Trump is on the right path on trade
To the Times: As we’re repeatedly reminded, brilliant world leaders play three-dimensional chess and Donald J. Trump is plays checkers. I agree this mantra is partially true, as world leaders and their advisers are playing chess, but president Trump is playing poker.
Chess requires the ability to anticipate moves several turns out, but requires little regarding max/min theory, when to walk, reading people, and bluffing. I would argue that poker skills are more valuable to a president, especially when negotiating trade.
Renegotiating our current trade agreements is a game of poker because demanding trade parity can have little cost relative to a huge payout. Consider our 2017 trade deficit of $566 billion despite $2.3 trillion in exports. To compare scope, consider that recently passed tax reform is expected to add $135 billion to our economy in 2018. Hence, even modest success in reducing U.S. trade barriers and improving exports would be significant.
Perhaps a bigger reward is that forcing our trading partners to reduce barriers for U.S. goods and services will fuel their economic growth as well. Allowing Japanese citizens to purchase food items and motorcycles at lower cost will improve their standard of living and leave them with more money for other purchases. This is the primary benefit of trade and lowering the cost of products and is a major impetus for growth. The effects of freer trade duplicated around the world could lead to greater growth in the global economy and that will benefit everyone.
When pundits discuss Trump’s approach to trade, they continually overlook reasons to be optimistic or expect success. Instead, they assume failure and focus on the consequences of the ensuing “trade war.” The mere notion that the Trump administration may be better negotiators than previous administrations completely contradicts the ongoing narrative of his political adversaries (including the media).
Most compelling, I submit that by negotiating with our trading partners, one at a time, no one failure will be devastating to our economy, however it may be to theirs. Retaliation regarding penalties to obtain parity from Japan in the treatment of motorcycles could result in some layoffs associated with the import and sales of vehicles, however the Japanese may have to shut down a Honda plant.
More important, any damage that could result from a trade war in the pursuit of “trade reciprocity” is reversible. We can always revert to the current system.
Regarding China, they account for $375 billion of our current trade deficit, as with other countries, this is not solely due to tariffs but unfair trade practices as well (quotas that prohibit companies from really marketing their product abroad). China has the added distinction of demanding 51 percent ownership of companies operating in their country as well as ownership of intellectual property (not to mention they have no respect for IP rights). China, more than any other country is dependent on access to our markets and negotiating substantially better trade deals should not be that difficult.
For those worried that China, a major holder of U.S. debt, could use this position as a weapon, keep in mind if China liquidated their investments (sold their debt), it would likely cause the U.S. dollar to drop precipitously, which would result in their losing a lot of money, and U.S. goods becoming much cheaper worldwide. China would then have the added problem of finding a better place to “park” their money, good luck on that.
When current trade deals are juxtaposed to Trump’s aspirations for global trade, one must wonder why the disparity and why Trump is so optimistic. Perhaps previous trade deals where negotiated by actors that were enamored by their position or their assigned status on the world stage; perhaps they didn’t understand the gravity of their agreements; perhaps there were corrupting influences.
I would submit none of this motivates or affects Trump. I would suggest that Trump may be motivated by winning (ego), reelection, or just doing the right thing.