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The trade war’s winners don’t include us….. – Publications – AEI

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AEI The trade war’s winners don’t include us….. …. is the title of an op-ed in today’s Wall Street Journal by Robert B. Zoellick (former World Bank president, U.S. trade representative and deputy secretary of state). Here’s the part of the article where Zoellick outlines five adverse effects of Tariff Man’s trade war (bold added): President Trump’s trade policy represents a fundamental break from the past 85 years. It’s more than a matter of aggressive negotiating tactics. Not since Herbert Hoover has a U.S. president so openly embraced trade protectionism. In his inaugural address, Mr. Trump proudly proclaimed himself a protectionist; we should now believe him. His assertion that he is a “tariff man” should convince any holdouts. What have been the effects of Mr. Trump’s return to

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AEI
The trade war’s winners don’t include us…..

…. is the title of an op-ed in today’s Wall Street Journal by Robert B. Zoellick (former World Bank president, U.S. trade representative and deputy secretary of state). Here’s the part of the article where Zoellick outlines five adverse effects of Tariff Man’s trade war (bold added):

President Trump’s trade policy represents a fundamental break from the past 85 years. It’s more than a matter of aggressive negotiating tactics. Not since Herbert Hoover has a U.S. president so openly embraced trade protectionism. In his inaugural address, Mr. Trump proudly proclaimed himself a protectionist; we should now believe him. His assertion that he is a “tariff man” should convince any holdouts.

What have been the effects of Mr. Trump’s return to protectionism?

1. The U.S. has lost markets for exports because it dropped out of deals like the Trans-Pacific Partnership. The TPP lowered trade barriers in Asia for others, but not, thanks to Mr. Trump, for the U.S. The European Union has gained preferential access to Japan and other markets. China has lowered its average tariff for others to 6.7%.

2. The tariffs have provoked world-wide retaliation, hurting America’s most productive businesses and farmers. For Americans, China boosted its average tariff to 21.8%. Congress now doles out tens of billions of dollars to U.S. farmers to compensate for lost sales. U.S. exporters will pay a price for years because of supply-chain shifts.

3. The president’s protectionism costs American businesses and families. The administration raised taxes on 15% of U.S. imports even before the upcoming tariff increase on almost all Chinese goods. Mr. Trump started by raising tariffs on intermediate goods—on aluminum, for example, even though 97% of U.S. jobs in the sector use aluminum as an input. The Peterson Institute for International Economics estimated that the cost paid by steel users for each steel job gained by tariffs was about $650,000. As U.S. firms pay more for inputs, some are regretfully moving operations abroad to remain competitive. In two years, the president has increased the average tariff on Chinese goods to 24%, up from an average of 3%. Americans will end up paying these in the form of higher prices.

4. With increased costs and uncertainties about doing business in the U.S., foreign direct investment is falling. This suppresses job and wage growth and disrupts international supply chains.

5. President Trump’s trade policy ignores how the U.S. has used free-trade agreements to write pro-U.S. rules for cutting-edge sectors such as medical and financial services, intellectual-property rights, and data access and security. Trade agreements also allow the U.S. to establish best practices in anti-corruption laws, border procedures and transparency. Because U.S. businesses have been leaders in innovation, past American negotiators have been at the forefront of international rule-making. This president disdains rules; he acts as if governments control purchases like in old-style mercantilism.

Mr. Trump counters that these costs are the price Americans must pay for his deal-making. But his record is pitiful.

…..

Amazingly, even amid such a record of failure, the Washington Post last month referred to the administration’s “mixed success” on trade. What success? Even by the president’s own measure, the U.S. trade deficit, he’s losing. If the U.S. slides into recession, his policies will make conditions worse. Congress needs to wake up and push back. Business executives should support them before the trade smashup leads to an economic breakdown.

Bottom Line: As the op-ed’s sub-title appropriately asks: “Lost foreign markets, retaliation, higher prices, falling investment. Where’s the upside?” Or in other words, “Where’s the winning?”

The trade war’s winners don’t include us…..
Mark Perry

Mark Perry
Mark J. Perry is concurrently a scholar at AEI and a professor of economics and finance at the University of Michigan’s Flint campus. He is best known as the creator and editor of the popular economics blog Carpe Diem. At AEI, Perry writes about economic and financial issues for American.com and the AEIdeas blog.

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