As baby boomers (the oldest of whom have lived through as many as thirteen presidents), we suddenly find ourselves in uncharted territory, as President Trump proudly ignores and even flouts the norms of his predecessors. In this Boomer Opinion piece, BoomerCafé co-founder and executive editor Greg Dobbs looks at the impact of that attitude on the American economy.
I don’t get it. I just don’t get it.
President Trump is willing — in fact from the looks of things, President Trump is eager — for a trade war. Consider his tariffs, his disengagement the first week in office from the Trans-Pacific Partnership (the 11 nations we abandoned, representing a market of half-a-billion people, just last week formalized their tariff-cutting trade alliance without us), his whole quixotic crusade for America First in a world where American supremacy is neither totally unchallenged anymore nor thoroughly respected.
What I don’t get is, why? If our economy were going down the tubes and we were desperate, I could see it. A last-ditch effort. A defensive counterpunch.
But does anyone see us going down the tubes? To the contrary, Mr. Trump inherited an economy on the upswing. And maybe partly to his credit, the upswing by and large has continued. At least in the short term, tax reform has put some wind in our sails, although the long term still portends higher deficits.
Look at unemployment. The president protests about losing jobs to foreign competition, but that’s fallacious on two fronts. First, the most authoritative study of the impact of foreign competition on American jobs, put out a little more than a year ago by Ball State University, concluded that 88-percent of U.S. workers who have lost their jobs were not replaced by cheap labor overseas. No, they were replaced by robots. In other words, automation. The study cited General Motors, which once had 600,000 factory workers but today has just a third that number … yet turns out more cars and trucks than ever.
Second, at the beginning of this year, unemployment in the U.S. just last month stood at its lowest point since the start of the new millennium: 4.1-percent. Compare that to almost 10-percent ten years ago during the recession. Another way to look at it is this: last month alone, the economy added 313,000 people to payrolls. The average American worker by the end of last year earned $24.57 per hour, up 40-cents an hour from the year before. We’re on a roll.
But we need a trade war, which might put that in jeopardy?
Look at the stock market. President Trump crows about the record levels it has reached on his watch. You could argue that he has less to crow about now, because once he announced his intransigent commitment to tariffs, it began to tank. But still, compared to when he took office, it has climbed roughly 25% and still is in record territory (although credit where credit is due: the market rose 150-percent under the watch of President Barack Obama, which gave Trump a lucky start).
But with so many Americans depending on the stock market for their nest eggs, we need a trade war?
Look at inflation. It has been at what economists call a “break-even” point ever since the recession. In layman’s terms, that means inflation has been almost inconsequential. But with tariffs, that changes. Tariffs might ultimately spur new production within our shores but that’s far from a sure thing and in the meantime, tariffs mean higher prices. Higher prices for anything in our country made from aluminum or steel, from a soup can to a car. And fewer items sold for export, once other nations slap their own retaliatory tariffs on American products (and you can bet they will!). You can figure out the impact of that on our economy for yourself.
But a trade war is what we want?
Sure, for 30 years we have spent more on imports than we make on exports and we have a growing trade deficit right now. At more than $56-billion a year, it is the highest it has been in a decade. Inarguably it would be good for our economy if that figure came down. But the plurality of the trade deficit is due to the overheated export economy in China. Despite the president’s almost across-the-board application of tariffs, that isn’t going to go away.
Maybe the most comprehensive figure about the state of the American economy is this: it grew at the end of last year by 2.5-percent. That’s better than the year before. And better than the year before that.
But the president says, “I like conflict.” And just like that, he welcomes a trade war.
I like a healthy economy better than I like a hazardous conflict that puts it in peril. So I don’t get it. Or, considering the unanchored, uninformed, and sometimes unhinged behavior of Donald Trump, maybe I do.
Check out Greg’s latest book, Life in the Wrong Lane.