Trump Puts Hopes on Tariffic Trade War

By SAM URETSKY

Possibly the most divisive piece of legislation of 2015 was a bill to fast track joining the Trans-Pacific Partnership (TPP) trade agreement. In a political climate where a single vote crossing the aisle is considered bipartisan approval, The Hill reported, “But the White House and GOP House leaders face a close vote, with strong opposition from progressives worried about trade’s effect on American jobs and from conservatives balking at handing Obama more power.” President Obama strongly favored joining the TPP, and so did then House Speaker Republican Paul Ryan, Meanwhile People’s Action published a list of 19 Democrats who supported the bill in a Wall of Shame.

Sen. Bernie Sanders issued a 10-point statement condemning the TPP and arguing against giving the president fast track authorization. “The TPP follows in the footsteps of other unfettered free trade agreements like NAFTA, CAFTA and the Permanent Normalized Trade Agreement with China (PNTR). These treaties have forced American workers to compete against desperate and low-wage labor around the world. The result has been massive job losses in the United States and the shutting down of tens of thousands of factories. These corporately backed trade agreements have significantly contributed to the race to the bottom, the collapse of the American middle class and increased wealth and income inequality. The TPP is more of the same, but even worse.”

President Obama supported the TPP, and in an op-ed in the Washington Post (5/2/16) wrote, “The TPP brings together 12 countries representing nearly 40% of the global economy to make sure that private firms have a fair shot at competing against state-owned enterprises. It keeps the Internet open and free. It strengthens the intellectual property protections our innovators need to take risks and create. And it levels the playing field by setting the highest enforceable standards and by removing barriers to selling our goods overseas — including the elimination of more than 18,000 taxes that other countries put on products made in America. Simply put, once the TPP is in place, American businesses will export more of what they make. And that means supporting more higher-paying jobs..”

His point, simply, is that if the United States joined TPP, it would have a voice in making the rules. The alternative would be to leave the rule making to China.

On Jan. 23, 2017, President Trump signed an executive order withdrawing from the TPP. President Trump stated that he would not join the sort of multinational trade agreements that had been supported by previous administrations of both parties. “I will make bilateral trade agreements with any Indo-Pacific nation that wants to be our partner and that will abide by the principles of fair and reciprocal trade … What we will no longer do is enter into large agreements that tie our hands, surrender our sovereignty and make meaningful enforcement practically impossible.”

On April 29, 2019, Reuters reported, “The leaders of Canada and Japan on Sunday touted the benefits of a Pacific trade deal that US President Donald Trump walked away from and said the pact should serve as a model for future agreements ... Canadian Prime Minister Justin Trudeau said exports of some beef products from Canada to Japan had increased nearly threefold under the deal, formally known as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership.”

In contrast to multinational trade agreements, President Trump seems to prefer bilateral agreements, including trade wars based on imposition of tariffs. Unfortunately, President Trump seems not to understand how tariffs work, or who pays for them. The Washington Post has projected that high tariffs may cease to be a short-term negotiating tool and become a permanent feature of the US economy. This would cause significant price increases for Chinese made products, along with reductions of Chinese imports of American products. Beyond that, the Chinese can easily retaliate

While multi-national treaties require compromises, tariffs can be directed to support specific industries – as when President Trump imposed a tariff on Chinese steel as a form of protection for the American steel industry. In retaliation, the Chinese looked at the electoral map of the United States and aimed their tariffs at the products of Trump voters. After President Trump raised tariffs on Chinese goods on May 10, the Chinese raised tariffs on American goods including beer, wine, swimsuits, shirts and liquefied natural gas the following Monday. While Mr. Trump asked Congress for billions of dollars to help compensate farmers for lost exports, there don’t seem to be any provisions for aiding Americans in paying higher prices for Chinese products. Also on May 13, stocks fell sharply on Wall Street as the markets adjusted to the possibility of a new economic reality and an ongoing trade war.

The original TPP was never completed, but the Comprehensive and Progressive Agreement for Trans-Pacific Partnership is in force, liberalizing trade between Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Viet Nam. Meanwhile, although President Trump has insisted that his tariffs are a multibillion-dollar, mostly one-way payment by China to the American Treasury, his chief economic adviser has admitted that the program will be painful for American consumers.

Oh yes – traditionally, when the economy is doing well it favors the incumbent. According to the New York Times (5/13/19) “I love the position we’re in,” Mr. Trump said, adding that the United States was “taking in billions of dollars in tariffs.” This may go on for a long time. Think about it.

Sam Uretsky is a writer and pharmacist living in Louisville, Ky. Email sdu01@outlook.com.

From The Progressive Populist, June 15, 2019

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