By Paul Krugman – The New York Times
The pain is real, but the coercion isn’t.
Donald Trump’s declaration that “trade wars are good, and easy to win” will surely go down in the history books as a classic utterance — but not in a good way. Instead it will go alongside Dick Cheney’s prediction, on the eve of the Iraq war, that “we will, in fact, be welcomed as liberators.” That is, it will be used to illustrate the arrogance and ignorance that so often drives crucial policy decisions.
For the reality is that Trump isn’t winning his trade wars. True, his tariffs have hurt China and other foreign economies. But they’ve hurt America too; economists at the New York Fed estimate that the average household will end up paying more than $1,000 a year in higher prices.
And there’s no hint that the tariffs are achieving Trump’s presumed goal, which is to pressure other countries into making significant policy changes.
What, after all, is a trade war? Neither economists nor historians use the term for situations in which a country imposes tariffs for domestic political reasons, as the United States routinely did until the 1930s. No, it’s only a “trade war” if the goal of the tariffs is coercion — imposing pain on other countries to force them to change their policies in our favor.
And while the pain is real, the coercion just isn’t happening.
All the tariffs Trump imposed on Canada and Mexico in an attempt to force a renegotiation of the North American Free Trade Agreement led to a new agreement so similar to the old one that you need a magnifying glass to see the differences. (And the new one may not even make it through Congress.)
And at the recent G20 summit, Trump agreed to a pause in the China trade war, holding off on new tariffs, in return, as far as we can tell, for some vaguely conciliatory language.
But why are Trump’s trade wars failing? Mexico is a small economy next to a giant, so you might think — Trump almost certainly did think — that it would be easy to browbeat. China is an economic superpower in its own right, but it sells far more to us than it buys in return, which you might imagine makes it vulnerable to U.S. pressure. So why can’t Trump impose his economic will?
There are, I’d argue, three reasons.
First, belief that we can easily win trade wars reflects the same kind of solipsism that has so disastrously warped our Iran policy. Too many Americans in positions of power seem unable to grasp the reality that we’re not the only country with a distinctive culture, history and identity, proud of our independence and extremely unwilling to make concessions that feel like giving in to foreign bullies. “Millions for defense, but not one cent for tribute” isn’t a uniquely American sentiment.
In particular, the idea that China of all nations will agree to a deal that looks like a humiliating capitulation to America is just crazy.
Second, Trump’s “tariff men” are living in the past, out of touch with the realities of the modern economy. They talk nostalgically about the policies of William McKinley. But back then the question, “Where was this thing made?” generally had a simple answer. These days, almost every manufactured good is the product of a global value chain that crosses multiple national borders.
This raises the stakes: U.S. business was hysterical at the prospect of disrupting Nafta, because so much of its production relies on Mexican inputs. It also scrambles the effects of tariffs: when you tax goods assembled in China but with many of the components from Korea or Japan, assembly doesn’t shift to America, it just moves to other Asian countries like Vietnam.
Finally, Trump’s trade war is unpopular — in fact, it polls remarkably poorly — and so is he.
This leaves him politically vulnerable to foreign retaliation. China may not buy as much from America as it sells, but its agricultural market is crucial to farm-state voters Trump desperately needs to hold on to. So Trump’s vision of an easy trade victory is turning into a political war of attrition that he, personally, is probably less able to sustain than China’s leadership, even though China’s economy is feeling the pain.
So how will this end? Trade wars almost never have clear victors, but they often leave long-lasting scars on the world economy. The light-truck tariffs America imposed in 1964 in an unsuccessful effort to force Europe to buy our frozen chickens are still in place, 55 years later.
Trump’s trade wars are vastly bigger than the trade wars of the past, but they’ll probably have the same result. No doubt Trump will try to spin some trivial foreign concessions as a great victory, but the actual result will just be to make everyone poorer. At the same time, Trump’s casual trashing of past trade agreements has badly damaged American credibility, and weakened the international rule of law.
Oh, and did I mention that McKinley’s tariffs were deeply unpopular, even at the time? In fact, in his final speech on the subject, McKinley offered what sounds like a direct response to — and rejection of — Trumpism, declaring that “commercial wars are unprofitable,” and calling for “good will and friendly trade relations.”
