Ted Malloch: TRUMP, No Chump on Trade
The other day, President Trump tweeted: “Talks with China are going very well!”
The press has hammered him mercilessly for being tough on trade.
Guess what? It is working.
Trump’s trade policy is focused on these key elements, as it succeeds at the overarching thematic of his presidency, namely, making America great again.
His attention is all about putting America—first.
Trump is a free trader by instinct and as he has stated he has no plan to return to the failed Smoot-Hawley plan of the 1930s, rest assured.
The economic reality is that tariffs usually don’t work.
Countries retaliate, and all parties loose in a trade war.
Of course in the past, the US has always backed down—caved in.
We are negotiating this time to get real results not just more promises and blather…
There are supposedly 142 items on our list of demands on China: See-https://www.washingtonexaminer.com/policy/economy/secret-list-of-142-items-key-to-us-china-trade-talks
So what REALISTICALLY can be done by Trump on trade viz a viz China and other predatory/mercantilist nations?
On the supply side, surely the US must constantly get more competitive.
This includes more research & development, constant innovation, advanced technological manufacturing, improved access to capital, renewed skills training and benchmarking.
A pro-growth and deregulated environment, is being earnestly followed by Trump, and will lead to prosperity and rising standards of living and increased wages for all Americans.
On the demand side, first, Trump has already cooled off on all the Obama globalist trade deals.
Now put them on ice permanently. The TPP with eleven Asian countries was a bad deal.
Trump killed it. Had anyone read all 5600 pages of it?
The one with the EU is no better. It is dead in the water.
Next, continue to confront China on its currency manipulation.
This is rarely discussed but is at the heart of our trade imbalance.
The Treasury Department biannual report to Congress on exchange rate practices of our trading partners confirms Trump’s analysis — that foreign countries are eating our lunch and that the US government is doing little or nothing about it. Under current procedures, by the time we finish pleading with them to halt their unfair practices, there will be little or no industrial economy left in this country.
Under enhanced reporting criteria set forth by Congress in the Trade Enhancement and Trade Facilitation Act of 2015, Treasury names five countries — China, Japan, Korea, Taiwan, and Germany — whose trade policies pose a threat to the US and global economies.
This is nothing more than a ‘name and shame’ document since each of the countries only meets two of the three necessary criteria for (ineffective) action.
Thus all Treasury does is put the countries on a new ‘monitoring list.
That means we watch them while they continue to steal factories and jobs from the United States and our workers.
And, even if the countries did meet all three criteria, the weak potential penalties are rather toothless — and can be reversed by the President basically at will.
We need a concrete plan that fixes this with immediate action.
Currency misdealing can no longer be tolerated.
If need be, we can play the same game.
Make no mistake, China and other countries also routinely break the rules by dumping their products (and not just steel) below cost in the US market.
Some also specialize in making counterfeit products, thereby costing the companies who make the authentic products over $20 billion a year.
We are told that Larry Kudlow and Trump team are negotiating on this and that further tariffs will be postponed for 90 days or likely more.
This is not a sound idea.
China only reacts to real threats and real tariffs, so we have to keep up the pressure.
Don’t relax it.
If we fail to do so they will game us again… just like they have for the last three decades.
Trump needs to tell China, and anyone else doing so, we will add up that bill and assess the tariffs accordingly.
They also need to police their own producers — on their end.
That goes especially for illicit goods including fentanyl, which is killing thousands of Americans.
These same countries also use illegal trans-shipping by changing documentation to avoid duties.
The penalties on such behavior should be raised a thousand fold.
A few shamed examples that are severely penalized would work to end the practice.
It is true Trump will need Congressional approval for imposition of any lasting and sizeable tariffs on imports.
This he can get with a Republican controlled Senate.
He does not need approval for short-term, sectoral retaliatory tariffs or negotiations.
This he can do himself and indeed he has.
Trump can also block US companies from shifting production overseas by taxing them identically at home and abroad, abolishing the foreign tax credit, which avoids double taxation, and by jawboning them, as he has already done with Carrier Corporation, and others, who planned on moving 1500 jobs from Indiana to Mexico.
These should set a precedent.
It will be imperative for Trump to work with the Congress as they have jurisdiction over many trade matters.
Honestly, our elites — on both sides of the political spectrum — have been lying about the exaggerated benefits of globalization for decades.
It, like free trade, is in reality a mixed bag.
Like any equation there are inevitably — winners and losers.
The losers have unfortunately been Americans, and particularly the middle class who work in manufacturing and reside in the rustbelt.
Free trade, you see, nice as it appears in theory and in economics textbooks, does not benefit everyone.
The US has lost one third of its jobs over the last fifteen years, over six million real workers — gone.
And last year the US ran a $365 billion merchandise trade deficit with China alone, which translates to 2.4 million jobs lost to Chinese imports over the same longer period.
Trump’s tariffs should be used as what they are– a threat.
They are a stick and they can be removed when the culprits change their behavior.
The point is we want reciprocity.
Play by the rules, which were set up by the World Trade Organization, or we will react. Those rules themselves must also be bent in our favor, as they are uneven at present.
This will keep more jobs at home.
Open up or we will close down.
That means Japanese and European car markets, Chinese financial services, and access to every other market must change or we reciprocate and impose on them exactly what they impose on us.
Isn’t that fair?
We have been stupid for far too long, so now, under Trump, we are starting to — get smart.
Global trade is not a zero-sum game.
Trump is putting together a comprehensive plan to uphold his promise to the American voters.
This will involve tough negotiations by professionals who know what they are doing and coordination between USTR and Commerce, Defense, Energy, and Treasury, as well as all other government agencies.
Trump has named a Trade Czar in the brilliant Amb. Robert Lighthizer, who will work for him alone — not for any special interests — and who is producing immediate and measurable results.
He won’t fall for China’s empty promises.
A new Index on MAGA, called the Trump Prosperity Index should capture how we are doing, measuring all new jobs created, all jobs returned, economic expansion, the employment participation rate, and all trade balances moving in our direction.
This one combined number will prove Trump’s economic benefits in a telling way.
He has started — and now he must finish the job.
Trump is producing results and moving the needle in the direction it needs to go.
The entire country is counting on it.
The result will be a more inclusive capitalism, higher economic growth, and very improved employment numbers—for every worker.
Featured image via Flickr