Jeffrey Tucker: Trump Wins the Trade War. Everyone Else Loses

The 70-year global progress toward freer trade is permanently reversed so long as the Republicans hold the White House. That’s the message of the non-deal trade deal just announced between the U.S. and China. It’s a deal that reduces no existing tariffs and offers only symbolic changes in other terms that were already on the table two years ago. Never mind that every credible source says that this situation loses billions or trillions in productivity in seen costs and unthinkable costs in what is not seen.

The only good news coming from this deal is that the U.S. has temporarily pulled back on the imposition of even more tariffs later this month. While robbery is better than assault, and a promise to steal less in the future can’t be brushed off as irrelevant, this trade deal does nothing to improve relations between the countries relative to the status quo of two years ago. However, in times when symbols matter more than reality, the US president can control the spin and therefore wins the day.

The only concrete change here – leaving aside some vague financial-access concessions – comes from China in the form of asking Chinese companies to buy $10 billion more soybeans and pork than is currently on the table, purchases extended over an uncertain period of time.

This would help address a major political problem of the Trump administration that the American agricultural sector has been suffering from a vast loss of its export markets due to the trade retaliation that the Trump administration said would never be imposed in this “easy to win” trade war. It does not, however, compensate for billions more in losses, nor pay back American taxpayers for the latest $16 billion pushed out as agricultural subsidies designed to soften the blow of the war.

Among the other contentious issues that are not mentioned in this deal:

  • Coordinating intellectual property rules in a way that would curb the ability of Chinese companies to reverse engineer technologies of American origin, an absurd hope that flies in the face of the very meaning of economic cooperation;
  • A rolling back of existing tariffs of the U.S. against China and China against the U.S.;
  • Chinese subsidies to technology companies or US subsidies to agriculture;
  • US restrictions on visas for Chinese visas;
  • The rise of US export controls against China;
  • The fate of Huawei;
  • Alleged cyberhacking of Chinese origin;
  • Enforceable rules on foreign-exchange valuation which are governed by market forces.

Why would the Trump administration proclaim this a victory when it actually seems merely to codify tariffs as policy? It comes down to two factors. First, the economics of this trade war is obviously and overwhelmingly negative. There are no credible outliers on this claim. This also spells some political trouble with heartland voters who have felt the pain most intensely. The mere hope of a solution was enough to lift financial markets.

Second, selling more product abroad is one way that mercantilists (Trump is an adherent of that deprecated school of thought) believe that they will reduce the “trade deficit,” an accounting fiction that is not only miscalculated but is irrelevant even if it were accurate.

The reality of what will not change except perhaps some of the planned tariffs is revealed in this chart from Goldman Sachs.

Another factor goes beyond any proposed deal or any future negotiations. It is the problem of trade uncertainty. Businesses and investors need a predictable regime to plan years in advance. That stability has been shattered as a result of executive-branch impositions that bounce around week to week, always the goal of making it clear who is in control.

So long as the U.S. runs a trade deficit with China (at least on paper), the Trump administration is likely to push for more tariffs under the mistaken belief that China is paying them, that these will make it disappear, and that this matter one whit for the fate of world prosperity.

Following the disastrous Smoot-Hawley tariffs of 1930, Congress turned over its constitutionally-codified power to regulate international commerce to the office of the president. The belief that this would remove the problem of special-interest protectionism held true for the remainder of the 20th century and until 2018, when the centralization of power came back to bite the great cause.

Today Congress is statutorily impeded from stopping a continued march toward autarky, lest there appears some bipartisan legislation structured to take it back. The problem is that the Republican president has received almost no pushback from the Democrats against his trade policies; indeed, the leading contender for the Democratic presidential nomination, Elizabeth Warren, holds to a doctrine of “economic patriotism” that is not different in substance from Trump’s own.

You have to look hard to find good news in this poor excuse for a U.S./China trade deal, but there is this: there is no longer much dispute about the harm the trade war has caused everyone – everyone but the man who will claim to have won it.

