Many American free-traders are wearing blinders. The rest of the world has erected punitive tariffs against our products -- 25% on cars going into China and 100% on motorcycles going into Japan, etc. -- yet when Trump places selective tariffs on steel and aluminum, our Chamber of Commerce predicts the end of the world. We are still living with the fiction that trade barriers caused the Great Depression ... not the real culprit, very tight monetary policy.
Trump's (and Wilbur Ross's) instincts are right ... either the rest of the world should level the playing field to American products or we will reciprocate in kind. The multitude of countries who have been wallowing in balance of payments surpluses with the U.S. should think twice before issuing hollow tariff threats. They have much more to lose than to gain.
Trump is actually wrong on one count -- this country has a long way to go before we are truly great again. Too many of our industries are on life support (or dead) due to not just unfair tariffs but also numerous subsidies by foreign countries on their industries ... just those with value added taxes (VATs) have a huge competitive advantage which is not being negated by Trump's push-back ... and they should. No wonder we are running close to trillion dollar trade deficits with the rest of the world. We are fighting these trade wars with both hands tied behind our backs ... tariffs and VATs. And I have read that there is a high positive correlation between negative trade balances and government spending deficits.
Trump is playing our economic offense correctly. But he needs to keep up the pressure before we can feel that that we have bulldozed the playing field level.
3 comments:
The USA should have value added taxes. Adds a bit of complexity but in the computer age, it should be easy to manage.
Its a question of Trump's style. He has lunch with some group and then blares out some outrageous plan it a TwitterStorm. Then backtracks a couple steps. While it rattles the ponderous steps of research and diplomacy -- a good thing in many ways -- it also smacks of authoritarianism.
While we know that Trump admires autocrats and reads back the playbooks of Putin, Xi, and Duerte, a LOT of Americans don't want our country ruled that way.
He tends to be more honey than vinegar toward our real enemies, yes. But do you forget Obama's pen and phone?
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