs on 128 U.S. Products, Including Wine, Pork and Pipes
(NYT) The Chinese government hit back Monday at President Trump’s tariffs on steel and aluminum by acting on a threat to put tariffs as high as 25 percent on imports of 128 American-made products, including pork and seamless steel pipes.
The Chinese Ministry of Commerce indicated that the tariffs, which it first publicly suggested almost two weeks ago, were intended to pressure the Trump administration to back down from a simmering trade war. In addition to imposing additional tariffs on steel and aluminum from China and other countries, President Trump has threatened to put protective duties on other Chinese-made products worth $60 billion.
“We hope that the United States will rescind its measures that violate World Trade Organization rules as quickly as possible,” the ministry said in an online statement about China’s retaliatory tariffs. “China and the United States are the world’s two biggest economies, and cooperation is the only correct choice. Both sides should use dialogue and consultation to resolve their mutual concerns.”

23 March
American Farmers Are Collateral Damage in Trump’s Trade War
“Folks are getting pretty nervous.”
(Mother Jones) From the Midwest’s soybean fields to nut groves out West, US farmers look to absorb the bulk of the showdown’s fallout. That’s because cargo boats that arrive in US ports packed with Chinese-made smartphones and metals return in large part stuffed with US-grown food, including soybeans, pork, fruit, and nuts. Since we export around five times as much food to China as we import from the country, a US-China trade war won’t change much about the price of your food—if anything, the domestic gluts it could create might make items like meat and nuts a little cheaper here. In farm country, though, it’s a different story.

19 March
Which U.S. states are most exposed to the EU’s retaliatory tariff proposal?
(Brookings) [T]he products on the EU list accounted for $8.2 billion worth of U.S. exports to the EU in 2017, or 3 percent of the total ($283 billion). As we have documented before, U.S. states vary in their exposure to trade policy shifts based on their core export industries and top destination markets. New York, for instance, exports $1.5 billion worth of goods under the Commission’s scrutiny, including $1 billion of jewelry and other precious metals. The states of leading congressional Republicans would also face these custom duties. California, the home of House Majority Leader Kevin McCarthy, is the third most exposed state in volume, exporting $700 million worth of goods included in the list to the EU. The tariffs would also affect exports of electrical machinery from Texas, the state of Senate Majority Whip John Cornyn, as it exported to the EU for $143 million.

13 March
Republicans must choose: Trump or trade?
(WaPost Editorial Board) PRESIDENTIAL POWER over trade and tariff policy is a little-known but crucial, and enduring, legacy of the New Deal. Reacting to the disastrous Smoot-Hawley Tariff enacted by a Republican Congress in 1930, the Democratic Congress under President Franklin D. Roosevelt passed legislation empowering the executive branch to set tariffs through reciprocal bargains with other nations. … Among many reasons President Trump’s declaration of new tariffs on steel and aluminum, ostensibly on national security grounds, represents a potentially radical departure in U.S. trade policy is that it shows what can happen when this legal authority, designed for an era of trade-promoting presidents, suddenly falls into the hands of a protectionist.