Jeffrey A. Tucker is Editorial Director for the American Institute for Economic Research. He is the author of many thousands of articles in the scholarly and popular press and eight books in 5 languages, most recently The Market Loves You. He is also the editor of The Best of Mises. He speaks widely on topics of economics, technology, social philosophy, and culture. He is available for speaking and interviews via his email.  Tw | FB | LinkedIn

This op-ed was first published at the American Institute for Economic Research.

This entry was posted in Cross Post, Economics and economy, Guest Post. Bookmark the permalink.

45 Responses to Jeffrey Tucker: Trump Wins the Trade War. Everyone Else Loses

  1. stackja

    DT is President of USA.
    USA has been too generous to the the world. Red China isn’t interested in helping the USA. Why is DT viewed as wrong in looking after USA interest?

  2. John Brumble

    So I’m down at the voyeur club and Bob won’t bang his missus in front of us when Greg is there. Everyone misses out now. Sure, Greg was sticking his todger in Bob’s missus every chance he got, but this behaviour from Bob is just stopping everyone from looking. Look at this chart showing less bonking happening as a result of this decrease in voyeurism. Bob needs to ignore Greg taking unasked-for prods at Bob’s wife and just get on with the public shagging.

    PS, I don’t have a wife, so the club needs to keep hiring me a prostitute.

  3. Iampeter

    Why would the Trump administration proclaim this a victory when it actually seems merely to codify tariffs as policy?

    Same reason this entire post is going to fall on deaf ears on this website.
    Conservatives have no clue what’s going on. If Trump says “victory” then they will mindlessly accept this.

    It’s 2019 and conservatives have become the left of 1919, only without any awareness or plan.

  4. RobK

    Didn’t Trump offer bilateral removal of all tariffs?

  5. Ubique

    This is the 976th article in a row on the so-called ‘trade war’ I’ve read that fails to mention that the US is suffering a US$ 1 billion a day deficit in its trade with China. Any commentary that fails to mention this blue whale in the room is just drivel.

  6. Entropy

    Coordinating intellectual property rules in a way that would curb the ability of Chinese companies to reverse engineer technologies of American origin, an absurd hope that flies in the face of the very meaning of economic cooperation;

    Better to roll over then. Obviously. Swamp creature.

  7. mh

    Rather disingenuous to not have a pic of Jeffrey sporting a colourful bow tie.

  8. pete m

    Unique, if every country traded in equal amounts with every other country what would be the difference?

    Singapore has great trade deficits with many countries but seems to be doing ok? Why is that a bad thing?

    The currency manipulation is far more detrimental than a deficit.

  9. MACK

    Lots of criticism of the President but no alternatives given. The author’s allegedly ” an advocate of anarcho-capitalism” which sounds promising, so let’s hear more on that.

  10. Entropy

    The 70-year global progress toward freer trade

    Ben the first phrase is a risable joke. The only way you could say this with a straight face is if you are successful parasite feeding off the existing system.
    Ask any Australian farmer how good the existing “freer trade” is. truth is, from the EU to the USA and indeed China, the biggest silverback always gets first dibs.

    By the way, why the fuck is DFAT deluding itself any kind of FTA with the EU will really benefit Australia?The only real benefit will be to DFAT swampies maximising trips to Paris. Much more fun than dour London.

  11. Orange Man Bad. Everything that preceded Orange Man good.

  12. struth

    Conservatives have no clue what’s going on. If Trump says “victory” then they will mindlessly accept this.

    It’s 2019 and conservatives have become the left of 1919, only without any awareness or plan.

    Some more in depth political analysis by the eternally confused and bitter.

    Free trade isn’t free trade when only one side is practicing it.
    Of course the parasites of the rest of the world would love a no tariff USA, while maintaining theirs.

    The argument that it hurts the USA itself doesn’t face up to the reality that without tariffs the USA was failing before hand.
    You can’t argue that what he is doing is bad and ignore the economic plight of the USA prior to this.
    But again with libertarians, they read a theory once and it’s an immovable position regardless of real world scenarios.

  13. Tom

    Yet another think tank never-Trumper. Yawn.

