Las Vegas Review-Journal (Sunday)
On the whim of the president, we could see another Great Depression
Farmers aren’t the only Americans who’ll suffer collateral damage in President Donald Trump’s trade war if it goes to all-out escalation. Consumers of an array of products are going to start feeling it soon, if they haven’t already. And jobs are going to be lost.
That’s the upshot of a recent analysis by the Tax Foundation, which reported that if all of Trump’s proposed tariffs are put in place, 364,000 jobs would be eliminated and the gross domestic product would take a $118 billion hit — or 0.47 percent — over the long term. Meanwhile, the International Monetary Fund reported that trade tensions could result in a $400 billion reduction in global output by 2020, and that the U.S. was “especially vulnerable” to such a slowdown.
Then there are the looming price increases. Some would be barely noticeable, such as a few pennies for a can of soda, but others would be significant. If Trump were to establish his proposed 25 percent tariff on foreign-made automobiles, the price of a family car is estimated to go up by $4,000 to $6,000.
So much for those tax cuts. In fact, as Washington Post columnist George Will pointed out, the extra price for a new car would roughly be the same amount as the tax break for a family making $125,000.
If this is winning, then yes, we’re tired of it.
Good news on this front came Wednesday when Trump and European Commission President Jean-Claude Juncker announced that they’d reached a truce on trade. The auto tariff is off the table, at least for now, which is a significant relief.
But Trump being Trump, it’s no sure thing that things won’t heat up again.
“This could just be perfunctory, and if it just stops extra tariffs, that’s fine,” Brussels-based economic analyst Maria Demertzis told The New York Times. “But you can’t really depend on Trump. His understanding of global trade is bilateral balance, which is as good as arbitrary, given global supply chains. And it depends on what side of the bed he wakes up on tomorrow.”
Plus, regardless of what happens with Europe, it won’t affect Trump’s tariffs against several major trading partners, including Canada, Mexico and China.
Americans will suffer the fallout from those tariffs in the form of higher prices for goods.
Meanwhile, although Trump said Europe had agreed to “buy a lot of soybeans,” that promise wasn’t nearly enough to ease concerns among farmers, who stand to take an enormous hit due to retaliatory tariffs imposed by China.
Leaders from agriculture states are practically screaming at Trump to quit breaking relationships.
“Mr. President, it would be useful if we could narrow the scope and focus on China,” Sen. Jerry Moran, R-Kan., told CNBC. “And to do that, we need to have a good trading relationship with Mexico, Canada, the European Union. Let’s single out our efforts worldwide. They share our concerns with what China’s doing. Let’s work together.”
Sen. Ben Sasse, R-Neb., has also criticized Trump on the issue, particularly his proposed $12 billion in handouts to farmers to offset the damage from his trade war. Farmers don’t want welfare, he said — they want stable markets. Sasse said Trump was dragging the nation back to Coolidge-era protectionism that helped bring about the Great Depression.
“This administration’s tariffs and bailouts aren’t going to make America great again, they’re just going to make it 1929 again,” Sasse said in a statement.
The payouts help illustrate a fundamental problem with Trump’s actions, which amounted to taking a bat to a hornet’s nest. The consequence has been tit-for-tat tariffs that have left a wide array of unsuspecting American businesses holding the bag. If farmers deserve an offset, why not Harley-Davidson, which announced the tariff would increase its costs by as much as $100 million? Why not whiskey producers?
Trump and his supporters would answer these questions by saying shut up and be patient, because the benefits of the president’s approach will come eventually. Wrong. Dead wrong.
“It’d basically be a first” if the protectionist approach pays off, Sasse told NPR. “Tariffs never work. Trade wars never work. They’re always lost by both sides.”
Trump appeared to blink this week in his concessions to Europe. If congressional leaders care about protecting American workers and consumers, they will follow Sasse’s lead and keep pushing Trump in the right direction.