Clueless

New York Times columnist Paul Krugman’s column from yesterday is astute, to-the-point, and well worth the few minutes it takes to read it.  He hits the nail on the head regarding Trump’s trade ‘negotiations’ with China.

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The Art of the Imaginary Deal

On trade, Trump is a rebel without a clue

Are we going to have a full-blown trade war with China, and maybe the rest of the world? Nobody knows — because it all depends on the whims of one man. And Tariff Man is ignorant, volatile and delusional.

Why do I say that it’s all about one man? After all, after the 2016 U.S. election and the Brexit vote in Britain, there was a lot of talk about a broad popular backlash against globalization. Over the past two years, however, it has become clear that this backlash was both smaller and shallower than advertised.

Where, after all, is the major constituency supporting Donald Trump’s tariffs and threats to exit international agreements? Big business hates the prospect of a trade war, and stocks plunge whenever that prospect becomes more likely. Labor hasn’t rallied behind Trumpist protectionism either.

Meanwhile, the percentage of Americans believing that foreign trade is good for the economy is near a record high. Even those who criticize trade seem to be motivated by loyalty to Trump, not by deep policy convictions: During the 2016 campaign self-identified Republicans swung wildly from the view that trade agreements are good to the view that they’re bad, then swung back again once Trump seemed to be negotiating agreements of his own. (We have always been in a trade war with Eastasia.)

But if there’s no strong constituency for protectionism, why are we teetering on the brink of a trade war? Blame U.S. trade law.

Once upon a time, Congress used to write detailed tariff bills that were stuffed full of giveaways to special interests, with destructive effects on both the economy and American diplomacy. So in the 1930s F.D.R. established a new system in which the executive branch negotiates trade deals with other countries, and Congress simply votes these deals up or down. The U.S. system then became the template for global negotiations that culminated in the creation of the World Trade Organization.

The creators of the U.S. trade policy system realized, however, that it couldn’t be too rigid or it would shatter in times of stress; there had to be ways to relieve pressure when necessary. So trade law gives the executive the right to impose tariffs without new legislation under certain circumstances, mainly to protect national security, to retaliate against unfair foreign practices, or to give industries facing sudden surges in foreign competition time to adjust.

In other words, U.S. trade law gives the president a lot of discretionary power over trade, as part of a system that curbs the destructive influence of corrupt, irresponsible members of Congress. And that setup worked very well for more than 80 years.

Unfortunately, it wasn’t intended to handle the problem of a corrupt, irresponsible president. Trump is pretty much all alone in lusting for a trade war, but he has virtually dictatorial authority over trade.

What’s he doing with that power? He’s trying to negotiate deals. Unfortunately, he really, really doesn’t know what he’s doing. On trade, he’s a rebel without a clue.

Even as he declared himself Tariff Man, Trump revealed that he doesn’t understand how tariffs work. No, they aren’t taxes on foreigners, they’re taxes on our own consumers.

When trying to make deals, he seems to care only about whether he can claim a “win,” not about substance. He has been touting the “U.S. Mexico Canada Trade Agreement” as a repudiation of NAFTA, when it’s actually just a fairly minor modification. (Nancy Pelosi calls it “the trade agreement formerly known as Prince.”)

Most important, his inability to do international diplomacy, which we’ve seen on many fronts, carries over to trade talks. Remember, he claimed to have “solved” the North Korean nuclear crisis, but Kim Jong-un is still expanding his ballistic missile capacity. Well, last weekend he claimed to have reached a major trade understanding with China; but as J.P. Morgan soon reported in a note to its clients, his claims “seem if not completely fabricated then grossly exaggerated.”

Markets plunged earlier this week as investors realized that they’d been had. As I said, business really doesn’t want a trade war.

Let’s be clear: China is not a good actor in the world economy. It engages in real misbehavior, especially with regard to intellectual property: The Chinese essentially rip off technology. So there is a case for toughening our stance on trade.

But that toughening should be undertaken in concert with other nations that also suffer from Chinese misbehavior, and it should have clear objectives. The last person you want to play hardball here is someone who doesn’t grasp the basics of trade policy, who directs his aggressiveness at everyone — tariffs on Canadian aluminum to protect our national security? Really? — and who can’t even give an honest account of what went down in a meeting.

Unfortunately, that’s the person who’s now in charge, and it’s hard to see how he can be restrained. So the future of world trade, with all it implies for the world economy, now hinges largely on Donald Trump’s mental processes. That is not a comforting thought.Text dividers

14 thoughts on “Clueless

  1. Dear Jill,

    And now you know why US and other countries signed up for TPP. I was in favor of TPP with the caveat, it needed to better address the workers who might be left behind. At the time my analysis was that TPP was great except for those making less than $80,000 annually. But this could have been addressed and this would have been a good work-around to the China problem.

    Hugs, Gronda

    Liked by 1 person

  2. No, there are never easy answers, but there are simple ones. Of course collapsing economies are going to have terrible effects on those living through the collapses, many people will die horrible deaths. I do not want such deaths to happen. But what is the alternative? Watching all humanity, and a helluva lot of innocent species die off with no hope of reoccuring. As far as I know, which is not a lot, no species that went extinct has ever been reformed anew. Extinction is proof they were not worthy of survival. Maybe we are not worthy of survival, but we stll have the chance to succceed. That is an opportunity we will not get if we go on as we are.