    It’s incoherent gibberish from PreciousTheoryLand. Tariff bad. Open slather good.

    Jeffrey Tucker has never had a real job in his life — let alone in international trade with all its cheating and jostling for contracts. He’s a pie-in-the-sky libertarian for whom the real world is too grubby and imperfect for all his magnificent theory.

    PS: Hey Jeff: see if you can cadge an invite to a White House function and ask Trump about Say’s Law — how, in the real world, you can build companies that devise products that create demand. He has forgotten more about the subject than you will ever know.

  14. Iampeter

    Lots of criticism of the President but no alternatives given. The author’s allegedly ” an advocate of anarcho-capitalism” which sounds promising, so let’s hear more on that.

    This is spot on.
    I agree with his criticisms of Trumps policies but his alternative ideas would be no better or even worse.
    Just like I point this out about conservatives trying to criticise progressives, same criticism applies to “anarcho-capitalists” critical of conservatives.

  15. DaveR

    Two major things going on here.

    1/ Free trade, trade imbalance and tariffs.

    2/ Unrestrained intellectual property theft and copying

    The arguments are not the same for each.

  16. Tim Neilson

    Of course the parasites of the rest of the world would love a no tariff USA, while maintaining theirs.

    Fact check: true.
    An analogy is our “entertainment and the arts” sector. All our artistes thespians and literatti resolutely oppose US encroachment on Australian “culture”* but they’d all suck every dick north of the Rio Grande for a Broadway or Hollywood gig.

    [* By Australian “culture” they mean the steady stream of absolute rubbish that no sane Australian would go within a trillion light years of, but which keeps getting churned out courtesy of the taxpayers and the “arts” cartel.]

    The argument that it hurts the USA itself doesn’t face up to the reality that without tariffs the USA was failing before hand.

    Fact check: true. Obama’s America was a disaster. The Orange God-Emperor has vastly improved the situation of American workers. Sure, there are risks in his strategy, but the critics have no alternatives but sneering.

    But again with libertarians, they read a theory once and it’s an immovable position regardless of real world scenarios.

    Fact check: true. See virtually any comment on this site by Iamashiteater.

  17. StrayanDrongo

    How do you suggest the USA protect their IP against China? Seems nothing can be used as leverage – I see these tarrifs as similar to sanctions, a way to build leverage. If the USA can stop having its IP stolen, they will become substantially more wealthy and powerful, but I cant see this happening without leverage.

  18. How do you suggest the USA protect their IP against China?

    US companies (and any other) are giving away their IP by choosing to manufacture in China. It’s as simple as that.

  19. BorisG

    US companies (and any other) are giving away their IP by choosing to manufacture in China. It’s as simple as that.

    It’s consumers choice. They love cheap.

  20. pete m

    bemused – because no-one has ever stolen USA IP from the USA like ever eh? Lots of stuff has been taken with simple reverse engineering of products that were never manufactured in China.

    The big issue is the Chinese Govt let their companies do it and have a legal system in place that protects them.

  21. j.arimathea

    It seems to me that your poster is fighting a battle. Trump is fighting a war. How much cheaper would have been a hamburger if the USA had not invested its wealth in fighting Japan and Germany? Probably several cents. History is the signal, politics and journalism are the noise.

  22. bemused – because no-one has ever stolen USA IP from the USA like ever eh? Lots of stuff has been taken with simple reverse engineering of products that were never manufactured in China.

    Some yes, but with most of the complex electronics and associated firmware/software, it’s because the products are fully made in China.

    You choose to manufacture in China, you play by their rules.

  23. Suburban Boy

    While robbery is better than assault …

    Actually, no: by definition a robbery is a theft combined with an assault. So how is it better to be robbed rather than just stolen from?

  24. JB of Sydney/Shanghai

    Hope this is not too long, but it is interesting reading.
    A quote from Pony Ma..”Ideas are not important in China, execution is.”

    https://www.fastcompany.com/3029119/tencent-the-secretive-chinese-tech-giant-that-can-rival-facebook-a

  25. Ƶĩppʯ (ȊꞪꞨV)

    the trade war is about forcing the supply chain out of communist hands. they will never honour any agreement. the chinese population is lame and trained not to question or be creative

  26. bespoke

    trillions in productivity

    Bespoke baristas?

