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Brief # 12

April 12, 2018

Since the beginning of 2018, the Trump administration has been enacting a series of tariffs, on a variety of foreign products, intellectual property rights, and technology services. The tariffs reflect Trump’s efforts to follow through on a campaign promise to not let other countries take advantage of the US. He is seeking to appease his base of supporters, many of whom perceive that current trading agreements with other countries is the major reason for their unemployment. The tariff’s that Trump has enacted include the following:

On January 22 the President imposed tariffs on imports of solar panels and washing machines; A tariff of 30 percent will be applied to imported solar panels, most of which originate in China. Tariffs will begin at 20% on large residential washing machines.

On March 22, he imposed a 25 percent tariff on selected Chinese products that could total $60 billion dollars. The products included aeronautics, modern rail, new energy vehicles, and high tech products.

On March 25 he imposed 25 percent tariff on imported steel and 10 percent tariff on aluminum. The administration stated that tariffs on such goods from Argentina, Australia, Brazil, the European Union and South Korea were delayed until May 1. Canada and Mexico are exempt from the tariff as the US reviews its national security relationships and the North America Free Trade Agreement (NAFTA)

On April 6th, after China retaliated with its own tariffs on US products, Trump announced he was considering $100 billion dollars of additional tariffs on Chinese goods.

The Chinese government, according to a CNN Report,  then responded by reiterating that it doesn’t want “to fight a trade war, but we are not afraid of fighting it.” “If the United States disregards the opposition of China and the international community, and insists on unilateralist and protectionist trade practices, the Chinese side will follow through to

Analysis

By instituting these new tariff’s President Trump is threatening to overturn a decades long bi-partisan policy of free trade. This policy is predicated on the fact that national economies have become increasingly inter-dependent, and that many businesses operate by buying and selling products and services across the planet. Trump’s tariffs also threaten to unleash a trade war, as the Chinese have observed. Trade wars, usually escalate conflict between countries rather than cooperation. They result in higher prices for consumers, shrinking demand for business services and products, and increased unemployment. The last large-scale global trade war occurred in the nineteen thirties and was a factor that contributed to the Great depression and World War II.

Fortunately, the U.S. and the world learned a lesson from this experience. With the Reciprocal Trade Act of 1934 and its successors, which granted the President authority to reach tariff reduction agreements with foreign governments, U.S. trade policy came to be global and strategic.

This new approach was institutionalized at the international level with the creation of the General Agreement on Tariffs and Trade in 1948 and its successor, the World Trade Organization (WTO), in 1995.

The basic principle of these agreements is reciprocity — that each country will agree to liberalize its trade to the extent that other countries liberalize theirs. The approach uses international negotiations to overcome protectionist political pressures 

President Trump claims that certain countries have weakened American industries by exporting cheap products to the United States. He believes this has been going on for decades and has caused significant job losses. He takes this position because a large part of his political base are unemployed blue-collar workers.

However, international trade is one of many factors contributing to US unemployment; the larger ones being the onset of automation, the lack of an adequate unemployment safety net, and the lack of effective job education and retraining programs.

There are better ways for addressing international trade issues that don’t publically embarrass nations and force them into an escalating trade war. These include behind the scenes country-to-country diplomatic negotiations or working through the WTO that was established to deal with trade disputes between countries.

It is true that there remain many injustices in the world trading system. Until recently most free trade agreements failed to take into account workers’ rights and labor and environmental standards. It is also true that the WTO is still a young organization that needs strengthening. However, these are problems that skilled diplomats and trade negotiators can address.

There is increasing concern that President Trump’s tariffs will likely impose a heavier burden on lower income households as these households generally spend more on traded goods as a share of expenditure/income.

Engagement Resources

VoxEU.org – CEPR’s policy portal was set up in June 2007 to promote research-based policy analysis and commentary by leading economists.

https://voxeu.org/columns/archive

The Council on Foreign Relations (CFR)-The CFR is an independent, nonpartisan membership organization, think tank, and publisher dedicated to being a resource for its members, government officials, business executives, journalists, educators and students, civic and religious leaders, and other interested citizens to understand foreign policy

https://www.cfr.org/blog/trump-steel-tariffs-could-kill-40000-auto-jobs-equal-nearly-one-third-steel-workforce

The Center for Economic and Policy Research (CEPR) – The CEPR was established to promote democratic debate on the most important economic and social issues that affect working people’s lives.

http://cepr.net/

ThinkProgress is a news site dedicated to providing their readers with rigorous reporting and analysis from a progressive perspective.

https://thinkprogress.org/

The Economic Policy Institute (EPI) is a nonprofit, nonpartisan think tank created to include the needs of low- and middle-income workers in economic policy discussions.

https://www.epi.org/

This Brief was compiled by Ron Israel, USRESIST NEEWS Managing Editor and Bruce Boccardy

 

 

 

 

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