Boomer Opinion: A trade war, really???

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.

Greg Dobbs

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.

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4 Comments

  1. If one were able to take a close look at Trump’s real business portfolio, as well as his still unreleased income taxes, most (but not all) people would ‘get it’. As P. T. Barnum said, “There’s a sucker born every minute.” Trump is a showman, a faker, a con artist, a manipulator, and a huckster who loves living on the edge and surrounding himself with chaos and smoke and mirrors. His followers love him for all of those attributes, simply because he is not from the old school political pot, where everything is done in secret behind closed doors. Much of the political ‘old school crowd’ are corrupt in a small or big way, but it’s all hidden. Trump may also be corrupt on one level or another, but it’s right there for all of us to see, and if we don’t already know about his latest ‘madness du jour’ , he’ll Tweet the world to let everyone know of his latest escapade! He is showing Washington D.C. off for what it is, and laying it all on the table. Love him or hate him. He is what he is. And he could either screw up and destroy this country, or he could screw up and make it better. If it’s the latter, it won’t be because of any intelligence and political skill on his part. It will be because he’s just crazy and daring enough to do all of the unthinkable things he does that make him so entertaining and newsworthy. As one of Betty Davis’ movie lines went — “It’s going to be a bumpy ride!”

  2. Excellent piece, thanks for spelling it out so clearly.

    Looked at from the other side of the pond (Europe), I don’t get it either. Weird behavior, clearly self-mutilating. And Trump is attacking his closest and historic allies, Europe, and in particular Germany – complaining loudly about unfair competition, car dumping, in short, that Europeans have slapped high tariffs on every American import.

    Yet that is absolutely not the case. Tariffs average 2.5% in Europe and 25% in China. The real culprit here is China, not Europe. Plus China will not allow American (or for that matter European) businesses to set themselves up in China without a local partner, a joint venture where the Chinese have the upper hand.

    Yet, Trump with his tariffs on steel and aluminium, is hitting Europe. This is stunning. And you can expect Europeans to retaliate. They are talking of hitting things like food, clothes, cars. And no doubt they will.

    A trade war is always stupid. And in this case it’s also bizarre – as you say, so unnecessary. Probably, as Friedman recently pointed out in the NYT, this strange misunderstanding of where tariffs between the US and Europe really sit can be traced to the bad economics of Trump’s economic adviser Navarro. He may have earned a Ph.D but he clearly understands zilch about trade. It seems that (at least that is what can be deduced from the economic “white paper” in Trump’s campaign) that he has mistaken the European VAT tax system for a tariff when it’s really a sales tax (VAT ranges from 19% to 35% for luxury goods and is common across Europe).

    As such everyone pays VAT at the point of sales, Americans exporting to Europe but also European producers. Clearly not a tariff.

    Then, if you look at how Trump is treating China, you really need to wonder. The first thing he did when he got into office was to scrap the TPP which was a trade agreement with all of the US’s Asian partners minus China: It was a brilliant way to circumscribe China and push it into a corner. And Trump goes and destroys it! Now, the TPP has been revived minus the US and from what I read, it has invited China to join it!

    How much more stupid can this get? Over here, in Europe, we are all like you. We just don’t get it!

  3. Our President is not incompetent in economics, law, international trade, diplomacy, leadership, regulations, domestic policy,

    1. Michael,
      Is your comment maybe a stumble on the use of double negatives? I doubt if even Trump’s red hat wearing hard core following would go so far. They know he’s flawed but as a former reality show star and “one of them,” they cut him slack.

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