Trump finding it harder to fool people over trade
It is puzzling why US President Donald Trump’s interpretation of the US trade deficit with China differs starkly from that of almost all economists. His declaration that trade wars are good and easy to win is a clear contradiction to the reality on the ground.
A Quinnipiac University poll released this week may provide some clues. It shows that Trump may be losing support from “uneducated white voters”, referring to those without a college degree.
It is not a crime to not have a college degree, but what Trump has been doing is to cash in on people’s ignorance about trade.
On Wednesday, the US president again glorified his trade policy by tweeting that “Our Country was built on Tariffs, and Tariffs are now leading us to great new Trade Deals…”
This follows his multiple tweets on Aug 5 claiming “Tariffs are working far better than anyone ever anticipated…”, “Tariffs have had a tremendous positive impact on our Steel Industry” and “Because of Tariffs we will be able to start paying down large amounts of the $21 Trillion…”
Trump also said in an Aug 11 tweet that he is “looking forward to dinner tonight with Tim Cook of Apple.”
It is unclear whether Cook explained to him that night about how trade works and why the bilateral trade deficit does not matter, using the iPhone as an example. The iPhone accounted for $15.7 billion, or 4.4 percent, of the US trade deficit with China in 2017, but most of that was contributed by companies in Japan, the Republic of Korea, Germany and the United States.
The International Monetary Fund has warned that Trump’s tariffs are a big threat to the global economy including the US economy. Oxford Economics lead economist Adam Slater has called Trump’s tariffs a “significant” threat to world growth and said they could reduce world trade by 4 percent and wipe away 0.4 percentage points of global GDP, about $800 billion.
Trump may use the collected tariffs to pay off the mounting national debt, but US exporters are having to pay hefty retaliatory tariffs. Besides, US companies based in China are paying the punitive tariffs Trump imposed on China under Section 301 of the US Trade Act of 1974, because they are among the major Chinese exporters to the US. In this sense, Trump is literally taxing US companies.
This is true also because a large portion of the US tariffs on China are on intermediary goods that US companies rely on.
US farmers and ranchers, who are among Trump’s supporters, are also suffering, especially as the autumn harvest season approaches.
Element Electronics, a rare US TV maker, recently announced it was closing its plant and laying off all its workers in Fairfield County, South Carolina, a victim of Trump’s tariffs on steel and aluminum and on components from China.
The tariffs are so bad that even HarleyDavidson, once Trump’s favorite company, wants to move its US production to Europe to avoid retaliatory tariffs.
The general consensus among economists and trade experts is that tariff is a tax on consumers. It will drive up the US dollar and hurt US exports. Many worry that if Trump carries out his escalating tariff threats it might even cause a global recession, just like the notorious protectionist Smoot-Hawley Tariff Act, which was signed into US law in 1930 and blamed for exacerbating the Great Depression.
Trump’s tariffs are bad for the US and the world. The Quinnipiac University poll suggests that even the “uneducated” won’t be easily fooled.
The general consensus among economists and trade experts is that tariff is a tax on consumers. It will drive up the US dollar and hurt US exports.