Commentary
Although there is great reluctance to recognize it in the still thickly populated ranks of the Trump antagonists in the United States, the president’s tariff initiatives to date have painlessly produced a startling success. Approximately
90 countries are now approaching Washington to negotiate a reduction in tentative tariff increases and conciliate the United States by making concessions against what had been the status quo. Obviously the details remain to be negotiated, but the cost so far has been minimal while the resulting reduction in the unsustainable American
trade deficit of over US$1 trillion is bound to be significant.
It is surprising that China, which has been gaming the system with patient calculation for decades, picked up the gauntlet and entered a one-on-one joust that it cannot win. The United States is a naturally rich country, whereas China has to import a great deal of raw materials and energy.
Despite the fact that up until Trump’s first inauguration eight years ago, it was impossible to set foot out of doors anywhere in the world without someone advising you that China was about to surpass America’s economy,
China’s economy is today not two-thirds of that of the United States. And as nothing published by China on its economy, nor any numbers that it produces, are believable—and it is known that there are profound debt problems in the country’s public and real estate financing—it is much more vulnerable than the United States in a serious exchange of economic fire.
Foreign trade represents almost twice as great a percentage of the Chinese as of the American GDP, and in such a contest as now impends, this creates another serious vulnerability for the Beijing regime.
In the stampede of countries to stabilize trade relations with the United States,
Spain has been the only significant economy that has responded positively to China’s rather desperate efforts to round up some sort of a rival bloc to the serried ranks of countries with close economic relations with the United States. But Spain has not been flourishing lately. It is only the
fourth-largest GDP in the EU and is one of the few remaining European countries governed by Social Democrats, who look to the public sector for much of their economic growth. Spanish Prime Minister Pedro Sánchez just made
his third visit to Beijing in two years and is beating the tambourines for a
greater economic relationship between Europe and China, but no one is listening.
As in many other policy areas, President Trump has started from the premise that practically everything has to be reviewed because the continued advisability of most established U.S. government practices is suspect. In the post-Reagan era, the Washington establishment became and remained for decades a self-serving consensus. Control of the White House and Congress changed from time to time, but with D.C. being predominantly Democratic, power steadily flowed from elected officials to permanent government officials, making the Republicans doppelgänger Democrats.
Regarding climate policy, Trump considered it carefully and declared that climate change “
is a hoax,” and he is basically correct. He also said that existing free-trade agreements were extensions of Cold War policy designed to incentivize many countries to avoid the Soviet bloc by allowing them to export goods to the United States. The expectation was that the economy’s strength would lead to much of the foreign investment being reinvested in the United States, which operates on such a scale that there’s no significant danger of excessive foreign ownership of its economy.
Trump concluded that tariffs could reduce the trade gap, bring back American industry, and that foreign nations would want to maintain access to the U.S. market—the world’s greatest by far. He argued that any increase in domestic costs due to tariffs would be a one-time inflationary jump and wouldn’t affect key inflation indicators since tariffs don’t apply to essential goods.
Very few essential groceries, no housing, and not many raw materials whose costs come through into the Consumer Price Index would be subject to tariffs. And as increased tariff revenues would go to finance personal and corporate
income tax reductions, the result would be a gain across the board. Tariffs would be a voluntary tax as they would be assessed on imports that almost no one would have to buy. In that sense, tariffs are like most sales taxes or goods and services or value added taxes: They are usually on voluntary expenditures and are therefore much less annoying to the taxpayer and accordingly easier and less expensive to collect.
In the tumultuous events of last week, Trump’s media critics, who had been defeated and intimidated by his sequence of successes since the election, were again out in great numbers and good voice.
Some suggested, with their usual total absence of evidence, that it was a stock market play to make quick capital gains for the president and his cronies. Some others said that it was a full-scale trade war and that Trump had no intention of negotiating anything because he wanted to end foreign trade and have the United States exist entirely on its own production.
The simultaneous opening of general discussions with scores of countries interred that argument quite promptly. A similar fate befell aspersions on the president’s sanity that held that he was a compulsive gambler no matter how great the stakes or what the odds, and the thrill of gambling came from the possibility of losing—undesirable though that was. This absurd theory held that the president is addicted to thrill-seeking risk-taking. This interpretation has about as much to support it in Trump’s record as president as the claims seven years ago that there was “
direct evidence” of Trump’s collusion with the Russian government in the 2016 election.
The one false note has been the mistreatment of Canada, which the U.S. public does not approve of. The United States has no deficit with Canada if the oil that it buys from Canada at knockdown prices and then sells to third parties at a profit is excluded. And likening the conduct of Canada, a reliable ally and a fair-trading country, to that of Mexico is scandalous.
Canada has a serious complaint regarding the influx of people who have entered the United States illegally surging northwards into Canada, and bringing with them a great many firearms that are illegal in Canada. To some extent,
Justin Trudeau is to be blamed for Trump’s nonsense about
Canada joining the United States because he pre-emptively volunteered that the Canadian economy would collapse if subjected to a 25 percent tariff. Also, he was extremely slow to promise to raise Canada’s contribution to its own self-defence. In this light, it is little wonder that Trump suggested Canadians would be better off packing in the whole business and avoiding tariffs and defence costs.
What is shaping up over tariffs, and cannot be more than a couple of months away, is another startling vindication of Trump’s innovative policymaking.
Views expressed in this article are opinions of the author and do not necessarily reflect the views of The Epoch Times.
