EDITORIAL

Negotiating with Tariffists

Donald Trump has been throwing his weight around on global trade matters with little apparent long-term planning. He threatened tariffs on steel and aluminum imports. Then, when America’s trade partners retaliated with tariffs on American products, he upped the ante. When he proposed tariffs on $34 billion worth of Chinese imports, Beijing retaliated with tariffs on an equal value of US goods, including beef, pork, soybeans, cars and computer chips. So Trump has threatened to escalate the battle with tariffs on more than $200 billion worth of goods from China.

Trump got a lot of mileage in his 2016 campaign with his co-opting of the populist belief that “free trade” deals have contributed to the misery and inequality afflicting working-class communities in America. That may have made the difference in his razor-thin victories in Wisconsin, Michigan and Pennsylvania.

But when, as president, he started the saber rattling, Trump showed little sense of the trouble he was unleashing. “Trade wars are good and easy to win,” he tweeted in March. He had imposed tariffs on solar panels, newsprint and washing machines before he started the war on foreign steel and aluminum. But after he announced tariffs on steel and aluminum from Canada, Mexico and the European Union on “national security” grounds, EU officials announced they would apply tariffs on a series of American goods, including Harley-Davidson motorcycles. When Harley-Davidson announced it would move some production overseas to avoid the tariffs, which would increase the cost of motorcycles by an average of $2,200, Trump urged the company to “be patient.”

Trump, a practiced grifter, advises American businesses and farmers to “be patient” in the same way itinerant driveway pavers collect a down payment, and advise the homeowner to “be patient” when they promise to be back in a week or so to do the work.

Tariffs on Mexico, Canada and the European Union are questionable, as they are traditional allies and do not engage in the sort of predatory trade practices China uses. Trump could use some allies in his attempt to rein in China, but the alienation of US trading partners comes at a time when Trump suggests he is also considering reducing the US commitment to the North Atlantic Treaty Organization.

The Mexican and Canadian tariffs also could wreak havoc on economies that are closely integrated with neighboring US states after 24 years under NAFTA. Goods and services trade with Canada totaled $673.9 billion in 2017, with a net trade surplus of $8.4 billion for the US, owing to its $25.9 billion surplus in services, according to the Office of US Trade Representative.

According to the Department of Commerce, US exports to Canada supported 1.6 million jobs in 2015 (the latest data available). The tariffs are supposed to protect 140,000 US steelworker jobs.

Goods and services trade with Mexico totaled $616.6 billion in 2017. Exports were $276.2 billion; imports were $340.3 billion with a US deficit of $64.1 billion in 2017. However, the US had a services trade surplus of $7.8 billion, and trade with Mexico supported 1.2 million US jobs in 2015.

US goods and services trade with the EU totaled nearly $1.1 trillion in 2016, making it the largest trading partner with the US, and a net trade deficit for the US of $92 billion, or less than 1%.

The US had a $147 billion deficit on goods trade with the EU out of a total of $686 billion in 2016. But the US had a $55 billion surplus in services with the EU out of a total of $407 billion, and US exports to the EU supported 2.6 million US jobs in 2015.

The largest trade deficit is with China, which did $648.5 billion in trade with the US, and recorded a $385 billion goods and services surplus in 2016. US exports to China supported 911,000 jobs in 2015, with 601,000 supported by goods exports and 309,000 supported by services exports.

Now that Trump has targeted a wide range of Chinese products, the conflict is likely to cause collateral damage among American companies that rely on those products in the global supply chains. The White House also is placing restrictions on investment and on visas for Chinese nationals as leverage to force Beijing to make changes, including opening its markets to American companies and ending its practice of requiring firms operating in China to hand over valuable technology.

The New York Times reported July 5 that companies like Husco International, a Wisconsin-based manufacturer of parts for companies like Ford, General Motors, Caterpillar and John Deere, now face a 25% increase on a variety of parts imported from China. Austin Ramirez, Husco International’s chief executive, said that increase would immediately put him and other American manufacturers at a disadvantage to competitors abroad.

“The people it helps most of all are my competitors in Germany and Japan, who also have large parts of their supply chain in Asia but don’t have these tariffs,” he said.

Farmers also have been hit by Chinese retaliatory tariffs on pork and soybeans — a serious blow, as China has been a market for mor than half of American soybean exports, and fears of the tariffs have pushed down the price of soybeans by roughly 15% in recent months, wiping out potential profits for that crop. American farmers also risk losing key markets in the long term, as farmers in Brazil are boosting soybean production to scoop up the Chinese market.

Progressive Democrats should support the need to renegotiate NAFTA, the World Trade Organization and other trade deals to preserve the authority of governments to regulate business and industry and abolish investor-state dispute settlement panels that can overrule national courts. Progressives should promote a trade policy that protects labor and environmental standards.

But remember that Trump has no principles guiding his trade or immigration campaigns. As a developer, he used undocumented Polish workers in 1980 to demolish a department store to make way for Trump Tower; then he forced them to go to court to get paid. Trump's resort, Mar-a-Lago, in June asked the Department of Labor for 61 H2-B visas for foreign servers and cooks. He used cheap Chinese steel and aluminum in Trump hotels in Las Vegas and Chicago and he has used Chinese factories to make his merchandise. His campaign gets flags from a Chinese factory whose owner said he has already started to make flags for Trump’s 2020 campaign. And White House adviser Ivanka Trump’s foreign-made products on her fashion line won’t be touched by tariffs.

And on May 13, two days after state-owned Metallurgical Corporation of China offered to lend $500 million to Indonesian developers to finance a Trump-branded resort in Indonesia, Trump pledged to help ZTE, a Chinese telecom equipment manufacturer with ties to the Chinese government, recover from a $1.19 billion fine and a ban on dealing with US companies, after ZTE sold technology products in North Korea and Iran, in violation of sanctions, then lied about it to US officials. US intelligence officials also warned of security risks in allowing ZTE phones to be used by government employees. But Trump tweeted: “President Xi of China, and I, are working together to give massive Chinese phone company, ZTE, a way to get back into business, fast. Too many jobs in China lost. Commerce Department has been instructed to get it done!”

When asked about the business deal in Indonesia, White House deputy press secretary Raj Shah referred questions to the Trump Organization, saying, “You’re asking about a private organization’s dealings.”

So don’t count on Tariffist Trump to do the right thing. — JMC

From The Progressive Populist, August 1, 2018

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