Jonathan Kraut: Let the trade wars begin

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One can make the argument that leadership starts with finding common needs, moving others towards meeting those needs, and creating trust through keeping one’s word and acting as promised.

The President has launched yet another salvo of global economic destabilization by implementing the other day tariffs on imported steel and aluminum. Even our closest economic partners, Canada, Mexico, and the European Union will be hit hard by taxing these imported materials.

Blowing out the North American Free Trade Agreement (NAFTA), pulling out of the Paris Climate Accord, and bitterly criticizing China for providing the inexpensive goods we buy apparently was not destabilizing enough.

Thus, the Trade Wars have begun and every person on this planet is about to spend more for less as a result.

Americans saved tons of money with a supply of goods less expensive from manufacturers overseas. Seems Trump doesn’t care if the consumer pays more for everything in order to protect some steel mills and mining operations.

What Trump’s action portend is higher prices here and around the world, uncertainty that the U.S. will keep its word and honor its agreements, and a few factory and mining executives making excessive bonuses.

We should we never once again become a sweatshop, manufacturing, cheap labor economy. We should strive to continue to enhance our economic prowess which is by leading the world with innovation, new thinking, and technology.

A hallmark of the Republican platform has been that free trade is good. This means moving in less expensive quality goods into our economy and selling our quality goods overseas without export taxes or tariffs. Free trade, the Republican Party has for a generation argued, stabilizes the world economy and everyone benefits as fair market values determines price.

One excerpt from the 2016 Republican Platform reads like this:

“International trade is crucial for all sectors of America’s economy. Massive trade deficits are not. We envision a worldwide multilateral agreement among nations committed to the principles of open markets, what has been called a “Reagan Economic Zone,” in which free trade will truly be fair trade for all concerned.”

Using the trade deficit is an unsophisticated and simplistic way to view our economic success. Generally, countries who rely on cheap labor and underpay their employees generate a trade surplus.

While it is true we import in value more than we export, the cheaper costs of goods not only improve the quality of our lives but allows Americans to spend their extra income here at home. I guess Trump did not read the last sentence which lauds free trade, meaning lessening or eliminating the kind of tariffs Trump has announced.

Another except reads “We need better negotiated trade agreements that put America first. When trade agreements have been carefully negotiated with friendly democracies, they have resulted in millions of new jobs here at home supported by our exports.”

The first argument here that we need to put America first at the cost of the world economy ignores that when the world economy bends to our will our economy bends with it. The second remark about “negotiated with friendly democracies” I assume refers to NAFTA, a treaty which we have broken and please point out to me these “millions of new jobs.”

While Trump comes down hard on most nations, he is still going soft on China, and of course very, very soft on Russia. I find this odd although the Republican Platform clearly attacks China. “We cannot allow China to continue its currency manipulation, exclusion of U.S. products from government purchases, and subsidization of Chinese companies to thwart American imports.”

Have you noticed any attempt to impede Chinese imports of late?

The best part of the 2016 Republican Party Platform outlines Trump’s favorite tactic, which is to walk away from negotiations and then come back and pretend something good came out of this childish behavior.

“Republicans understand that you can succeed in a negotiation only if you are willing to walk away from it.”

Kim Jong Un of North Korea, Putin of Russia, and Xi Jinping ruling Communist China all expect at the last-minute “Trump will walk away and with no substantive gain he will come back to the table and pretend new progress was a result” ploy.

For the next few years I suggest we observe if prices go up or down, if trust in America is bolstered or is lost, and if our full employment economy continues on its current path.

Looks like 2020 will be a Democratic Party year.

Jonathan Kraut directs a private investigations firm, is the CFO of a private security firm, is the COO of an Acting Conservatory, is a published author, and Democratic Party activist. His column reflects his own views and not necessarily those of The Signal.

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