Trade Wars: The Farce Awakens
"We have to believe that at some point, common sense will prevail. But we see no sign of that in this action today by the US administration," Canadian PM Trudeau says after new US tariffs. https://t.co/MRwpTeK7l1 pic.twitter.com/fCHsPyHAqE
— NBC Nightly News with Lester Holt (@NBCNightlyNews) May 31, 2018
In about an hour, the United States will slap 25% tariffs on steel and aluminum imports from our closest allies. On the other hand, Beijing’s emoluments appear to have, at least for now, paid dividends. Over at The Washington Post, Heather Long writes:
President Trump campaigned on going hard after China for ripping off the United States on trade. Yet a year and a half into his presidency, Trump has put more tariffs on longtime U.S. allies than he has on China, his supposed “bad guy” on trade. The Trump administration announced new tariffs Thursday on the European Union, Canada and Mexico.
Almost all of the reaction has been negative. Many are calling it a political and economic mistake.
America’s allies are stunned, stocks slid on Wall Street as trade-war fears returned, and economists are warning that Americans will soon face higher prices on a wide variety of products. A slew of Republican lawmakers immediately trashed the move as bad for the economy and foreign relations.
“Europe, Canada & Mexico aren’t China. You don’t treat allies the same way you treat opponents. Blanket protectionism is a big part of why we had a Great Depression. ‘Make America Great Again’ shouldn’t mean ‘Make America 1929 Again.’ ” tweeted Sen. Ben Sasse (R-Neb.), joining an opposition that included many Republican officials and business groups.
Some suggest that this isn’t a big deal, because the Bush Administration imposed a steel tariff back in 2002 and NATO didn’t collapse. Of course, in 2002 the United States was near the peak of its “unipolar moment” (and about to hasten American decline, and cause the deaths of hundreds of thousands of people, through a war of choice in the Middle East). And the tariffs still failed. Miserably.
Life of the tariffs. It also did not occur simultaneously with undermining virtually every dispute resolution mechanism available.The negative experience with those tariffs is precisely why virtually all of industry has been trying to explain that this is disastrous policy.
— Joshua Zive (@jczive) May 31, 2018
(On the last point, see Nathan Jensen’s article on the WTO and the tariffs.)
The basic problem here is that even if the economic results of this ploy aren’t terrible—say, increased materials prices combine with pro-cyclical tax cuts to drive inflation, or retaliatory trade measures don’t amount to a major drag on the expansion that Trump inherited—there are still downside risks on the geopolitical side.
Most of our core allies in North America, Europe, and Asia consider Trump unreliable, corrupt, and incapable of making sound policy decisions. They’ve seen Trump withdraw from the Paris climate agreement, axe US participation in the Trans-Pacific Partnership, routinely threaten to pull out of existing trade deals, and scrap the JCPOA despite overwhelming evidence of Iranian compliance. Indeed, as European leaders scrambles to keep the JCPOA in place, they watch Trump pursue a nuclear agreement with North Korea which is highly unlikely to generate a better deal than the US got with Iran. Moreover, because many of their citizens don’t care much for Trump either, standing up to America is good politics; capitulating to American demands more costly.
I’ve made this point before, and I’ll make it again. It’s easy to forget how much the Bush administration, mainly in its first term, strained relations with US allies. In some respects, though, our friends could rationalize this period as the effects of the September 11 attacks. The US went a bit crazy, but then it came to its senses. Trump’s election punctures that narrative. It raises significant—and, to be frank, fully justified—doubts about the ability of the American political system to deliver stable and steady international leadership. And each week, Trump makes things worse.
PS: apologies for not posting much. I’m in the process of ‘clearing’ my work queue (as much as possible, given that I’m still editing International Studies Quarterly until January) because I have a book manuscript, co-authored with Alex Cooley, due in September. I cling to the notion that I’ll somehow work this summer’s rather intense writing process into blogging here. We’ll see.