Monday, March 05, 2018

Trump must be stopped from starting a trade war!

My worst fears about Trump appear to about to be realized. It looks like he is serious about starting a trade way.  Once started it may take on a life of its own and spin out of control  Once unleashed we not be able to put it back in the bottle.

I had almost relaxed and thought my concerns about a Trump presidency were unfounded. I still questioned his temperament and thought he may lack clear governing principles but after a year in office, I was warming to the guy. He appointed Neal Corsach to the Supreme Court and lots of conservative lower court judges, he had gotten a tax cut passed, he had slashed thousands of regulation and he was advancing an immigration policy that, except for his insistence on building the wall, I essentially agreed with. Our military had defeated ISIS, we were taking the threat of North Korea seriously and turning attention toward the threat of a nuclear armed Iran. We were talking about rebuilding the military. He had gotten us out of the useless Paris Accord on climate change and had stored up relations with Saudi Arabia, and he had moved our embassy in Israel to Jerusalem. He had only talked tough on trade, he had not done anything dangerous.  He did get us out of TPP but I was not too concerned about that. He was renegotiating NAFTA but it appeared to be fine tuning; It did not appear he was going to rip it up.

He still made be cringe from time to time. His insulting school yard juvenile bully usage of "whittle" for people not as tall as he, told me he may have grown tall but never grew up. He appeared petty, thin-skinned and had an inflated ego. I found him crude and rude. However, I could overlook most of that stuff. It was personality that concerned me about Trump, not policy.

Now, however he has fired the first shot in a trade war that could bring down the whole economic structure of the world. This is serious and dangerous stuff.  He may be laying the ground work for the Second Great Depression. On Thursday he announced he would impose steep tariffs on imported steel and aluminum; 25% on steel and 15% on aluminum. This will make manufactured products more expensive for all Americans and  could lead to big job losses. When things cost more, people buy less of it and jobs disappear.  While imposing tariffs on steel may save steel manufacturing jobs, it will likely cost many more jobs in the various industries that use steel in the production of their product. Also, when foreign countries retaliate, American exports will decline resulting in more job losses. Unless we also impose a tariff on foreign cars, cars made in America with American steel will be at a disadvantage compared to imported cars.

If China responds to American tariffs by imposing a tariff on soy beans, the American agricultural sector will suffer. If European nations impose a tariff on American whiskey, Tennessee Jack Daniels and Kentucky Bourbon producers will suffer. If we impose a tariff on steel, offended countries may impose a tariff on Bowing Air, one of our most successful exports. There are competitors to Bowing. A 25% tariff on steel will not go unanswered and when foreign countries impose tariffs on American products then we will likely reply again with more tariffs. This could spin out of control very fast and millions of Americans could be standing in breadlines, and to deal with the depression, the money supply would likely be inflated and  the wealth in one's IRA could disappear.

It appears that Trump decided this policy in a fit of anger having more to do with Kushner not getting a security clearance, the Russian probe, and other pressures of the day than it did trade policy.  He did not warn our allies or even give the State Department a head's up.  This policy, however,  is consistent  with Trumps longstanding position on trade.

To impose these tariffs does not take Congressional action. According to the Trade Expansion Act of 1962 if the Commerce Department finds that the importation of steel has a negative impact on National Security then the President has the authority to impose tariffs. "National Security" is defined not as one may think but is defined as "general security and welfare of certain industries (link)."

A lesson should be learned from this. For generations congress has given away authority and presidents have taken power. Often, Congress gave the executive branch powers they didn't even ask for. Congress has given non elected  agencies power to make their own rules, and act as the judicial authority to determine the justice of the application of their rules.  It is time for Congress to retake power from the executive branch.

President Trump has changed his mind before on issues, maybe he can be persuaded to change his mind on this. Neither Republican or Democrats want a trade war. One would be hard pressed to find any economist who thinks this is a wise move on Trump's part. Historically, the Republican Party has been the party of free trade, at least since the Civil War. The Democrat Party at times has sounded protectionist to pander to their labor union base but in action both parties advanced tariff reductions and increased trade. What populist would call the "elites" of both parties, are greater advocates of free trade than are the rank and file of either party. One reason Trump won the presidencty is that he was able to appeal to union workers who were tired of being taken for granted by the Democrat Party. He told them what he would do and now he is doing it, but he must be stopped.

If Congress has the will they can stop Trump's trade way. The act that gave the president power to impose tariffs can be amended. If there are legitimate national security reasons for giving the president power to set tariff, then he could be given that power subject to congressional approval.  The President could have the power to impose the tariffs for 72 hours after which the Senate must approve the decision by a two-thirds vote. There may be other ways to address this but it can be stopped.

This is not the time for Republicans to be loyalist and support a policy they do not believe in.  It is not a time for Democrats to get timid fearing they will lose union support. Now is the time to put a stop to an impending disaster.

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  1. The art of the deal. Give the man some time and see how this plays out.

  2. You never trumpers will never learn. The Art of the Deal

    President Donald Trump on Monday dangled the possibility of lifting the new steel and aluminum tariffs he's imposed if NAFTA is renegotiated to terms more favorable to the US.

    "We have large trade deficits with Mexico and Canada. NAFTA, which is under renegotiation right now, has been a bad deal for U.S.A. Massive relocation of companies & jobs. Tariffs on Steel and Aluminum will only come off if new & fair NAFTA agreement is signed," Trump tweeted Monday morning.