Month: March 2018

Alternative Fact: Trade Wars

Alternative Fact (from Trump’s Twitter @ dark-o-clock today): “When a country (USA) is losing many billions of dollars on trade with virtually every country it does business with, trade wars are good, and easy to win. Example, when we are down $100 billion with a certain country and they get cute, don’t trade anymore-we win big. It’s easy!”

 

Real fact: Not buying a billion dollars of stuff from country X does not mean said “stuff” will now be produced domestically (assuming the domestic capacity and raw materials to produce the “stuff” exist). It may well mean we’re paying for a few cents more (bad for people with limited income streams) to source the “stuff” from country Y (until Trump sufficiently offends them too and we have to move on to country Z at yet another slight cost increase).

Retaliatory actions significantly reduce American exports too (see: Bush 2’s steel tariff a year or so into his presidency). So maybe you’ve managed to reduce the trade deficit with country X. You’ve increased the overall trade deficit twofold: we’re paying more for our imported “stuff” AND the targeted countries (and possibly non-targeted countries) are buying less from us.

Now theoretically slapping wide-spread tariffs on everything sourced from everywhere would be an easy trade war to win – assuming you want to restrict your country to domestic markets (again, retaliatory action). I expect that means domestic corporations with international operations would spin off international divisions. An ugly mess … and probably why the stock market reacted so poorly yesterday.

Bonus real fact: China isn’t our biggest trading partner for steel or aluminium. That would be Canada. And the EU. Both of whom, I must assume, will object to the tariffs (again, see Bush 2 in 2002)

Let the war begin

One thing I respected about the first President Bush was that he didn’t attempt to secure re-election by re-invading Iraq. The 1990-1991 invasion of Iraq led to significant jumps in Bush’s approval rating — 15% at the onset and 20% when we “won”. And a surge of nationalism (and the “don’t change horses mid race” thinking that certainly helped his son’s re-election bid) that accompanies military action may well have allowed him to win in 1992.

George W didn’t have terrible approval ratings at the onset of his presidency – his approval number was over 50% just before 9/11. But his approval rating hit near 90% in the immediate aftermath.

Which brings me to Trump. Someone who loves glowing praise. And who kicked off a new round of trade wars with tariffs on steel and aluminium which may allow some increased domestic production, but is more apt to make everything that uses steel or aluminium more expensive. Or maybe it make more sense to make parts in Canada and truck the bits South. Or maybe finished products crossing the ocean become cost competitive. And that doesn’t even address adverse response from trading partners.

If the guy was sufficiently delusional to believe it was possible for any president to receive a surfeit of adoration, and by his own admission he’s not into fomenting new wars (+he has some existing wars in which to drop huge bombs +the general population has had more than enough warring to last a few lifetimes) … is it possible this is a self-aggrandizing trade war?