Trump Will End, Not Start, A Trade War (Part 4)

Dernier volet du document, tous ce qui est dis dans ce carnet est valable pour le Canada.


Trump Will End, Not Start, A Trade War

clip_image002Those who suggest that Trump trade policies will ignite a trade war ignore the fact that we are already engaged in a trade war.

It is a war in which the American government has surrendered before engaging.

Unfair trade practices and policies of our competitors
are overlooked or ignored.

As a well-documented result, America has already lost tens of thousands of factories, millions of jobs, and trillions in wages and tax revenues. 

Donald Trump will simply put our government on the field in defense of American interests.

As a very practical matter, as Trump pursues a policy of more balanced trade, our major trading partners are far more likely to cooperate with an America resolute about balancing its trade than they are likely to provoke a trade war. 

This is true for one very simple reason:

America’s major trading partners are far more dependent on American markets
than America is on their markets.

Consider that roughly half of our trade deficit is with just six countries: Canada, China, Germany, Japan, Mexico and South Korea.

If we look at the bilateral relationships of America with each of these countries, improvement in our trade balance is clearly achievable through some combination of increased exports and reduced imports, albeit after some tough, smart negotiations – an obvious Trump strength.

Consider South Korea, and recall here that Hillary Clinton’s 2012 South Korea trade deal has resulted in the loss of 75,000 jobs – especially in America’s auto industry. 

As has been noted, this poorly negotiated Clinton deal has also led to a near doubling of the US trade deficit with South Korea.  

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Donald Trump has promised to promptly renegotiate bad deals such as this.  Given that it is abundantly clear that this deal did not perform as promised, South Korea will have no grounds to complain when Trump calls for a renegotiation.  The two parties will simply seek a far more equitable deal. As for South Korea, Germany, and Japan, all import a very high percentage of their hydrocarbons (as does South Korea).  However, most of these imports do not come from the US.  

With Trump promising to increase oil and natural gas production in the US and remove any restrictions on US exports, there are reasonable deals to be made here with little or no cost to our petroleum-dependent trading partners, and there are many highpaying American jobs that would be created in our energy industries as a result.

China is likely to pose the biggest challenge.

That said, the US is still China’s biggest market, and the Chinese Communist Party runs a huge risk if it chooses to destabilize its own economy, and undermine Party control.  

For example, China cannot cancel imports of American soybeans because there is not enough global excess supply of soybeans to replace the American output.   If China paid a premium to divert supplies from other countries, the US would simply fill the market void created so there would be no net impact on US exports. In terms of deals to be had, China likewise imports much of its petroleum needs so there is room to negotiate here. 

·       However, a Trump Administration will confront China’s continued high tariffs on a wide range of American products, from motorcycles to raisins, as well as China’s limits on imports such as cotton from the US.  

·       Trump will also insist that China relax its numerous non-tariff barriers now blocking US exports across a wide range of products, including autos, agricultural commodities, fertilizers, and telecommunications equipment.

·       Nor will a Trump Administration condone China’s continued dumping of billions of dollars of illegally subsidized goods into US markets, e.g., the massive dumping of steel. 

US China trade -1

Our view is that China’s leaders will quickly understand they are facing strength on the trade issue in Trump rather than the kind of weakness on trade that has characterized the Obama-Clinton years. 

Just as these Chinese leaders have been exploiting American weakness by cheating in the trade arena, they will acknowledge the strength and resoluteness of Trump and rein in their mercantilist impulses.  

Ultimately, our view is that doing nothing about unfair trade practices is the most hazardous course of action – and the results of this hazard are lived out every day by millions of displaced American workers and deteriorating communities. 

There are many markets in the world and China is just one of them.  We simply cannot trade on their one sided terms as they are too destructive to the US growth process. 

The same is true of other trading Partner

La bataille que fait Donald Trump est la bataille
pour tous la classe moyenne des pays occidentaux.

Pas de problème avec le libre-échange, mais qu’il soit équitable pour les deux peuples (j’ai bien dis : peuple, pas pour le 1%)


Dan DiMicco, managing trade issues during his transition

These critics claim Trump will start a trade war. Newsflash: We are already in a trade war started by the Chinese and others who have traditionally kept their currency devalued USDCNH, +0.2468%  to flood our market with their goods while protecting their own. And we are losing.

This was precisely the point made last summer by Dan DiMicco, the former steel executive Trump has charged with managing trade issues during his transition.

“Hillary Clinton has claimed Trump’s trade policies will start a ‘Trade War,’ but what she fails to recognize is we are already in one,” he wrote in his blog.

“Trump clearly sees it and he will work to put an end to China’s ‘Mercantilist Trade War’! A war it has been waging against us for nearly two decades!”

And hard-nosed bargaining will be the way Trump ends this war, DiMicco added. “He will do this by negotiating from a position of strength, not condescending weakness. China respects strength but takes full advantage of weakness. In the end it will be in China’s best interest to stop cheating on trade.”

China needs trade with the U.S. at least as much as we do. The idea, for instance, that China would retaliate against U.S. tariffs on some manufactured goods by blocking agricultural imports from the U.S. ignores the fact that China’s massive population has to eat.

China is the focus for unfair trade practices, but let’s not forget there are many others. Germany, for instance, manipulates its currency in a much more subtle fashion. By tying it to lower performing economies to keep the value of the euro EURUSD, +0.1493%   low, Germany prospers while driving other euro countries to ruin.

Trade pacts with insufficient protections exacerbate this situation, as does a World Trade Organization with unenforceable restrictions.

Trump is exposing this charade for what it is.

Solutions may not come easy, but you can’t solve the problem if you don’t first figure out what it is.

It is much easier for reporters, and the economists currently exerting influence on policy, to fall back on the bromides of the corporatist neoliberalism they have been indoctrinated in.

One of the main reasons mainstream media missed the appeal of Trump’s candidacy is because they operate in an echo chamber that listens exclusively to this orthodoxy.

Finding the right policy mix to protect American jobs while encouraging a healthy level of fair trade will be a challenge.

But we know trade pacts don’t get the job done and it’s time to try something else.