President Trump has triggered what could be “the largest trade war in economic history,” the Chinese Commerce Ministry warns. Trump is threatening tariffs on $500 billion in Chinese goods, virtually all of our imports from China.
He’s also hit Mexico, Canada and our European allies with punitive tariffs. This week, the president of the European Community will meet with Trump in what is described as a “last ditch” attempt to avoid tariffs on car imports. Inevitably, these countries have retaliated with tariffs on U.S. goods.
Trump says “trade wars are good, and easy to win,” but this could get messy. Needless to say, the free trade lobby is up in arms in protest. Light too often gets lost in the heat. As the rhetoric and posturing gets more extreme, a little common sense is needed. First, the U.S. has been running unsustainably large trade deficits for years — as high as 6 percent of GDP in 2006-2007, down to 2.4 percent OF GDP last year.
Much of these deficits come from internal transfers within American multinationals, with companies moving jobs abroad to take advantage of cheap labor or poor environmental standards and then shipping the products back here. This has devastated communities where the plants closed and given CEOs a club to threaten workers with, contributing to wages losing ground and to obscene levels of inequality.
Addressing U.S. trade deficits and their effects is long overdue. Second, Trump is a lousy general for the war that he’s started. Our trade deficit with China is the largest bilateral deficit in history, nearly $376 billion last year. A sensible general would have engaged our allies to join in challenging China’s mercantilist trade policies that trample global trade rules, from manipulating their currency, to stealing or extorting technological secrets, to suppressing worker rights and environmental protections.
Instead, Trump has decided to open fire on everyone — ally and adversary — at the same time. Third, Trump seems to get why we are in this hole. He says prior U.S. negotiators were stupid, cut bad deals and that other countries are stealing us blind. In fact, U.S. negotiators — virtually all drawn from global corporations and banks or their law firms — rigged the rules to serve their interests. These agreements work great for the CEOs, the multinational banks and corporations. That they shafted American workers was intentional, not an oversight. Tariffs are a crude club, one that invites retaliation. Trump’s use of them reveals that he sees the U.S. as weak, not strong.
A sensible strategy would have totally different priorities. It would start by guaranteeing greater security to U.S. working people in a global economy: Medicare for all, free college and advanced training, a living wage, a full-employment economy. That economic bill of rights should be bolstered by a cutting-edge industrial policy designed to ensure the U.S. leads in the emerging markets of the future.
That would include public investment to rebuild our decrepit infrastructure, from transportation to water systems to public education and training. It would include investing in advanced research and technology. It would lead in driving the green industrial revolution in alternative energy and energy efficiency.
Trump’s tariffs won’t succeed in getting the Chinese to abandon their industrial policy, but we surely could compete if we organized our own. These internal reforms should be accompanied by efforts to rewrite the rules of the global economy that have directly contributed to the widening gulf between rich and poor.
The U.S., the author of most of those rules, should lead the effort, with negotiators who represent the vast majority, not the executive suite. According to reports, Trump’s negotiators in the NAFTA talks with Mexico and Canada have pushed sensible reforms — an end to the investor-state dispute settlement system that gives corporations a privately rigged legal system, a $17 minimum wage across countries in the automobile sector, better rules and enforcement for union organizing. For these reforms to survive, Trump will have to overcome the conservatives in his own party, which seems very unlikely. Trump is a bombastic showman, with a conman’s sense of what sells.
The trade wars help distract from the scandals that dog him at home, and let him drive the headlines while posturing as the champion of working people. He’s addressing a problem that is real, but he displays neither the understanding of what needs to be done nor the instinct for the strategy needed to achieve it. And the very people he claims to be helping are likely to pay the highest cost for his follies.
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