We’re Losing Donald Trump’s Trade War
Donald Trump's trade war continues to have negative consequences for American consumers and businesses.
With the Trump Administration set to potentially announce new tariffs against China by the end of the week, we’re already seeing signs of retaliation from America’s allies for the tariffs that have been imposed against them. Over the weekend, for example, Canadian Prime Minister Justin Trudeau announced some $12.6 billion in new tariffs against American-made products including ketchup and other American-made food products as well as American steel and aluminum, a move that is obviously meant to counteract the tariffs that President Trump imposed on Canadian steel and aluminum earlier this year. Significantly, Trudeau chose to announce those new tariffs yesterday, which of course marked Canada Day which celebrates the birth of Canada as a nation independent of British colonial rule. To a large degree, these new tariffs from our neighbor to the north are also a reaction to domestic pressure that Trudeau has felt as many Canadians have seen the American tariffs as an attack on Canadian pride and an underserved rebuke toward what has been a loyal American ally and trade partner.
In addition to Canada, the European Union is warning the United States regarding the long-rumored plan to impose new tariffs on cars made in Europe, and even a plan that would effectively ban German-made luxury automobiles from the American market. That warning was joined by one from General Motors regarding the impact that the tariffs could have on American carmakers:
General Motors warned Friday that if President Trump pushed ahead with another wave of tariffs, the move could backfire, leading to “less investment, fewer jobs and lower wages” for its employees.
The automaker said that the president’s threat to impose tariffs on imports of cars and car parts — along with an earlier spate of penalties — could drive vehicle prices up by thousands of dollars. The “hardest hit” cars, General Motors said in comments submitted to the Commerce Department, are likely to be the ones bought by consumers who can least afford an increase. Demand would suffer and production would slow, all of which “could lead to a smaller G.M.”
The president has promoted tariffs as a way to protect American businesses and workers, aiming at dozens of nations with metal tariffs, as well as bringing broader levies against Chinese goods. But companies, which rely on other markets for sales, production and materials, have been increasingly vocal about the potential damage from his policies.
The warning by G.M., echoed in comments by trade groups and other automakers, could test the president’s aggressive approach to trade and his commitment to business. In the past, Mr. Trump has lauded General Motors for its job creation and vowed to defend the auto industry.
A G.M. spokeswoman, Dayna Hart, said that the company had no contingency plans calling for job cuts, but that such a move was “something that could happen.”
“We are still assessing the impact,” she added.
The White House did not respond to a request for comment.
G.M. and other industry leaders are caught in the middle of an escalating trade war that has prompted retaliation from the European Union, Mexico, Canada and China.
Last month, Mr. Trump ordered an investigation into whether imported cars and automotive components pose a national security risk, calling for penalties expected to be as high as 25 percent. The administration has already put levies on imported steel and aluminum, and is about place tariffs on $34 billion worth of Chinese goods.
G.M. and other automakers rely heavily on parts and materials from overseas to build their cars. The president’s threat to pull out of the North American Free Trade Agreement could hurt the industry’s supply chain, which integrates operations in the United States, Canada and Mexico.
“If there’s a full-blown trade war, it will be pretty tough for the auto industry and consumers,” said Michelle Krebs, an analyst at AutoTrader.com.
“Consumers are already facing headwinds in credit and average prices going up,” she said. “If you add a tariff, my guess is a lot of people just won’t buy new cars.”
This is just the latest development in a trade war that has been going on for four months now, and it’s showing no signs of letting up.
While we saw signs of what was to come when the President pulled the United States out of the Trans-Pacific Partnership early in his Administration, it wasn’t until this year that the Administration really started taking three-quarters of a century of American trade policy off the trails. It started, of course, in March, when the Administration announced aluminum and steel tariffs that, at the time, were primarily aimed at China and a handful of other nations while exempting, for the time being, allies in Europe as well as Canada and Mexico. Not surprisingly, that announcement was received negatively on Wall Street, which until then had been largely headed upward, on fears that we were witnessing the beginning of a trade war that threatened to undo much of the progress that had been made on international trade since the end of World War Two. This announcement was followed weeks later by a Presidential announcement of a series of new tariffs on China, which quickly led China to announce retaliatory tariffs of its own, many of them aimed at industries such as agriculture that had been heavily pro-Trump in the 2016 election. Several soon afterward, Trump said that the United States was considering additional tariffs against the Chinese amounting to as much as $100 billion dollars. The Chinese Trade Ministry quickly responded to these statements from the President, saying that “We do not want to fight, but we are not afraid to fight a trade war.” Indeed, as Steven Lee Myers noted when these statements were made, the Chinese are confident that they could win a trade war.