    Liked by 1 person

    • You make some good points. Humans seem to have this sense of superiority, of being more highly intelligent than other species, so perhaps it’s time we step up to the plate and put that intelligence to some good use, yes? I’d still opt for finding other solutions than collapsing economies, though, and if people will but open their eyes and their minds, work collectively as a global community, putting aside the pettiness of ‘nationalism’, or ‘tribalism’, then I think we might actually be able to find those solutions.

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      • Oh, I’m sure we could. But we need new forms of government to accomplish that. The European Union was a step in the right direction, but they kept their own national governments, which was not a good step. If we have to have government, one government is all that is necessary. Otherwise we end up with what we have today, petty tyrants. And lots of them.
        Wishful thinking does not beget action. Action is a necessity!

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        • Perhaps you are right, that one government, one that is concerned only with acting in the best interests of ALL the people on the globe, is the best solution, but I think that even if the human race were to survive for another 2,000 years, that would not happen. And I don’t expect the human race to survive in its current form for another 200 years, let alone 2,000. Humans may mutate into something different, evolve in order to be able to survive the effects of either climate change or nuclear war, but that’s something from a Sci-Fi novel. In truth, I think that all these things we have called “progress” for so many centuries have actually been the lead-up to our own self-destruction. Cheery tonight, aren’t I? Must be that ‘holiday spirit’. 😉

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          • You are allowed to be cheery in whatever way you like, Jill. Yes, progress is not going to have a good ending, but then it never had a good beginning. Remember 7 day workweeks, 14 or more hour workdays, childhood labour, everything including shelter and food being sold to you by the company you worked for. That was progress then. We have gone from bad to worse. I’d laugh, but it truly is not funny.

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            • Yes, I do remember … well, not personally perhaps, but I remember my father-in-law, who was a coal miner for many years, telling of the ‘company store’ and you ended up giving them your whole paycheck to pay for the groceries and other things you bought the month before … a vicious circle that few were able to break out of. Fortunately, he did and ended up with an engineering degree working for BOAC. I recently heard that somebody in the federal government, I disremember who, wanted to lower the legal working age to, I think, 12. I tell you, we are going backward! You’re right … nothing funny about it all. Sigh.

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  3. Does the world economy really matter? If collapsing economies are better for slowing down climate change, what is the right choice? Serious adjustments have to be made, and our present global economy is not going to allow real change to be made. And were our economies to collapse, it would be the rich who would be hardest hit. Their wealth would become useless. I for one am perfectly okay with that. Are you?

    Liked by 1 person

    • I suppose how much it matters depends on whether you are part of one of those collapsing economies or not, don’t you think? We all tend to view things from where we stand, from our own perspective. You know I agree with you that we must all make sacrifices in order to halt or reverse the deadly effects of climate change, and I have no problem at all with those wealthy people who have been the guiltiest in destroying our planet being toppled. But I may have misgivings about condemning an entire nation to starvation. There are no easy answers.

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  4. I agree with Krugman that we should be banding together with our allies (even though we may have had some trade disputes them) in order to address the huge problems presented by China’s unfair trade practices. Though we may find some benefit from the revised North American trade deal it comes at the cost of irking the very countries we need at our side. We need to focus on the big fish and maybe let the little ones go.

    I think Krugman misses the point though. It may be unclear how much of Trumps base support a trade war or tariffs in of themselves. While some might be blinding following his lead, many see them as a symbol of standing up for the American worker and as a negotiating tactic, pure and simple. If you want to make an omelette you have to break a few eggs. Will it ultimately work though? We’ll see…

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    • I suspect that the bulk of Trump’s base don’t understand tariffs and their effects much better than Trump himself does. They accept what he tells them, that this will bring more jobs to America, without giving consideration to any other thoughts, such as the fact that the tariffs ultimately hurt the U.S. consumer more than any other. Unfortunately, there will be a wake up call when it starts to hit their own wallet, when they try to buy a new car or washing machine next year.

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  5. True indeed. Even his levels of concentration are suspect It’s quite likely he reacts to something he thought he understood without even having read a whole document.He certainly thinks himself a good business man and forgets the periods as a bankrupt.It’s possibly those periods, and the inability to raise funds from conventional U.S. banks that have sent him to the Russian Banks and their money.I bet they’re no longer sure where his money ends and theirs begins.
    Cwtch

    Liked by 1 person

    • Ah yes, but you forget that he is a ‘genius’ with ‘superior’ intelligence, so he has no need to read or educate himself about such pesky little things as tariffs. He told us, didn’t he, that he trusts his ‘gut’ more than the experts and analysts. Gawk … I cannot even type that without choking! Joking and sarcasm aside … you’re right … he is so convinced that he knows more than all the experts in the field, that he doesn’t read and refuses to listen to those who do. And whatever he decides today likely doesn’t matter anyway, for he will reverse it tomorrow. His business acumen is virtually non-existent, for he has shafted contractors, been in trouble for racial discrimination against both employees and customers, had six bankruptcies (to date) and more than 6,000 lawsuits. Not the signs of a good businessman, not even the signs of a human being of average intelligence. We may never know to what extent he is in debt to either the Russians or the Saudis, but that he is indebted to them both is no surprise.
      Cwtch

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