Putting Trump’s Trade Bombast to the Test

https://www.nytimes.com/2018/04/06/opinion/trump-trade-china.html

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President Trump’s recent threat to escalate his trade skirmish with China into a full-scale trade war is a foolish gambit with little historical precedent. It is also hard to take seriously, given how quickly Mr. Trump changes his mind and how rarely and clumsily he tends to follow through on tough talk.

Mr. Trump said on Thursday that he wants to slap tariffs on an additional $100 billion in Chinese imports in response to Beijing’s plan to retaliate against an earlier American proposal that was aimed at $50 billion in Chinese goods. The president also said he was seeking ways to protect American farmers hurt by Chinese retaliation — a move that could result in fresh trade fights with other countries as they seek to defend their farmers from subsidized American grain.

If you’re confused or shocked by these announcements, you are not alone. Most experts say that a trade war between the world’s two largest economies would hurt American businesses, farmers and workers whose profits and livelihoods depend in part on commerce with China. That’s probably why the Standard & Poor’s 500-stock index fell more than 2 percent on Friday.

Historians say there is little precedent for Mr. Trump’s direct and forceful targeting of China. The last time a president used trade policy to hurt specific nations was when Thomas Jefferson and Congress restricted trade with Britain and France in the early 1800s, said Douglas Irwin, an economics professor at Dartmouth College who recently published a history of American trade policy. Those trade battles ended up leading to the War of 1812. “We haven’t seen anything like this in centuries,” he said.

Even the infamous Smoot-Hawley tariffs that Congress enacted in 1930 were put in place to protect struggling domestic industries and farmers, not to penalize specific countries. Of course, those tariffs did not quite work as intended, because other countries moved to shield their own economies by raising tariffs, too. Experts now believe those trade policies probably exacerbated the Great Depression.

Mr. Trump’s bombast is so odd that it has scrambled the usual politics of trade. Many Republican lawmakers, including those who support him on most issues, have come out strongly against him on trade. For example, Pat Roberts, a senator from Kansas, said the impact of the president’s threats against China was “disconcerting,” and Senator Charles Grassley of Iowa said American farmers and ranchers “would bear the brunt of retaliation” by China. At the same time, Mr. Trump has won praise from some Democrats, like Senator Sherrod Brown of Ohio, who are opposed to many other Trump policies.

The big question now is what Mr. Trump will actually do. Some officials — like Larry Kudlow, the former cable-TV pundit who recently became the top economic adviser in the White House — are trying to tamp down talk of a trade war, and say the administration is using the threat of tariffs to get China to the negotiating table. To Mr. Kudlow’s way of thinking, the Trump strategy is similar to how President Ronald Reagan got Japan to voluntarily limit exports to the United States in the 1980s by threatening to impose steep tariffs.

There is a strong case to be made that the United States needs to do all it can to get Chinese officials to change economic policies that have hurt American businesses and workers. For example, officials in Beijing have forced foreign businesses to transfer technology to local joint-venture partners as a condition of doing business in China. China for many years also artificially depressed the value of its currency, the renminbi, against the dollar to make its clothes, electronics and other products more affordable to American consumers.

But it is hard to see this administration striking an effective and comprehensive deal with China. That’s because Mr. Trump and his officials seem incapable of putting in the time and hard work required to hammer out such agreements with other countries or political adversaries. They have also displayed little of the finesse and diplomacy needed to strike international deals.

Consider, for example, the trade deal the administration struck with South Korea last month. Experts say that it will do little to increase American exports to that country and will only modestly reduce imports to the United States. A day after formally announcing that agreement, Mr. Trump said he might delay it in an effort to pressure North Korea to reach a deal on its nuclear weapons. That about-face would no doubt make other countries reluctant to reach an agreement with this president — they could never be sure if a deal was a deal.

Or take the North American Free Trade Agreement, which the Trump administration has been renegotiating for months. American officials have apparently walked back from some of their most aggressive demands in recent talks, The Times recently reported. Those changes might make it easier to get agreements with Canada and Mexico. But they could leave many domestic groups disappointed with Mr. Trump — as were many of the workers at Carrier whose jobs he claims to have saved early in his presidency but who were eventually laid off anyway. Some Democratic lawmakers, American labor unions and other groups that theoretically support Mr. Trump’s tougher trade policies are worried that their priorities, like a provision requiring Mexico to improve labor rights for factory workers, will not be included in a new trade agreement.

Mr. Trump has dramatically raised the stakes on trade with his brash pronouncements about tariffs. But there’s little cause to hope he and his team can deliver the big economic gains that they argue can come only from such a combative approach.