9 March
The Politics of Trade Wars
Europe has gotten another American president to back down on tariffs—by targeting products produced in politically sensitive districts.
(The Atlantic) The ironic effect of a nationalist trade gesture was to demonstrate how much politics can be global, namely when Europe threatened retaliatory tariffs affecting iconic American goods and, not incidentally, key congressional districts in the United States.
The European Union is the second-largest exporter of steel to the U.S. (behind Canada), and said after Trump first proposed the tariffs that it would consider imposing counter-measures against American exports to Europe, including bourbon whiskey and Harley Davidson motorcycles.
(LA Times) The same South Korean envoys who told Trump about Kim’s desire to meet also carried a request: Please exempt Korean steel exports from your newly announced tariffs.
Given South Korea’s key role in brokering the nuclear negotiations, there’s a good chance Trump will agree. As Don Lee explained, the tariff order that Trump announced on Thursday “looks less like an effort to preserve national security and more like an attempt to create a giant bargaining chip that the president can play around the world.”
In practice, he announced that, at least for now, he would exempt imports from Canada, the largest exporter of steel to the U.S., and Mexico, the fourth largest. South Korea is No. 3 on the list. Together, those three countries accounted for 38% of U.S. steel imports in 2016, according to the government’s International Trade Administration.
If South Korea wins an exemption, can Japan, another key ally in the North Korea negotiations, be left out? They’re No. 6 on the list. (Brazil and Turkey are the other two sources in the top five).
China, which Trump often talks about as his chief target, is No. 11, and its direct exports to the U.S. have dropped sharply to just about 3% of U.S. imports. Steel-industry analysts say, however, that Chinese overproduction of metals accounts for much of the global surplus that has driven down prices. [NB U.S. allies line up for exemptions from Trump’s aluminum, steel tariffs , e.g. Turnbull Says Trump Promised Him Exemption on Metals Tariffs]
“We’re going to be very flexible,” Trump said — a promise that will do little to reassure companies that rely on steel or aluminum to build cars, planes and a host of other products and who want to know what prices they will face.
As Lee noted, until mid-week, White House officials had been saying that specific carve-outs for individual countries were not planned because they would be too difficult to implement.
Trump had justified the tariffs on national security grounds, but undermined that argument on Monday when he suggested he would use them as leverage in the NAFTA negotiations with Canada and Mexico. That statement could weaken the administration’s legal case if the tariffs are challenged either in court or before the World Trade Organization.
Dani Rodrik: Trump’s Trade Gimmickry
(Project Syndicate) The imbalances and inequities generated by the global economy cannot be tackled by protecting a few politically well-connected industries, using manifestly ridiculous national security considerations as an excuse.
As Jared Bernstein and Dean Baker point out, Trump’s tariffs are likely to benefit a small minority of workers in protected industries at the expense of a large majority of other workers in downstream industries and elsewhere. The imbalances and inequities generated by the global economy cannot be tackled by protecting a few politically well-connected industries, using manifestly ridiculous national security considerations as an excuse. Such protectionism is a gimmick, not a serious agenda for trade reform.
A serious reform agenda would instead rein in the protection of drug companies and skilled professionals such as physicians, as Bernstein and Baker argue. It would address concerns about social dumping and policy autonomy by renegotiating the rules of the WTO multilaterally. And it would target areas where the gains from trade are still very large, such as international worker mobility, instead of areas that benefit only special interests.

8 March
Paul Krugman: Oh, What a Trumpy Trade War!
There’s a reason we have international trade agreements, and it’s not to protect us from unfair practices by other countries. The real goal, instead, is to protect us from ourselves: to limit the special-interest politics and outright corruption that used to reign in trade policy.
Some background: Contrary to what some seem to believe, textbook economics doesn’t say that free trade is win-win for everyone. Instead, trade policy involves very real conflicts of interest. But these conflicts of interest are overwhelmingly between groups within each country, rather than between countries.  … The small groups that benefit from protectionism often have more political influence than the much larger groups that are hurt. That’s why Congress used to routinely pass destructive trade bills, culminating in the infamous Smoot-Hawley Tariff Act of 1930: Enough members of Congress were bought off, one way or another, to enact legislation that almost everyone knew was bad for the nation as a whole. In 1934, however, F.D.R. introduced a new approach to trade policy: reciprocal agreements with other countries, in which we exchanged reduced tariffs on their exports for reduced tariffs on ours. …
F.D.R.’s reciprocal agreement approach led to a rapid unwinding of Smoot-Hawley, and after the war it evolved into a series of global trade deals, creating a world trading system that these days is overseen by the World Trade Organization. In effect, the U.S. remade world trade policy in its own image. And it worked: The global deals that evolved from the reciprocal tariff approach greatly reduced tariff rates around the world, while setting up rules that constrain countries from backtracking on their commitments. … Under U.S. trade law, which is written to be consonant with our international agreements, the president can impose tariffs under certain narrowly defined conditions.
… Trump is in effect both violating U.S. law and throwing the world trading system under the bus. And if this escalates into a full-scale trade war, we’ll be back to the bad old days. Tariff policy will once again be driven by influence-peddling and bribery, never mind the national interest.