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Annex:
Saudi Dictatorship Erecting Statue of Liberty is Perfect Symbol of Trump-MBS Bromance
By Anthony Harwood* – Newsweek
You couldn’t think of many countries more incongruous with the word “freedom” than Saudi Arabia, but there she is—Lady Liberty herself, lifting her torch high above the kingdom’s port city of Jeddah. Only in the Trump era could such a potent symbol of freedom as the Statue of Liberty be hijacked by a dictatorship like Saudi Arabia.
For the millions of immigrants who passed through Ellis Island as they entered America over 100 years ago, the torch that Lady Liberty held up was a beacon of hope.
How then has she come to be used at a month-long festival in Jeddah, a port city in a country which could not be more undeserving of “The Lady in the Harbor”?
For, if you live in Saudi Arabia you have no hope if you are a woman, gay, in favor of free speech or democratic rule.
That the Statue of Liberty can be associated with such a place is an insult to those who cherish everything it represents: America the beacon of the world, America the melting pot of nations, America the land of the free.
But the fact that the Saudis feel emboldened enough to use her to claim some sort of solidarity with America is all down to Donald Trump.
When the rest of world recoiled in horror at the murder of Jamal Khashoggi, the imprisonment of women rights activists, the execution of people for being gay or the bombing of school buses in Yemen, he was not swayed.
Despite the most heinous of crimes, Saudi Arabia was still a “great ally” and a great supporter of America, he would say.
As long as lucrative arms deals are providing jobs back home, the bromance will continue with Crown Prince Mohammed bin Salman, of whom a UN report last month said there was ‘credible evidence’ he was involved in the killing of the Washington Post journalist, Khashoggi.
It’s not surprising that the Saudis carry on regardless.
However, if you accept that the Statue of Liberty represents the very best of America and her place in the world, then by extension you have to also accept that Donald Trump is an “un-American” President.
Lady Liberty and he just do not share the same values.
Thankfully, most American senators and congressmen still know what being a true American means, as they continue to pass laws saying the US should punish those responsible for Khashoggi’s murder and end its support for the Saudi war in Yemen.
According to the UN, by November 2018 nearly 7000 civilians had been killed there and 10,768 injured, most by Saudi Arabia-led air strikes, with 10 million more on the brink of famine.
But on Yemen, Trump exercised his veto and on Khashoggi he just chose to ignore the Magnitsky Act.
On migrants and the border wall, he tried to block a $4.5billion aid bill which included new standards for migrants in custody following reports that children were being kept in terrible conditions.
The problem is not that there aren’t any “American” politicians on Capitol Hill, it’s that there aren’t enough of them to override an ‘un-American’ presidential veto.
So, for now, we’re treated to the grotesque spectacle of the Statue of Liberty being wheeled out on the Jeddah Corniche as part of some tacky display of Americana, along with a Hollywood sign, a Welcome to Vegas sticker, an Uncle Sam hat and an Elvis Presley statue—all set to the Bruno Mars song, Uptown Funk.
The truth is that if Liberty were to suddenly get down off her pedestal and start reading the poem inscribed on it she would be arrested and thrown behind bars before she could say: “I lift my lamp beside the golden door.”
The whole thing gets even more perverse when you consider that in New York the “Mother of Exiles” was welcoming poor and downtrodden immigrants, and today Saudi Arabia uses the hated kefala system of sponsored labor, described as modern-day slavery.
Take Nepalese workers, for example. In 2016 the country was responsible for the most Nepalese labor deaths from natural causes in the world, including 60% of traffic accidents, according to the International Labor Organisation.
Last year, Saudi Arabia cited a United Nations job application as evidence against the women’s rights activist, Loujain al-Hathloul, still behind bars for campaigning for women’s right to drive and an end to the male guardianship system.
Loujain also allegedly “confessed” to being in contact with human rights groups, Amnesty International and Human Rights Watch.
Maybe it would be more appropriate, instead of the Statue of Liberty standing alongside them, to have a Baby Trump balloon floating over the heads of rapper Nicki Minaj, pop star Liam Payne and DJ Steve Aoki when they close Jeddah World Fest later this month.
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*Anthony Harwood is a former foreign editor of the Daily Mail and US Editor of the Daily Mirror. The views expressed in this article are the author’s own.?????