The trade war took an unexpected turn in May, though, when the President revoked the exemption from the steel and aluminum tariffs that had been announced back in March that applied to American allies in Europe as well as Canada and Mexico. This was obviously not well-received in Ottawa, Mexico City, or Brussels. Canada’s Foreign Minister called the new tariffs “absurd,” for example, and European Union officials announced retaliatory tariffs against American goods. Things got even more bizarre in this regard as Trump exchanged harsh words with Canadian Prime Minister Justin Trudeau prior to the G-7 Summit. Once he was at the summit, Trump essentially did everything he could to alienate America’s closest allies, thereby seemingly achieving a goal that Russia and, before it, the Soviet Union had only dreamed of. After the Singapore Summit with North Korean leader Kim Jong Un, Trump continued his tirade against Trudeau, while polling revealed that Canadian public opinion about the United States was suffering as a result of American actions and the President’s rhetoric.
All of this has had a predictable impact on the American economy, an impact that only seems likely to grow as long as this goes on. In May, for example. The Wall Street Journal reported that prices for both foreign and domestic steel and aluminum were increasing and having a negative impact on manufacturers that rely on these raw materials for their products. Other reports indicated that American pork farmers were increasingly nervous about their overseas business with nations like China. In Iowa specifically, it is being reported that Chinese retaliation for the tariffs imposed on Chinese goods could cost soybean farmers $624 million this year alone, with the prospect of larger losses if the retaliation continues beyond this year. This has led many leaders in Iowa and elsewhere, including Senator Chuck Grassley to express concern about the impact of the trade war on Republican fortunes in the fall. This is especially true given the fact that the tariffs seem to be expressly targeted toward Trump voters and middle-class Americans. This month has also seen that the tariffs have had a negative impact on other American businesses, and has even led an iconic American brand like Harley-Davidson to announce that they are moving some production overseas in response to the retaliatory tariffs imposed by the European Union.
As The Washington Post’s Robert Samuelson put it in a column last week, while it’s still early in the game, it’s clear that the United States is going to lose this trade war:
The reality is that Trump’s obsession with the trade deficit is misplaced. Since 1976, the United States has continuously run trade deficits on goods and services. If the United States were a normal country and the dollar a normal currency, a correction would have occurred long ago. The dollar would have dropped on foreign exchange markets, making U.S. exports cheaper and U.S. imports more expensive. Our trade would have swung toward balance or surplus.
But the United States is not any-old-country, and the dollar is not any-old-currency. It continues as the most important global money, used to settle trade transactions and make cross-border investments. This extra demand for dollars props up its exchange rate. This makes U.S. exports costlier and imports cheaper. Deficits ensue.
Just what technology controls the United States should adopt to screen transactions with China isn’t clear or easy. The ultimate outcome is likely to be some combination of added powers for the Committee on Foreign Investment in the United States, which oversees foreign investment here, and export controls, which regulate sales of technology abroad, said Martin Chorzempa of the Peterson Institute.
But whatever Congress and Trump do won’t be effective unless it’s matched by other major trading countries. Trump either doesn’t realize this or doesn’t care. He’s infuriating the very countries whose support he desperately needs. His policies are more than misguided; they’re backward.
The expanding trade war has also had an impact on world financial markets, especially on those companies that rely on international trade. This has resulted in all of the major stock indices — the Dow Jones Industrial Average, the S&P 500, NASDAQ, as well as broader measures of the stock market such as the Wilshire 5000. Since March, all of these indices have declined precipitously, with many of them experiencing massive volatility based solely on the announcement of new American or retaliatory tariffs. As a result, we are now at the point where Wall Street has erased all the gains it made since the end of 2017. To be fair, it’s worth noting that the stock market had been on a virtually uninterrupted upward swing since the November 2016 election and that a correction of some kind was inevitable. Nonetheless, it seems clear that Trump’s trade moves have been a significant factor in pushing stock prices down due to the concerns about the impact they could have on corporate earnings and on financial markets around the world. Thus, while stock prices are still well above where they were after the election, and could easily turn around fairly quickly if the news warrants it, the fact that we are headed into what looks like it will be a prolonged trade war does not bode well for the future.
