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How Trump's dog deals will damage global trade with the US
Some commentators are hailing Trump’s trading savvy. Are they right?
Trump’s EU deal will help blue-collar workers.” So believes Nicole Russell, a columnist for USA Today, “Critics can hate Trump’s personality all they want,” she says, “but the president’s ability to forge trade deals that favour American workers shouldn’t be discounted.” The gist of Russell’s argument is that the deal includes requirements for Europe to buy energy and military equipment from the US. This kind of stuff is made by people wearing hard hats or wielding power tools – that is, by “blue collar” workers.
Russell must not have much free time. If she had, she might have thought this through a bit further. In the first place, why should US government policy favour one group of workers (blue collar) over another group (white collar)? In the second place, the tariffic negotiations also favour very big businesses – oil and defence. How is that a plus for the guys who mostly work for small businesses?
In the third place, the same policies that will supposedly favour US industry output with a 15% tariff on imports also call for taxes of 50% on steel and aluminium, which must be paid by US carmakers and ultimately by car buyers. What good does that do the guy who needs wheels to get to work?
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In the fourth place, who does she think pays for the tariffs? Tariffs are essentially a tax, paid by American importers – and then passed along to US consumers. White collar, blue collar or no collar at all – they’re all going to pay. Who else would? Dogs don’t pay tariffs. Inanimate objects don’t. In the end, all government revenues must come from the people.
Trump has, says The Wall Street Journal, “achieved the remarkable: raising tariffs by more than the notorious Smoot-Hawley Tariff Act of 1930, while – it appears – avoiding the destructive trade war that followed”. Including the deal struck with the EU, the US will impose an effective tariff rate of about 15% on its trading partners, by far the highest since the 1930s, according to JPMorgan Chase.
But will the deals stick? Trump’s big trade deal with Japan is already falling apart, says The New Republic. A report from the Financial Timesshows that US and Japanese officials aren’t seeing eye-to-eye on what exactly was agreed. Mireya Solís of the Brookings Institution told the FT “both sides made promises we can’t be sure will be kept” and “there are no guarantees on what the actual level of investments from Japan will be”. It’s not exactly a done deal with Europe either. Fred Hutchison, CEO of LNG export group LNG Allies, told Energy Intel that both sides can do a lot to encourage additional commercial deals in the LNG sector, but “neither government has any control over what happens commercially”.
Trump got his deals thanks to leverage over other countries’ deep economic and security ties to the US, says the WSJ. But in the coming years, “that leverage will wane as those countries cultivate markets elsewhere and build up their own militaries. The resulting international system will be less dependent on the US – and less stable.”
The markets are less stable too. Already teetering at the tippy-top of their trading range, stocks have become even more overvalued. More importantly, Trump has raised the cost of trading with the US. He must also have increased the desire not to trade with it at all.
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Bill Bonner is an American author of books and articles on economic and financial subjects. He is the founder of Agora Financial, as well as a co-founder of Bonner & Partners publishing.