  27. RobK

    Trump Wins the Trade War. Everyone Else Loses
    Tucker has discounted any value of “watch and learn”. It’s not over yet.

  28. Bill H

    Some of you need to read the following:
    https://theconservativetreehouse.com/2018/11/02/eagle-vs-red-dragon-continues-larry-kudlow-discusses-conflicts-with-china/

    Trump is playing China by its rules and the Chinese do not like it one bit. Trump understands what needs to be done to rein Chinese ideas of global power and rule. The trouble with most global elites and businesses and their hangers on, is they only understand profit and making money and not the long game or having a future.

  29. Ƶĩppʯ (ȊꞪꞨV)
    #3183662, posted on October 14, 2019 at 11:55 am

    the trade war is about forcing the supply chain out of communist hands. they will never honour any agreement. the chinese population is lame and trained not to question or be creative

    Exactly. Trump is shifting the supply chains and also pressuring China to stop using North Korea as an attack dog.
    Across the board tariffs are not good for anybody. However, once supply chains have been diversified, then targeted tariffs can be used to punish recalcitrants like China. The goods effected can be procured from elsewhere so that consumers aren’t hurt.

    These “tariffs are bad” people are at the same intellectual level as the “guns are bad” people.
    Just like guns can be a force for good, so can tariffs be a force for good.

  30. RobK
    #3183535, posted on October 14, 2019 at 9:12 am

    Didn’t Trump offer bilateral removal of all tariffs?

    Yeah he did. He cannot be flawed here.

    The G7 or G8 (can’t remember which one) didn’t bite.

    The US needs external trade less than everyone else, so they can have trade reducing tariffs for everyone else.

    I have nothing wrong with Trump’s mindset “well, no free trade, so it’s going to be on our terms” but overall, tariffs are nothing more than another tax. They’d still be better off by abolishing tariffs.

  31. Across the board tariffs are not good for anybody.

    They’re actually the best kind of tariff.

    These “tariffs are bad” people are at the same intellectual level as the “guns are bad” people.
    Just like guns can be a force for good, so can tariffs be a force for good.

    This is not only completely false, but the analogy is also wrong.

  32. Judge Dredd

    This is the same Jeffrey Tucker who thinks Trump is a fascist.
    https://www.newsweek.com/donald-trump-fascist-403058
    Why would anyone bother listening to a word this clown-tie wearing cuckservative said.

  33. struth

    These “tariffs are bad” people are at the same intellectual level as the “guns are bad” people.
    Just like guns can be a force for good, so can tariffs be a force for good.

    This is not only completely false, but the analogy is also wrong.

    It’s completely bloody correct, but Dot’s read a book, doncha know!
    FMD.

  34. Chris M

    Is Frank Dot? Bruddy ell.

    Haha you couldn’t tell?

    This Tucker chap does appear to be a never-Trumper, the whole article is based on one step the the process. and as RobK mentioned President Trump has offered full free trade with removal of all tariffs. for some reason that didn’t seem a big feature of the article now did it. Orange man bad, always.

  35. Tel

    Dot has always been very Frank.

  36. Tel

    Trump declares trade war: reduce US corporate tax (i.e. reduce the internal tariff that makes it more difficult for Americans to trade with other Americans) and swing this across to imposing tax on Chinese imports (i.e. increase the the external tariff that makes it more difficult for Americans to trade with Chinese).

    End result? Fairly close to revenue neutral, in as much as Federal tax receipts have grown at a lower rate under President Trump than any recent President, not counting situations where they were right in a recession. You want to call that “robbery is better than assault” when he takes LESS of what people earn than the other Presidents? BTW: the President doesn’t entirely set tax policy, but has some influence in the process. Trump pushed hard for tax cuts early in his term.

    https://fred.stlouisfed.org/graph/fredgraph.png?g=p9Ho

    China attempts a retaliation: Oh yeah?!? Well if you won’t buy our steel and widgets then we will … ahhh, we won’t eat that’s what! Take that you big bully, China doesn’t want your food.