None of this should come as a surprise to anyone who is even moderately well-versed in economics, of course. Both economic analysis and actual history have demonstrated time and again that tariffs and trade wars are ultimately destructive, that they do not “protect” domestic industry, that the end up harming international relations outside of the economic sphere, and that they end up harming consumers. One of the best examples of this, of course, is the one that most Americans are probably the most familiar with, the infamous Smoot-Hawley tariffs imposed just before the start of the Great Depression. While later economic and historical analysis has shown that the role the tariffs played in precipitating the subsequent economic downturn likely wasn’t as prominent as has been popularly believed, it’s nonetheless true that they did nothing to help the economy recover and, predictably, led to the kind of retaliatory tariffs that weakened the world economy and helped to set in motion many of the elements that played a role in the inevitability of the Second World War. As I’ve said before, President Trump once said that trade wars are good and easy to win. Four months into this debacle, it’s already becoming clear that he was disastrously wrong.
Mr. President, we predict a stock market correction.
What can we blame it on?
Usually it’s excessive tariffs.
Ok, implement those. And then when it crashes I will remove them and save the day!
A subtle sophisticated strategy. But in case you have not noticed, Trump does not do sophisticated strategy. Or any strategy, really. China shop, meet bull.
Oh, yes. because in the event that WWIII breaks out, the absolute top-priority is to acquire a large fleet of luxury cars, so officials can be seen importantly flitting about Washington. And with Russian submarines prowling the Atlantic and sinking every ship in sight, there’s no way to get enough Mercedes limos to meet the demand for this absolutely vital task.
Wait. I thought the problem with tariffs wasn’t that they disturbed the status quo. I thought the problem with tariffs was that they hurt your own economy by promoting and protecting inefficiency and rent-seeking. Now, however, that’s no longer the case. Now, the argument is that tariffs are actually can benefit you but you can’t use them because other countries will impose their own tariffs to support their economies and harm yours. It’s free trade as Mutually Assured Destruction.
And it pretty much sums up the stupidity and fanaticism of free trade ideology to worry about four months of rumblings on Wall Street after two generations of callous indifference to stagnant wage growth, an explosive increase in income inequality, the destruction of entire American industries, and the transfer of millions of jobs from America to other countries. Hint: factories haven’t been built in places like China and Mexico because of their superior automation technology.
Whether Trump is gone in two years, six years, or six months, there is something we all need to understand. He is the end of “the end of history” and whatever the future may be, it won’t be some Thousand Year Reich of neoliberalism.
Mike
The average tax cut for the middle 5th of Americans is about $18 a week.
These measily tax cuts will be wiped out by the effects of the tariffs.
It’s getting tiring; I mean, how many ways can you say that this guy is an idiot?
Almost every single policy is based on lies and mis-information.
It’s going to take so long to clean up all these messes.
@MBunge:
The US isn’t the first country to experience post-industrialism. It won’t be the last.
And you’re not so gosh darned special that you’ll escape it.
Sure, a great deal of manufacturing has shifted overseas in pursuit of cheaper labor. A great of manufacturing remains in the US as well – it’s just a great deal more automated than it used to be and the lower-skilled / unskilled people who used to be able to support themselves via factory labor no longer can. Machines work 24 hours a day, never call in sick and don’t require benefits.
Tariffs don’t work. They have never worked. They’re not going to work here. Especially not here since the Moron in Chief has managed to pit the US against essentially the global economy as a whole.
Those displaced folks out in the Rust Belt have two choices – retrain and move, or sit and wait (to die). That’s it. Your buddy Trump is kicking them in the teeth. Not me. Them.
Sad part is I – and Dems – used to care about their plight. I no longer do.
@MBunge:
That’s all due to your parties war on the middle-class.
And now your dear leader is making it worse…not better.
Wages are still flat…and the corporate tax giveaway is all going into stock buy-backs.
You’re delusional. Professional help is available.
@MBunge:
No, it won’t be liberalism, it’ll be socialism. Fascism doesn’t work, it self-destructs: Germany, Austria, Italy, Japan and Hungary in the 40’s, Spain, Argentina, Chile, South Korea in the latter part of the 20th century. And what did fascism leave in its wake? Nations that were more democratic and more socialist.
