Tag: donald trump

1.Trump’s So-Called “Trade War.”

Many call the American effort to obtain either tariff parity or a reduction in the roughly $1 trillion trade deficit and fifty years of consecutive trade deficits “a trade war.” But then what do they call the policies of the past half-century by Europe, Asia, China, and others to ensure asymmetrical tariffs, pseudo-health and security trade restrictions, and large surpluses?

A trade peace? Trade fairness?

2. Do Nations Prefer Surpluses or Deficits?

Why do most nations prefer trade surpluses and protective tariffs?

Are Europe, Asia, China, and others stupid? Are they suicidal in continuing their trade surpluses and protective or asymmetrical tariffs?

Is the United States uniquely brilliant in maintaining a half-century of cumulative trade deficits? Do Americans alone discover the advantages of a $1 trillion annual trade deficit and small or nonexistent tariffs?

Why don’t America’s trading partners prefer deficits like ours—given we supposedly believe they are either advantageous or perhaps irrelevant?

3. Would Our Trade Partners Prefer to Trade Places With Us?

Would our trade partners prefer to have America’s supposed benefits of a $1-trillion trade deficit? Would the United States then “suffer” like they do by running up $200 billion annual surpluses?

4. What if Wages Went Up at the Rate of the Stock Market?

What would now be the reaction of the stock market if over the last decade wages had increased at the rate of stocks—and the stocks at the rate of wages?

5. Is Wall Street’s Panic Based on What Might Happen—Or What Is Happening?

Is Wall Street’s meltdown a fear of what might happen in the future? Or is it reacting to March’s latest jobs report that there were 93,000 more jobs created than predicted? Was the Wall Street panic predicated on reports of much lower oil prices? Did the furor arise over the March inflation report that the annualized inflation rate dipped to 2.6% per year?

6. Is the Frenzy Caused by the Trump Economic Agenda?

Is Wall Street’s worry that Trump’s impending tax cuts, more deregulation, greater budget cuts, and continued efforts to eliminate budget deficits and reduce national debt will stall economic growth?

Keep reading

Trump’s tariffs are not designed to encourage Americans to borrow money and maximize their consumption. Nor are they designed to encourage participation in speculative stock market or real estate bubbles. America’s free trade policies encouraged such excesses after the end of the Cold War, and we can’t stand a repeat of the folly. While his critics wrongly invoke the Smoot-Hawley tariff failures of 1930, Trump’s emerging tariff policies, particularly if combined with the appropriate monetary policy, will have much better results and Make America Great Again. 

As Trump’s tariffs are implemented, they will generate revenue for the federal government and encourage investment in atrophied as well as cutting-edge sectors of the American economy. In addition, they will increase the quantity and quality of jobs available for Americans as a whole, will persuade (and are already persuading) our trading partners to adopt fairer and less predatory trading regimes, will arrest a possible slide into recession, and will get our economy moving toward our long-term growth potential of 3 percent (or more) GDP growth per year.

President Trump says “tariff” is one of his favorite words, and historical evidence indicates tariffs work. They worked for the Chinese this century, they worked for the Japanese after World War II, and they worked for the U.S. and Germany in the late 19th century. Back then, American and German growth rates and economic vibrancy radically outstripped the growth rates and economic vibrancy of a free-trading Britain, which, after abandoning its early 19th-century tariffs, adopted the free trade nostrums of David Ricardo and slipped into decline. 

One of the few instances when tariffs failed was during the Smoot-Hawley tariff episode at the beginning of the Great Depression. But there are special circumstances surrounding the imposition of the Smoot-Hawley tariffs that the free-traders hesitate to mention. When the United States raised the Smoot-Hawley tariffs, the U.S. was the world’s greatest creditor, and by raising the tariffs, we prevented others from selling us things so they could make money and pay us back. When they didn’t pay us back, it collapsed the global financial system and helped usher in the Great Depression.

Obviously, today the circumstances are reversed. The United States is now the world’s largest debtor. If we can’t pay back our debts, the global financial system will collapse, which would be disastrous for the entire world. 

Trump’s tariff medicine will put us on a diet, help us produce more, diminish inflation, and position us to manage and decrease our debt. Thus, Trump’s tariffs are not only good for Americans, but they are also good for everybody else across the world. While the Smoot-Hawley tariffs were bad, Trump’s tariffs are good because the relative financial position of the U.S. vis-à-vis the rest of the world is now reversed. This fact must not be overlooked when assessing the wisdom of Trump’s tariffs versus the folly of Smoot-Hawley. 

Furthermore, as Ben Bernanke, the former chairman of the Federal Reserve, taught us, at root, it wasn’t the Smoot-Hawley tariffs that sparked the Great Depression. It was a monstrous policy misstep on the part of the Federal Reserve Open Market Committee. On the eve of the Great Depression, the Fed raised rates and pursued a contractionary monetary policy when it should have cut rates and pursued an expansionary monetary policy. 

Keep reading