The Trade and Tariff Trumpster Fire

I've been searching high and low for sources of solace about the state of global affairs with Trump in the White House. They are depressingly hard to come by. I've found a sliver of solace in, believe it or not,... trade policy.


Trump's recent performance at the G7 meetings in Quebec coupled with his overt affections for thugs like Kim Jong Un relative to long-standing U.S. allies are depressing enough. But the debacle unfolding as a result of Trump's policy of "no tolerance" along the U.S.-Mexican border represents a new low point. Migration is a hideously complicated issue all over the planet. But the lack of compassion coupled with Trump's willingness to deploy the kind of dehumanising, scapegoating rhetoric reminiscent of the interwar years is profoundly unsettling.

A lot of people are spilling buckets of ink trying to make sense of this madness and sort through where all of this chaos might be headed, preferably somewhere other than oblivion. Among the efforts to understand what sort of damage Trump has done is last week's Economist. In their briefing, the Economist outlines three basic camps about Trump on the eve of his inauguration in January 2017: 1) outright despair. 2) "Yes, but..." meaning Trump is trouble but this is what the Founding Fathers planned for and one of the reasons the U.S. Constitution remains the world's oldest written constitution. Moreover, they say, Trump's abhorrent rhetoric far outstrips any lasting damage he will be able to exact. Trump will eventually depart and rationale American leadership will come back. 3) An openness to any successes Trump might be able to pull off by being so far outside the box. Indeed, this kind of optimism argues that Trump's threats to the postwar order could amount to transforming lemons into lemonade. The postwar political and economic order, this line of reasoning holds, was creaking and in need of a shake-up. Trump may be a lot of things (or not), but the chaos he creates may be what the global order needs to set itself right. My read of the Economist's punchline is there's plenty of reason to fall into the "outright despair" camp.

As best as I've tried to find rays of optimism, I end each day mostly in the despair camp and see any short-run "wins" by Trump as undermining the long-term interests of nearly everyone; those who voted for him, America's traditional allies, and the citizens of increasingly thuggish regimes emboldened by America's abdication of leadership. Pyrrhic victories at best.

There have been similarly depressing efforts to tease out Trump Doctrine. As I have written about elsewhere in this blog, I generally think presidential doctrines are more of a preoccupation of academics than real guides as to American policy. I think this is especially true of the Trump Administration. A recent piece in The Atlantic by Jeffrey Goldberg has gotten a lot of attention lately for it's take on Trump Doctrine. In part, it depicts Trump as having so much disdain and contempt for nearly all conventions in American politics and foreign policy that his default position is to run head-strong into those conventions with anything that's diametrically opposed to them. Goldberg describes presidential aides articulating a "We're America, Bitch" outlook on those positions, an outlook that assumes few consequences in the aftermath of Trump's actions.

This is not a governing doctrine worthy of the presidency. Indeed, it's barely a doctrine at all. If you are in the "yes, but..." or "openness to Trump's successes" camps, you might be tempted to borrow from Joseph Schumpeter and argue that there could be some "creative destruction" in all of this. The problem is that there's no "creative" in anything Trump is doing. Using "We're America, Bitch" as an operating lens assumes an appreciation of American history, its institutions, or its role in the world Trump will never have.

Two Thumbs Up for Trump

I think the ugliness Trump has displayed around immigration is most revealing of who he really is; a narcissistic, racist thug who surrounds himself with sycophants willing to indulge and support his impulsiveness. The poster-boy for that is Vice-president Pence. I don't expect anything coherent to emerge from the White House, certainly nothing that could be even loosely termed a "doctrine."


Cold Comfort

Strangely enough, I actually take a small bit of solace from the chaos Trump has generated around trade policy. Let's be clear at the start: Trump hasn't got the slightest clue what he's doing. Yet, the ill-considered chaos of the Trump Administration fits in well with similarly bone-headed tariff policy debates earlier in U.S. history. Let's recap some of Trump's bone-headedness:

• withdraw from the Trans Pacific Partnership
• browbeating South Korea into renegotiating the KORUS
• same kind of browbeating with Canada and Mexico over the NAFTA
• Steel and Aluminum tariffs, mostly levied on allies
• sparking a trade war with China

I won't go through the Administration's intellectual dishonesty, corruption, and outright lies about who's benefiting from all of these agreements.... However, there's a certain comfort in all of this in the sense that none of it is particularly new.

I have been reading Douglas Irwin's "Clashing Over Commerce" this summer; a history of U.S. tariff policy. At nearly 700pgs, it is a beast. But few could have done better at weaving together politics and economics in an accessible history with important insights to today.  Specifically, I've been reading Irwin's depiction of the fights over tariff policy in the decades after the U.S. Civil War.

Until the early 20th Century, tariffs supplied nearly 90% of all federal revenue in the United States. Indeed, federal revenue was the main function of tariff policy until the Civil War. However, fighting wars tends to drain treasuries rather quickly and tariff policy began to take on the dual role of revenue and the incentivizing domestic (Union) war production. However, once the Civil War was over, and after significant war debts were retired, a bitter fight over tariff policy broke out. It seems a lot of American manufacturers had done quite well under the protective tariff and lobbied hard for protection to continue.

Critics pointed out that many of these newly politically powerful industrial interests were not models of efficiency, nor did they make the highest quality products relative to their foreign competitors. Most importantly, these sectors were being supported and enriched at the expense of other American manufacturers and, of course, consumer groups. These were not the critiques of some crazy free-market economists. These were the conclusions of a Congressional Commission set up in 1866 to re-evaluate post-Civil War tariff policy. The debate over these arguments was as vitriolic and personal as anything we see today. It entailed the political power of special interest groups winning the politics with plenty of irrationality and intellectual dishonesty about what was in the best interests of the nation.

All of this should sound depressingly familiar to anyone who's been following Trump Administration trade policy. However, (and this should be equally unsurprising) Trump didn't invent any of this debate. He is the first postwar president to shake the foundations of the postwar trading regime to the foundation, but he's hardly the first to exploit the political potency of populism around trade. Indeed, over the last several U.S. presidential election cycles, it's been hard to shine much light between any of the candidates (Republican or Democrat) on trade policy. And, as I argued in October 2016, my support for Hillary Clinton was based upon the assumption that once in the White House she would rapidly transform into a free trader much as Obama had done.

How do you stick it back in the tube?

Trump clearly sees trade policy as a way to beat U.S. trading partners over the head. He falsely claims he's getting tough with trading partners, renegotiating lousy deals, and bringing back all kinds of jobs. I don't know if he really believes what he's saying, but none of it is going to work out the way he promises. I just wonder when those that voted for him are going to realize he's not working for anyone other than himself.

I also worry, of course, about the impact the retreat and abdication of the United States are having globally. I take solace from the fact that debates around U.S. trade policy have routinely been devoid of fact and rationality. But this is 2018, not 1870, and the U.S. role in the world is a little different. I wish I could point to the 19th Century with a sense of calm. It helps to remind myself there were lots of nuts shaping trade policy. But it's cold comfort.

Unfortunately, my thoughts too often turn to the interwar years. I worry more than ever that historians will look back on 2017-2018 with the same astonishment we apply to the inaction and acquiescence of the 1920s.

I sincerely hope I'm being to alarmist. But as the President himself is wont to say..."we'll see what happens..."