You and the rest of the deplorables are fascist reactionaries. You’re the white backlash, the angry rustics, the misogynists and the nativists. Reaction stalls progress but doesn’t stop it. But we won’t return to status quo ante, we’ll move to the Left economically. UBI will be a major issue by 2020.
But, the pResident told us that trade wars are easy to win.
I guess he did not say who would win them.
I wonder whether this insane trade war will go on long enough to make steel smuggling worthwhile.
Unfortunately, Trump and his moronic economic advisors are likely to see the devastating effects of the trade war as a reason to double down. He’s already ranting and raving at Harley-Davison for moving their manufacturing.
Becoming clear to who? (Whom? I can never remember… actually, I think “whom” might have vanished from the language during my lifetime…)
I mean, it’s been clear to a lot of people since day one, but it won’t be clear to Trump’s supporters until they are standing in a breadline, complaining that there are also brown people in that same breadline and that those brown people ought to go get a job.
@HarvardLaw92:
Protectionism does work well for developing countries. Like the U.S. in the early part of the nineteenth century. They haven’t hurt more recently industrialized countries like Malaysia.
Tariffs were bad for the U.S. in the early twentieth century because the U.S. was then the industrialized low cost manufacturer.
@Gustopher:
Yeah, technically, “whom” is preferred as the object of a preposition. The who/whom distinction is essentially the same as I/me or he/him. Just as you’d say “Becoming clear to me” and not “Becoming clear to I,” you say “Becoming clear to whom?”
Of course hardly anyone follows these rules anymore except in very formal writing and speech, or in set expressions like “to whom it may concern.” The rules regarding which pronoun to use are so confusing to modern English speakers that some people even use whom when they shouldn’t (as in the line from the Clash’s “Should I Stay or Should I Go?” when he says “exactly whom I’m supposed to be”), a process known as “hypercorrection.”
Now back to the topic….
Does anyone know where the impetus for these trade wars started? I don’t recall industry, labor, or agriculture leaders petitioning for tariffs. The Trump fans are for tariffs now under the thesis that Trump can do no wrong, but I don’t recall this being a part of their passions previously. As I have said before, I run a trade deficit with the Isle of Islay but don’t see this as a problem.
@MBunge: You support Trump, a Republican President and therefore by definition the leader of the party primarily responsible for:
My 40 years in the southeast USA tells me this comment is literally true. I’d love to fact check it but I read last year somewhere that I can’t recall that the county with the highest rate of government assistance was 90% white and went heavily for trump.
@Gustopher:
No, it still won’t be clear to them then. They will be convinced that somehow it’s all Obama and the libtards who are responsible.
I forget where I saw this, but someone pointed out that, functionally speaking, Trump’s tariffs are essentially the US deciding to impose economic sanctions on itself.
Is this actually due to the tariffs or due to the tax cuts? Because the markets going soft has happened after every Republican tax cut since 1981.
Yeah! Cyclists are so pissed about Harley’s maneuvers over the last couple months that they stopped buying so many Harleys last year!
This comment is only going to work on Trumpers who can’t figure out that 2017 came before 2018, so only like 70% of them. 😛 😛 😛
@teve tory:
It’s morons all the way down!
I mean, god-Damn that is stupid.
Good grief….even Reagan, when his Alzheimer’s was at its worst, would look at the Orange Toddler now and rightfully claim, “This guy is an idiot!”
The company that signs your paycheck exploits you and only pays you until you are no longer exploitable. You are a thrall.
Unbound capitalism is relentless. It has to be. That is its nature. Darwinism extends into economics.
Capitalism must be bound by custom or legally / administratively else it would gradually grind us all into dust. One enterprise cannot be responsible for society’s well being when it is being relentlessly and existentially pressured into reducing cost and increasing efficiency.
Rural, white America, I’m sorry your good paying jobs went away overseas. I would correct that if I could, but I cannot. Unionizing would help, but you yourselves have made that devilishly difficult by policy choice thanks to people you elected.
You are not special. These forces have affected us all. Just because 3M or Maytag or Harley Davidson pulled out of your town does not make you special. Your plight is expected and predictable. You will never, ever see those ’50s style unionized manufacturing jobs with that pay and those benefits ever again. It cannot and will not happen.
You feel like you were uniquely fucked. “We stood here when all of our kids went away to the closest big city for education or jobs. We stood here and held the line.”
