The real reason Trump wants to start a trade war


By Paul Waldman*  – The Washington Post

President Trump was already expressing concern about the practices of America’s trade partners decades before he ran in the 2016 election.(Video: Bastien Inzaurralde/Photo: Jabin Botsford/The Washington Post)

On most policy issues, when President Trump states his position, you can tell that he’s blurting out an unformed idea that is always subject to change. No one is really surprised when, a day or an hour later, he says the exact opposite, because when it comes to policy, generally speaking, he doesn’t know and he doesn’t care.

There is one exception, however: trade.

In January, Trump imposed tariffs on imports of washing machines and solar panels. Then yesterday, he announced he would be imposing tariffs of 25 percent of imported steel and 10 percent on imported aluminum. To those who say that this could touch off a trade war, the president offered this as an answer today:

When a country (USA) is losing many billions of dollars on trade with virtually every country it does business with, trade wars are good, and easy to win. Example, when we are down $100 billion with a certain country and they get cute, don’t trade anymore-we win big. It’s easy!

 

You could survey a hundred economists — both liberal and conservative — and not one would tell you that “trade wars are good, and easy to win.”

Nevertheless, we may well be heading toward one. Even if we can avert an outright war, we have a good idea of what the results will be. The immediate beneficiaries will be the American steel and aluminum industries, while the victims will be . . . well, anyone who buys anything that’s made with steel or aluminum, which is pretty much everyone.

But the president’s commerce secretary, Wilbur Ross, has an answer for that too:

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I’m not sure if Ross’ numbers are right, but 25 percent of $700 is $175. That may not seem like a big price increase when you’re buying a car, but given that House Speaker Paul D. Ryan (R-Wis.) was stoked about folks getting $1.50 a week from the Republican tax cut, it seems like quite a bit — not to mention that it isn’t exactly the message you want to be sending to the public.

This is the dynamic that makes trade a tricky issue: Free trade has widely distributed benefits and concentrated costs, while a tariff like this one that is meant to help a particular industry has concentrated benefits and widely distributed costs. Some steel jobs may be saved, but it will cost consumers more, and perhaps cost jobs elsewhere. That you could buy a 12-pack of tube socks for $6.99 at Walmart or another retailer because they were made in Vietnam is good for your family and millions of others. But if you were one of the people who lost his job sewing tube socks — since it’s impossible to make them as cheaply here in the United States — it’s very bad. In political terms, people aren’t motivated to vote and act based on getting cheaper consumer goods, but they might well be so motivated if the plant that sustained their town shut down because of foreign competition.

That’s why there are some Democrats, particularly in the industrial Midwest, who support Trump’s decision. “This welcome action is long overdue for shuttered steel plants across Ohio and steelworkers who live in fear that their jobs will be the next victims of Chinese cheating,” said Sen. Sherrod Brown (D-Ohio.) The AFL-CIO released a statement saying, “We applaud the administration’s efforts today to fix this problem. Effective enforcement of trade laws . . . is critical to leveling the playing field and ensuring that U.S. steel producers and their employees have a fair shot in the global economy.” But on the whole, Trump’s decision is being panned by his own party and all of our trading partners.

The thing about this policy change, though, is that Trump doesn’t need anyone’s cooperation or approval. He can impose them all by himself. And he really, really wants to.

Trump’s announcement of a 25 percent tariff on steel imports could greatly affect products that you may not know depend on it, like Reddi-wip.(Jhaan Elker/The Washington Post)

For as long as he has been a public figure, long before he became a politician, Trump has complained about America’s trade policies and those of the rest of the world. There have always been two core ideas underlying his beliefs on trade. The first is that trade is a zero-sum contest in which the only goal is exporting goods. If we import something from another country, even if comparative advantage makes it perfectly reasonable for us to do so, then the other country has “won” and the United States has “lost.”

Trump’s second idea about trade is that it represents a kind of contest of pride, even manhood. When he talks about trade he nearly always says that other countries, particularly China, are “laughing at us.” When we, say, buy cheap consumer goods from abroad, it means we’re the sucker, the sap, the patsy.

Yet oddly enough, despite his long objection to American trade policies he shows not the least understanding of how trade even works, beyond the idea that we should impose lots of tariffs. He has long complained that the North American Free Trade Agreement, or NAFTA, for instance, is “the worst trade deal maybe ever signed anywhere, but certainly ever signed in this country.” Yet you’ve never heard Trump say exactly which provisions of NAFTA he dislikes or what he would change, probably because he doesn’t know himself. He just thinks that trade wars are good, and easy to win.

His aides don’t seem to be able to persuade him otherwise. According to CNBC, Gary Cohn, the president’s chief economic adviser, tried to argue to him that increased tariffs would hurt the economy by raising prices on goods that contain steel and aluminum, to which Trump replied that it’s “a small price to pay.” Since he sees this issue to be about not just jobs but even more importantly about pride and dignity, that won’t persuade him.

From where Trump stands, imposing the tariffs is an end in itself. It shows those foreigners that we won’t be taken advantage of, that we’re big and strong, that nobody’s going to laugh at us and get away with it. It’s “winning.” Even if we wind up losing.

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*Paul Waldman is a contributor to The Plum Line blog, and a senior writer at The American Prospect.