The Trade War Is On

Terry H. Schwadron

July 8, 2018

Despite all the caveats, the trade war is on and its effects are just beginning.

Threats of setting tariffs against China, Canada, Mexico and Europe are now real, as are counter-tariffs from all those countries and more, save Japan, which has not yet reacted. And while the overall numbers are a tiny piece of U.S. trade with these other countries, the tariffs and counter-tariffs are enough to prompt U.S. companies to pull back on adding employees, and in search of ways to do business overseas.

Generalities aside, the news media was turning pretty quickly to the kinds of businesses that will be most directly affected, like dairies in the Midwest, car and manufacturers who depend on metal parts, and the biggest talking crop — — Republican congressmen from states whose products are affected.

For its part, China, like U.S. allies, simply blamed President Donald Trump and the United States as violators of international trade arrangement, and said there would be plenty more as Trump levels his sights on more imported merchandise to target. China promises to go tax for tax.

The threat of tariffs seems to have had zero effect on getting a better deal with China about trade, as Trump promised and apparently expected.

Meanwhile, the tariffs on Mexico and Canada likewise have failed to push the parties for an updated NAFTA agreement, and the tariffs with Europe have just seemed to confuse all parties who note that the car builders who will be adversely affected work in places like South Carolina and Alabama.

China already has turned to Brazil for soybeans rather than the United States.

Meanwhile, the monthly job numbers are out, and already, the unemployment rate ticked up slightly, wiping out the progress that Trump has been touting because of passage of tax cuts benefitting American corporations. Total non-farm employment did increase by 213,000 in June, but so did the number of long-time unemployment. The percentage of various groups working the United States did not change much statistically, and over the month, job gains occurred in professional

and business services, manufacturing, and health care, while employment in retail

trade declined, as in previous months.

Most distressing to me, however, is the idea Trump is acting in these areas without substantive check from any direction, not Congress, not the international community, not Business. He is operating under his slogan of America First, and kicking at an increasing number of traditions and business advice along the way.

A Washington Post columnsuggests that while there is no formal definition of what constitutes a trade war, the escalating exchange of trade barriers between the United States and its trading partners has hit a point where most economists say there will be a negative impact — in jobs, in profits, in planning cycles. The New York Times’ Paul Krugman said,the belated recognition that his tough talk on trade was serious has spurred a flurry of action. Major corporations and trade associations are sending letters to the administration warning that its policies will cost more jobs than they create. Meanwhile, the U.S. Chamber of Commerce has begun an advertising campaignto convince voters of the benefits of free trade.

Worse, said Krugman, organizations like Heritage have long promoted supply-side economics, a.k.a., voodoo economics — the claim that tax cuts will produce huge growth and pay for themselves — even though no economic experts agree. They have accepted the principle that it’s okay to talk economic nonsense if it’s politically convenient. Now comes Trump saying “trade wars are good, and easy to win.” How can they convince anyone that his nonsense is bad, while theirs was good? But a trade war may be only the start of big business’s self-inflicted punishment. Much worse and scarier things may lie ahead, because Trump isn’t just a protectionist, he’s an authoritarian. Trade wars are nasty; unchecked power is much worse, and not just for those who are poor and powerless.

All these statements are worthwhile to heed — regardless of political orientation — because Trump’s aggressiveness over trade has become a hallmark of his administration, along with anti-immigration policies and a lean on religious activism in social policy arenas.

What started formally with the tariffs is the opening of a gap between what Trump says and what he does, a part of the pattern of Trumpism that has left us wondering who our international friends are, what our military and diplomatic goals are, and whether the president has any interest in representing anyone other than those issue-laden voters who supported his election.

Lest anyone worry about Trump family businesses, The Washington Post reminded us that Ivanka Trump’s business continues to manufacture clothing in China, and that the Trump has pursued several real or proposed financial deals with Chinese financial institutions, all while Trump trumpets America First and remains silent about his family’s fortune.

Expect higher costs in the marketplace, expect jobless numbers to rise again, expect thornier international relationships. Expect more blather about how Trump relies on his gut over actual preparation for international meetings, expect a decline in American prestige around the world.

Not affected by the trade issues are rising gasoline costs at the pump, rising health costs because of failed attempts to throttle Obamacare, rising incidents of uncivil behavior by those who believe that they are not part of Trump’s America.

Strap in, this trade war is just starting.

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