The dangers of a possible trade war
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.