The dan­gers of a pos­si­ble trade war

The Washington Post Sunday - - SUNDAY OPINION -

The Feb. 8 Econ­omy & Busi­ness ar­ti­cle “Who would suf­fer most if U.S. pol­icy spurs a trade war?” said, “Im­port bar­ri­ers could spark re­tal­i­a­tion from other coun­tries and even a harm­ful trade war, where coun­tries take turns hik­ing re­stric­tions to un­der­cut one an­other’s goods and ser­vices, rais­ing prices for con­sumers in the process.” Oth­ers have pointed out that Pres­i­dent Trump and Repub­li­cans see our Fed­eral Re­serve Sys­tem as an an­tag­o­nist that has too much con­trol over our econ­omy. The Fed’s ob­jec­tives, of course, are to main­tain sta­ble prices and full em­ploy­ment. Its tool for main­tain­ing sta­ble prices is to raise in­ter­est rates when the econ­omy ap­pears to be over­heated. In­fla­tion above 2 per­cent an­nu­ally in­di­cates over­heat­ing.

Now, in­fla­tion be­cause sup­plies from other coun­tries were cut off may in­deed in­di­cate over­heat­ing of our econ­omy if we are ex­pected to fill the gap im­me­di­ately with­out the plants and trained em­ploy­ees re­quired. But rais­ing in­ter­est rates would not solve this prob­lem any more than it solved the in­fla­tion pro­duced by the OPEC oil em­bargo in 1972. The fault is not with our Fed­eral Re­serve Sys­tem, but with a Repub­li­can ide­ol­ogy that is in­com­pe­tent in the field of macro­eco­nomics.

To make the ac­tions of the Fed de­pen­dent upon con­gres­sional ap­proval would be like letting our Congress do the trigonom­e­try for send­ing our as­tro­nauts to the moon. Bruce Her­bert, McLean

The Feb. 8 Econ­omy & Busi­ness ar­ti­cle “Who would suf­fer most if U.S. pol­icy spurs a trade war?” sharply un­der­stated the dam­age that would fall upon a core group that backed Pres­i­dent Trump: the ru­ral farm and agri­cul­tural sec­tor.

With ex­ports rep­re­sent­ing 50 per­cent or more of such widely planted crops as corn and soy­beans, while pro­vid­ing sig­nif­i­cant growth out­lets for high­value prod­ucts such as dairy, pork, chicken and al­monds, the dy­nam­ics of com­mod­ity pric­ing mean that blow-back from trad­ing part­ners would im­me­di­ately and sub­stan­tially shock prices through­out the farm econ­omy and those in­dus­tries that serve them. Nowhere is this bet­ter il­lus­trated than the U.S. dairy farm­ers’ stake in Mex­ico, which, be­cause of the mu­tual elim­i­na­tion of tar­iffs that came with NAFTA, now takes 26 per­cent of all their ex­port sales.

A loom­ing trade war is al­ready cre­at­ing sec­ondguess­ing about the cal­cu­lus made last Novem­ber: the clear fi­nan­cial dam­age from im­paired im­mi­gra­tion and blunted ex­ports vs. the prospect of looser en­vi­ron­men­tal reg­u­la­tions and tax treat­ment.

Thomas M. Su­ber, Wash­ing­ton The writer is a for­mer pres­i­dent of

the U.S. Dairy Ex­port Coun­cil.

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