The Coming Trade Debate

The Coming Trade Debate

Since mega-businessman Donald Trump has been strongly pushing tariffs and against reciprocal trade proposals, to save American jobs, and penalizing movements of companies and jobs overseas, these will become major debate issues, at least among economists and the economic press. Bill Clinton, Hillary Clinton, the Bushes, and the Republican congress have strongly pushed free trade agreements. The argument for free trade agreements is abstract and involves detailed studies and math, and doesn’t appeal to Trump rallies to the gut level simplicity of jobs being lost and going overseas. Any trade agreement involves job shifts, and usually lower prices, as new economic opportunities are opened up. So consumers have been gifted by free trade agreements, but jobs have been lost by many. Also, with pollution restrictions, industries have gone overseas where they haven’t had such restrictions.

The other problem with tariffs is that they open up trade wars. The weapons in trade wars are damaging tariffs in other industries, and result in a drop of trade that hurts everyone.

The ability to impose penalties on industries that go overseas is clearly out of the powers of the presidency. He would need the cooperation of the congress. Since interests of certain states may be involved in this, it becomes even more involved.

Lots of the jobs that went overseas were repetitive, robotic like jobs. Some of them involved risks and poor working conditions, as in mining. Hearing about the overworking and crowded dormitory conditions of iPad makers in China shows why US workers would not do such jobs for the same low wages. Even if Trump could force US consumers to pay more for recalling manufacturing to the US, foreign countries would not pay more for such products with already lower priced competitive products. This could ruin many of our most impressive industries.

This whole program not only upsets the cart for legislators and businessmen, but also investors and the markets. Much of US wealth is in retirement plans, which would be disrupted and suffer losses with Trumps plans. How he would get the economic community to go along just to save US workers jobs seems difficult. It is as difficult as getting businessmen to raise the minimum wage, which Trump himself opposes.

Donald Trump is going out to raise a billion dollars for his or the other Republican candidates, he was confused when he first spoke about this. Imagine his appeal to the typical Republican businessman whose business is based on cheaper labor outside of the country. Imagine also appealing to those who have on paper moved their business to a foreign country for tax purposes, or are sheltering their fortunes off-shore.

Although Trump rails against China and our imbalance of payments to it, our chief trading partners are actually Canada and Mexico. Imagine fighting tariff wars with them.

Finally, there is the real wall he plans to build at the Mexican border. No Republican has yet pointed out that since the recession, and probably NAFTA as well, there is no net immigration with Mexico. Also, only half of the undocumented immigrants are from Mexico. The others have overstayed their visas.

If there really is a wall built, it would be much easier and cheaper to build it on the Mexican side, since Mexican labor is cheaper. A businessman like Trump would think that way. It also avoids costly and lengthy public domain suits in the US, which are unpopular with the Republican grass roots. But since we cannot directly pay Mexican laborers, it would have to be run by the Mexican government, so we would pay their government first. Then Mexico would really be paying for the wall. I think this is really Trump’s secret plan to have Mexico build the wall.

I am obviously not an economist, but all readers on this issue will be exposed to the standard economic arguments and economists who back free trade agreements. Few economists would argue against the decades-long accepted standard policies.

About Dennis SILVERMAN

I am a retired Professor of Physics and Astronomy at U C Irvine. For two decades I have been active in learning about energy and the environment, and in reporting on those topics for a decade. For the last four years I have added science policy. Lately, I have been reporting on the Covid-19 pandemic of our times.
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