I am a free trader by nature but not a big fan of economic forms of self-harm. And I am certainly for Trump basing his decisions on political calculation, since I am also against political forms of self harm. PDT is shifting towards a slight increase in protection for American products, as summed up in this article from The Wall Street Journal: ‘Every day is a new adventure’: Trump upends Washington and Wall Street with shifts on trade, guns. Pulling the various bits from the article, there are two sides to it, always bearing in mind that if it’s in the WSJ the story will be shaped by a free-trade ethos. So why, according to the story, would protection levels be increased. This is part of the Trump calculation:
- foreign countries are stealing American jobs with cheap imports – tariffs are one of the only ways to punish other countries for [WTO-forbidden] practices that disadvantage U.S. manufacturers
- impose tariffs on steel and aluminum in the name of national security – large amounts of cheap steel and aluminum posed a national security risk for the United States
- Trump has also been keeping a close eye on the special election this month for a U.S. House seat in western Pennsylvania. Voters in places such as Pennsylvania’s 18th District are looking for more to be done by the administration. The president has noted that the Republican in the race is struggling in a district where he won by a large margin.
And why leave things alone. Again from the WSJ and part of the White House debate:
- tariffs could spark a trade war – other countries would retaliate, imposing tariffs on U.S. exports, damaging an economy that Trump was trying to build up through his tax cuts
- the stock market was doing well [as is the economy as a whole].
This is hardly a return to Smoot-Hawley, and if it protects Republican majorities in the House and Senate, the small ripple effects on the American and world economies will be worth the extra few dollars Americans pay for the goods and services they buy. Meanwhile, this is the stated threat from Europe:
“We will put tariffs on Harley-Davidson, on bourbon and on blue jeans – Levi’s,” European Commission President Jean-Claude Juncker told German television.
That’s about the size of it. Meanwhile public spending rises another trillion and no one says a word.