Sorry, but you chose wrong.
Big C capitalism does not give a fuck about you and your charming hometown. The last extant corporation, after eliminating all competitors, will discover it no longer has any consumers.
We’ll go out not with a bang, and not with a whimper, and not by fire or ice, but by devalued pension checks which cannot be delivered and cannot be cashed.
We could use them as wallpaper, or perhaps insulation in Northern climes.
@Kylopod:
I mean this to be corrective and instructive, not mean and assholish.
Proscriptive admonishments about how language should be used is a fool’s game.
Language shifts constantly. There are no rules, except for that you should use language in a way that you are understandable. We should generally adhere to common usage to communicate effectively. The point of it is to transfer meaning and knowledge from my brain to yours and vice versa. We use written symbols to convey meaning (that is a dense topic, indeed), but those symbols are arbitrary and only useful if understood by others.
There is a “rule” to not end a sentence with a prepisition which is the remnant of some long dead proscriptor. Some Latin usage piggy-backed onto English by a well-meaning idiot. Rank foolishness that ignores actual usage.
Policing non-standard language used by political and economic minorities is a form of soft (sometimes hard) oppression. Being constantly “corrected” by gate-keepers is the price that many outsiders continually pay.
Dude, just chill. It’s awesome. (Very little of that would have made sense when I was born, but it is perfectly cromulent American English now.)
@de stijl:
Since he pretty much said the rule didn’t really matter (“Of course hardly anyone follows these rules anymore except in very formal writing and speech…”), I think he’s chill already.
Owsley County, in the running for poorest county in the nation, votes 95% Republican and has the highest percentage of people, by county, in the US on food stamps. Link goes to conservative site that acknowledges this. Also goes on to explain why it is OK and they need food stamps. Suspect they forget to make that argument for groups they don’t like.
http://crusadeoftruth.com/meme-busters-food-stamps/
Steve
@de stijl:
I know. You seem to have forgotten my critique of prescriptivism from a few weeks ago, when I made more or less the same point. I was simply answering Gustopher’s question about whether to use who or whom in the sentence he mentioned. Explaining what the prescriptivist rules are when someone asks isn’t equivalent to advocating that people should use them or complaining about their lack of use. I thought I made that very clear.
@Kari Q:
Kylopod’s first, instinctive reaction was proscriptive and corrective, Kylopod downplayed that later in the comment, but the first response was key.
We are the victims of our schooling. We were taught that proper language usage is a mark of civilization and that those who use it incorrectly are uncivilized, and often incapable of using it properly because they are genetically and inherently predisposed to not be able to do so.
Kylopod wasn’t chill.
Kylopod was clearly marking a boundary. Kylopod then immediately backed off / disassociated from the initial confrontation that he initiated. Passive / aggressive comes to mind.
@Kylopod:
@Kylopod:
Why would think that I would have seen that? I do not monitor your monographs.
You are not the gate-keeper.
You seem to have forgotten how not to come across as an utter d-bag.
Again, you are not the gatekeeper so just let it all go.
@de stijl:
What, precisely, was I “correcting”? Gustopher asked a question about usage, and I answered it. Describing what the prescriptivist rules are doesn’t make someone a prescriptivist, any more than reading from the Bible makes someone a believing Christian or Jew.
Sorry, but you’re really grasping at straws here. You acted like I was being a hardcore prescriptivist “correcting” other people’s errors. Now that it’s been pointed out to you that that’s not what I was doing, you’re suddenly arguing that prescriptivism isn’t merely a philosophy but some kind of unconscious bias we can never quite shake despite our best efforts. Why not just admit you misunderstood me? Why not give me the benefit of the doubt instead of working overtime to read into my original comment something that Kari Q (and probably most of the people here) didn’t see?
@steve: That link is hilarious…whoever wrote it tries to stress that Republicans aren’t against food stamps because they go to black people but then he implies that the people abusing food stamps are black people and that’s why Republicans are against the program…oh, and of course those who truly need it are the white salt of the earth people in Appalachia…
@de stijl:
Kylopod was answering a question. Now it’s entirely possible that question was intended to be rhetorical, but that’s not clear and Kylopod’s response was pretty calm and non-judgemental. Maybe you are the one who needs to chill? You seem pretty worked up over something that’s really not that important.
@de stijl: Prescriptivists vs. descriptivists! Fight! Fight!