    Trump comment: This might be a bit easier than I expected.

    China comes back two years later: Come to think of it, we do want to eat … your food is OK after all … we will buy it.

  37. Hasbeen

    What the hell is good about free trade?
    It has lost us our industry, & the skills to make most of the stuff we need to be able to make to be an independent country.

    If ever shipping is cut we would quickly grind to a halt.

  38. Faye

    The Rise of China was paid for by America, namely Middle America whose manufacturing and jobs went to China courtesy of the globalists. America turned into a rust bucket whilst China built unoccupied cities. No previous American President of modern times ever put a stop to it.
    China has to import most of its food and resources making it very vulnerable. All that President Trump wants is for China to have a good economy by trading fairly, no stealing highly valuable Intellectual Property and commercial secrets and no state-subsidizing of its manufactured products. For decades America had an annual $500 billion trade imbalance with China. At last President Trump is putting a stop to it.

  39. Cynic of Ayr

    believe that they will reduce the “trade deficit,” an accounting fiction that is not only miscalculated but is irrelevant even if it were accurate
    Guest Author, where the hell do you think China got the money from to build it’s military, and the China Sea Islands?
    The fucking Tooth Fairy?
    If one country is paid more for goods than another country, the first one ends up with all the money. Even a child know that!

  40. Zatara

    Never mind that every credible source says……

    And you blew any credibility your piece might have had right there.

    Standard leftist wowser tactic ranking right up there with the classic “97% of scientists….”.

  41. struth
    #3184047, posted on October 14, 2019 at 5:06 pm

    These “tariffs are bad” people are at the same intellectual level as the “guns are bad” people.
    Just like guns can be a force for good, so can tariffs be a force for good.

    This is not only completely false, but the analogy is also wrong.

    It’s completely bloody correct, but Dot’s read a book, doncha know!
    FMD.

    Literally millions of years of man hours of research has proven over and over again that free trade is the best policy of all. It is indisputable, like the fact that atoms are made of protons, electrons and usually neutrons. Or more simply: water is wet and you can’t get rich by imposing taxes.

    Trump, being a smart guy, offered free trade, zero tariffs, but the other states were too protectionist to even consider it.

    Trump read it in a book too, he went to Wharton Business School.

    Stop being low class, uneducated dumbos and actually read one for once.

  42. Cynic of Ayr
    #3184705, posted on October 15, 2019 at 10:07 am

    believe that they will reduce the “trade deficit,” an accounting fiction that is not only miscalculated but is irrelevant even if it were accurate
    Guest Author, where the hell do you think China got the money from to build it’s military, and the China Sea Islands?
    The fucking Tooth Fairy?
    If one country is paid more for goods than another country, the first one ends up with all the money. Even a child know that!

    Trade isn’t a zero sum game. The most likely explanation for a current account deficit is that your money supply is running too hot relative to other nations. Which is why “China is a currency manipulator” is nonsense. The US is manipulating its own currency, destroying their own purchasing power more quickly than her trading partners.

    The trade deficit is to do with accounting for gold specie flow between banks prior to the end of the gold standard. It ensured that prices aligned with trade flows.

    The rise of China economically may be part smoke and mirrors. Their national accounts are questionable and they have an economy of over one billion people and have built up their military over 70 years, largely from Soviet aid in the first 23 years.

    China doesn’t “get all the money” because the US pays more. The US pays more because they can’t produce the same goods at the same price as China, and vice versa. China wants our coal and China wants US made soybeans and CPUs.

    That’s why anyone, from neighbours to nations even bother trading at all; trade is not costless.

  43. Zatara

    Communist slave labor is an economic tool/weapon. The Chicoms have been using it against the West ever since Chicoms were invented.

    Tariffs are also economic tools/weapons. Trump is using them to battle the Chicoms.

    Would the world be better without either? Yes. Meanwhile, I support tariffs.

  44. If you really don’t like China, never buy Huaiwei or Apple; get a Samsung.

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