Trump’s tariff war…
If President Trump succeeds in getting other countries to cut their tariff rates, that would be great. But if his actions lead other countries’ governments to raise their tariff rates, then, within a few years, we could have a substantially less-free-trade world to contend with.
The old line is that a reputation takes decades to build and can be destroyed in an hour. Free trade is not that fragile. But it may be more fragile than many of Donald Trump’s supporters believe. I hope they are right, but I fear and, more important, I believe they are wrong.
That’s correct, I think. Trump supporters think he can pull a rabbit out of that hat, as he often does. Trump opponents think he’s a loose cannon, playing with fire. I have no idea which it is in terms of tariffs—perhaps both. It really depends on the outcome.
For quite some time now I’ve thought that Trump’s trade proposals are the most problematic policy area of his presidency. However, I confess to the fact that understanding trade policy and the effect of tariffs (although I’ve read about the topic and studied it to a certain extent) is a pretty weak area of my own knowledge base.
[Hat tip: commenter “Cornflour”]
I’m worried than not everyone knows how to play the game, for instance, Trudeau. In fact, I doubt that many of the experts know how to play the game, after all, they are now in a world where they have no relevant experience. So it may be a problem if Trump misjudges his negotiating partners.
Mixing things up is always risky. Better than the status quo? We will see.
It’s a lot more risky for them than for us. We can adjust to higher prices more easily than they can. Our economy is strong and improving while theirs is stagnant at best. Trump has a history of successfully making difficult deals, especially when he is dealing from a position of power. Underestimate him at your peril.
Some interesting thoughts on trade & tariffs from Warren Buffett:
http://fortune.com/2016/04/29/warren-buffett-foreign-trade/
Id be more interested Neo, on what you think of his idea to bring Russia back into the G8. I believe Trump is hoping this olive branch to Russia will make Putin feel less isolated and better behaved but I think this may be ill conceived. I think former Canadian MP Stephan Harper is right on this one.
Trump claims that the US has massive trade imbalances with nearly every 1st world nation.
If untrue, his assertion is easily disproven.
If so, how can that be an equitable trade arrangement?
Just how long can America tolerate such an arrangement that places the US ever more deeply in debt to the rest of the world?
Given that reality, I fully support Trump’s actions.
Excellent link by David Foster. Buffett’s plan to do reverse tariffs with a market incentive might work. As Buffett avers, we need to reduce our trade deficit or face national bankruptcy. It could also spur domestic companies to become more aggressive exporters. If Trump’s direct approach doesn’t bear fruit, maybe this would.
What Geoffrey Britain said.
Free Trade doesn’t happen. Hasn’t happened. The countries complaining about our tariffs on their products impose their own on ours. Their issue basically amounts to “How dare you do to us what we’ve been doing to you?!?! It’s not fair!!!!!”
I never thought I’d live to see the day when we had a president so unabashedly pro-America. In every sense.
His job is to take of this Country and Our People. Not theirs. May he continue to do so.
One of the things that Canada imports into America with no tariffs at all is wood pulp in a slurry. It’s moved across the border in pipelines from Canadian woodlots to makers of newsprint in the US.
Why no tariffs from the US on wood pulp for newsprint? It would make newspapers more expensive to produce. Guess what trade associations oppose tariffs on Canadian wood pulp slurry?
How hard would it be to stop such an import? You can turn a pipe off at the spigot.
Who would weep and gnash their teeth? Newspapers like the Times and the Post.
Sad to think of, isn’t it.
Speaking of paper, Canada has also been “dumping” magnesium in the US at subsidized rates since the 1990s.
Magnesium oxide is used in making paper white and glossy. Who hearts cheap Canadian magnesium? Magazines.
In 2017 the U.S. was the second largest exporter of pulp at about 7 million metric tons, second only to Canada. For over a hundred years cheap newsprint pulp has been imported from Canada duty free allowing our mills to produce higher quality and higher value product for export.
Canada’s exports to China appear to be shrinking in 2016 while the US, Chile, Russia[3] and Scandinavia are on track to gain roughly 150,000 metric tons each…The fact that the US is increasing export volume is impressive considering the strength of the dollar against other currencies.
https://blog.forest2market.com/us-market-pulp-trade-statistics-september-2016
The fact that newsprint is being threatened is the work of one newsprint mill in the Pacific Northwest, NORPAC. In August 2017, NORPAC petitioned the United States Department of Commerce to begin applying tariffs to newsprint imported from Canada, claiming the imported paper was harming the U.S. newsprint industry…
The buying and selling of newsprint has always been regional without regard for the border…
But those regions are not newsprint deserts because of unfair trade by Canadian paper mills. Rather, newsprint mills shut down or converted to producing other, more profitable paper products when the demand for newsprint fell, something that has been happening steadily for decades. Since 2000, the demand for newsprint in North America has dropped by 75 percent…
When considering whether to take NORPAC’s claims seriously, the Department of Commerce excluded input from U.S. newsprint mills owned by Canadian companies – specifically Resolute Forest Products and White Birch. Excluding manufacturers who, during the period of investigation, had three functioning newsprint mills in the U.S. because they have sister mills in Canada shows an unwillingness to understand the borderless newsprint industry and the restructuring that has taken place in recent decades.
http://www.newsobserver.com/opinion/op-ed/article207258209.html
What will happen to U.S. newsprint mills when Canadian pulp is taxed? As the price increases the result will be the elimination of printed newspapers, sure, but also the closing of
the remaining mills in this country.
Trump is a genius. Just ask him.
Last night I was at a lecture by a key free market liberal Polish reformer, Leszek Balcerowicz
http://www.institute.sk/article.php?6190
He was a bit down on Trump, especially on style tho agreeing that on policies it’s a mix, and he’s strongly against tariffs.
Yet he wasn’t aware of the 270% tariffs the Canadians have on US butter. We don’t, today, have free trade; we have managed trade. And the rich US has been very generous, allowing most countries to have some protectionism against the US, while the US had less against their exports.
Many elites don’t seem to see any problem with the current trade imbalances against the US & the US workers.
The “unfair” advantages of foreign exporters has resulted in fewer US jobs, tho more foreign investment. That’s making the US more like Squanderville, as Warren Buffet says (2003 & again 2016). And it needs to change.
“Foreigners selling to us, of course, would face tougher economics. But that’s a problem they’re up against no matter what trade “solution” is adopted—and make no mistake, a solution must come. (As Herb Stein said, “If something cannot go on forever, it will stop.”) … But I believe that in the trade deficit we also have a problem that is going to test all of our abilities to find a solution. A gently declining dollar will not provide the answer.”
Trump has called for, explicitly, totally free trade, no non-tariff barriers, no subsides. That would be most economically efficient. Any “trade war” will hurt other economies more, or much more, than hurting the US economy.
Trump haters fear that Trump will start a “Tit for Tat” increase in tariffs — but I see him as responding, yes in a Tit for Tat response, to unfair practices of other countries.
There is no known strategy better than Tit for Tat at increasing cooperation.