7 March
Take that, Trump: WTO can authorize Canada to hit U.S. with $3.2B in retaliation measures
‘If you think hitting Paul Ryan would be a way to get Trump to remove the tariffs, maybe pick products from his district in Wisconsin’
(National Post) Canada would be entitled to trade retaliation measures of US$3.2 billion if U.S. President Donald Trump’s proposed tariffs on steel and aluminum are found to have violated World Trade Organization rules, according to a report from the Washington-based Peterson Institute for International Economics.
Relying on data from the Trump administration’s own models, the report found that Canada would endure the toughest trade losses under the tariffs. Of a total US$14.2 billion in losses imposed on partners, the European Union would take the next largest hit at US$2.6 billion followed by South Korea and Mexico at around US$1 billion each, according to Chad Bown, senior fellow at the institute and author of the report.

6 March
An Important Voice for Free Trade Proponents Goes Silent
(NYT) Gary D. Cohn is a Democrat, but his resignation as director of the White House National Economic Council on Tuesday actually underscored the fundamental divide between President Trump and his fellow Republicans as the president seeks to raise barriers to foreign trade.
From his perch in the West Wing, Mr. Cohn in effect served as a proxy for the business wing of the Republican Party as it fought what may be a losing battle against new tariffs on steel and aluminum imports. His departure deprives free trade proponents of perhaps their strongest voice inside Mr. Trump’s inner circle.
Trade has always been the iron curtain that divided Mr. Trump and establishment Republicans. The president argues that other countries have run roughshod over the United States when it comes to the exchange of goods and services while most Republican leaders in Washington maintain that lower barriers have helped keep the United States as the world’s leading economic powerhouse.
See also Trump Steel Tariffs: How They May Threaten Allies and Economic Growth and How Trump’s steel and aluminum tariffs could affect state economies

3 March
Trump was angry and ‘unglued’ when he started a trade war, officials say
(MSN) Trump’s policy maneuver, which may ultimately harm U.S. companies and American consumers, was announced without any internal review by government lawyers or his own staff, according to a review of an internal White House document.
According to two officials, Trump’s decision to launch a potential trade war was born out of anger at other simmering issues and the result of a broken internal process that has failed to deliver him consensus views that represent the best advice of his team.

2 March
Updated version of an article published on Nov. 15, 2017
Economic history shows why Trump’s ‘America First’ tariff policy is so dangerous
By Charles R. Hankla, associate professor of political science at Georgia State University in Atlanta.
(The Conversation) President Trump assumes the U.S. can act unilaterally without consequences.
Economic history shows this doesn’t work. The world’s economies are far more interdependent than they were during the Great Depression, so the impact of governments all following a “my country first” trade policy – as the president said he expected world leaders to do – could have disastrous consequences.

23 – 24 January
Donald Trump’s tariffs on panels will cost US solar industry thousands of jobs
Trump’s decision to impose a 30% tariff will cost the US around 23,000 jobs and risks slowing the growth of clean energy, advocates warn
Trump has imposed a 30% tariff on foreign-made solar cells and modules, with the White House expressing alarm at a huge rise in imported components “spurred on by artificially low-priced solar cells and modules from China”.
But solar installers warned that the tariff, which will reduce to 15% within four years, will cost US jobs rather than protect them.
The Solar Energy Industries Association said 23,000 jobs would be lost in 2018, pointing out that most solar manufacturing in the US revolves around making parts for cheaper imported panels, rather than the cells and panels themselves.
The installation of panels accounts for around 130,000 further jobs. … But while the tariffs may provide an unwelcome hurdle for the US solar industry, the cost of the technology and installation has dropped so precipitously in recent years that the industry could emerge relatively unscathed. The cost of installing solar panels on rooftops has fallen by more than 70% since 2010, according to the Solar Energy Industries Association. Solar now accounts for around 1.4% of US utility-scale electricity generation, up from virtually nothing in 2007.
Trump imposes steep tariffs on imported solar panels and washing machines
Restrictions aim to boost US manufacturing, but critics warn they will slow shift to renewable energy and increase consumer costs

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