DON­ALD TRUMP AND AMER­ICA’S HIGH TAR­IFFS

Chattanooga Times Free Press - - OPINION -

To hear Pres­i­dent Don­ald Trump tell it, every other coun­try in the world is tak­ing ad­van­tage of the United States by sell­ing milk, cars, steel and other prod­ucts to Amer­ica while re­fus­ing to buy madein-the-USA mer­chan­dise. His cease­less com­plaint about trade — with neigh­bors like Canada and Mex­ico, al­lies in Europe or mer­can­tilist China — is that the United States is get­ting a raw deal.

Much of what the pres­i­dent has said is malarkey.

It’s true that Amer­ica has run a large trade deficit for many years, and that some coun­tries — China in par­tic­u­lar — have used un­der­handed tac­tics like de­press­ing their cur­ren­cies to in­crease ex­ports. But, by and large, the world is not rip­ping off the United States. Scratch the sur­face of many of the pres­i­dent’s state­ments about trade, and it’s hard not to con­clude he ei­ther is try­ing to con­fuse the pub­lic or is rather con­fused him­self.

Re­cently, Trump has un­leashed his Twit­ter ac­count on one of Amer­ica’s old­est and clos­est friends, Canada, crit­i­ciz­ing the coun­try’s de­ci­sion to pro­tect its dairy in­dus­try. Last month, the pres­i­dent railed about that coun­try’s “270 per­cent tar­iff on Dairy Prod­ucts!” — a statis­tic that sounds out­ra­geous but re­ally is not. Canada al­lows a small quota of Amer­i­can dairy im­ports to come in with low or zero tar­iffs. Im­ports above that amount are taxed at vary­ing rates that can ex­ceed 300 per­cent for some goods.

Do you know which other coun­try pro­tects its dairy in­dus­try in a sim­i­lar way? You guessed it: the United States. Amer­i­can dairy quo­tas and tar­iffs are so re­stric­tive that a vast ma­jor­ity of the milk, cheese and but­ter fam­i­lies in the United States buy is made do­mes­ti­cally. In fact, dairy pro­duc­ers in Wis­con­sin and other states sold $792 mil­lion in prod­ucts to Canada in 2017, while Cana­dian pro­duc­ers sold just $149 mil­lion of dairy to the United States, ac­cord­ing to the Brook­ings In­sti­tu­tion.

And yet the Cana­dian prime min­is­ter, Justin Trudeau, doesn’t belly­ache in­ces­santly on Twit­ter about un­fair Amer­i­can dairy tar­iffs.

An­other of Trump’s trade bug­bears is the rel­a­tive dif­fer­ence in the tar­iffs the United States and the Euro­pean Union ap­ply to au­to­mo­bile im­ports. He points out that the Amer­i­can govern­ment charges a mod­est 2.5 per­cent tar­iff on im­ports of luxury sedans that BMW and Mercedes pro­duce in Ger­many and else­where. But Amer­i­can-made Lin­colns and Cadil­lacs are charged a 10 per­cent tar­iff when ex­ported to the 28 EU coun­tries.

This makes it sound as if the United States is get­ting played by Machi­avel­lian Europeans. But the Amer­i­can govern­ment also uses tar­iffs to pro­tect its auto mar­ket — it has just cho­sen to pro­tect a spe­cific seg­ment of the ve­hi­cle mar­ket (a far larger seg­ment than luxury cars) and with much higher tar­iffs: Pres­i­dent Lyn­don John­son im­posed a 25 per­cent tar­iff on im­ports of pickup trucks in 1963, which re­mains in place to­day.

Other ex­am­ples abound. For in­stance, when Trump talks about the trade deficit, he al­most al­ways refers to num­bers for trade in phys­i­cal goods — cars, steel, dairy and so on. He has re­peat­edly failed to take into ac­count or talk about trade in ser­vices — a broad cat­e­gory that in­cludes movies, soft­ware, tourism, le­gal ad­vice and the col­lege tuition paid by for­eign stu­dents to Amer­i­can uni­ver­si­ties. This omis­sion serves the pres­i­dent well be­cause it sug­gests the United States is at a great dis­ad­van­tage, buy­ing many more goods from the rest of the world than it sells — an $807 bil­lion gap in 2017, ac­cord­ing to the Cen­sus Bureau. But in ser­vices, the United States had a large trade sur­plus last year, $255 bil­lion, and in­clud­ing that makes the com­bined trade deficit smaller.

Even putting aside the inanity of us­ing the trade deficit as a score­board to de­ter­mine if the United States is “win­ning” or “los­ing,” most econ­o­mists say larger eco­nomic forces de­ter­mine the deficit, in­clud­ing the govern­ment’s fis­cal deficit, which Trump has been busily in­creas­ing. Nev­er­the­less, it makes no sense to ig­nore trade in ser­vices be­cause that sec­tor pro­duces about two-thirds of Amer­i­can eco­nomic out­put and em­ploys about 71 per­cent of work­ers.

On Tues­day, the day be­fore a NATO meet­ing in Bel­gium, Trump again at­tacked Euro­pean of­fi­cials by cit­ing data that ex­cluded trade in ser­vices. But all told, the United States ex­ported nearly $530 bil­lion worth of goods and ser­vices to the EU last year, about $100 bil­lion less than it im­ported. Clearly, many Amer­i­can farm­ers and busi­nesses are do­ing quite a lot of busi­ness in Europe.

Trump thinks it’s in his in­ter­est to paint Amer­ica as a vic­tim of cun­ning for­eign­ers. That much is clear. It’s far less ob­vi­ous why he be­lieves that coun­tries he has sub­jected to such base­less at­tacks will ne­go­ti­ate fa­vor­able trade agree­ments with a pres­i­dent who has shown he can’t be trusted.

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