Eminent media personality and Washington political columnist Tim Donner recently opined that President Donald Trump is engaged in a paradox: imposing tariffs to end all tariffs. After nearly two years of trade conflicts with Canada, China, and Europe – and soon to be Japan – there are zero signs that tariffs or the trade deficit will be eliminated anytime soon. Thus, like World War I, that Donner refers to, history will look back and ask: What the heck happened?
The U.S. Census Bureau released the latest balance of trade numbers, and they were not pretty for an administration whose goal is to shrink the imbalance.
We learned from the report that the trade deficit in goods widened in April to a seasonally adjusted $72.1 billion, up from $71.9 billion in March. Overall exports tumbled by 4.2%, led by declines in automobile shipments (7.2%) and capital goods (6.5%). Imports also slipped by 2.7%, driven by declines in capital goods (3.5%) and consumer products (2.3%).
Despite the gap being a key plank of his America First agenda, Trump has presided over a worsening trade deficit since entering the Oval Office. Even as the White House goes to battle with the Chinese leadership, Washington has not posted any major victories on imports and exports. Last year, the trade imbalance in goods with Beijing breached $400 billion. So far this year, the trade deficit has already ventured beyond $80 billion.
To be fair to the president, though, it should be noted that the United States gradually has been exporting more to China and importing less in 2019.
Trade deficits are not a bad thing. It is just the United States buying $50 million or $50 billion more from foreign markets than they’re purchasing from America. But who’s holding these millions and billions in dollars? Foreign investors, who are then investing in the dollar, which increases the value of the greenback at a time when the Federal Reserve has tried its best to debase the currency.
But the American people have been told for years how bad it is to have a deficit. The likely assumption is that we are equating the budget deficit with the trade deficit, but the former is a much more serious problem than the latter. For a file as immense as this, which has impacted domestic agriculture, global financial markets, and even diplomatic efforts, the United States should be expecting better results on the deficit.
George Hussein Trump on Tariffs
Trump isn’t the first president to go the tariff route.
In this century, former Presidents George W. Bush and Barack Obama tried to rein in the trade deficit, punish foreign markets, and bring back American jobs with import levies. The attempts were futile.
Bush applied as high as 80% tariffs on steel imports in 2002 to allow domestic industry to compete with China and the European Union. After 21 months, the tariffs raised steel prices significantly since there wasn’t any foreign competition to keep the U.S. steel sector from jacking up costs. As the economy took a $30 million hit, 200,000 jobs in transportation equipment, metal manufacturing, machinery, and other steel and steel-consuming industries were gone.
Seven years later, Obama mirrored the policy and targeted Chinese tire imports with a 35% penalty. It was deemed a success after a few months, but then the unintended consequences rolled in. In just a couple of years, 4,000 retail jobs were lost, consumers paid an extra $1.1 billion for tires, and other industries saw their revenues decline because Beijing retaliated. Today, total tire employment has slipped roughly 1.6% every year since Obama enacted the tariffs.
Trump is experiencing the same thing. While monthly non-farm payrolls are roaring, certain sectors are suffering, particularly agriculture, something that Liberty Nation has extensively documented over the last year.
It is regularly asserted that insanity is when you do the same thing over and over again and expect different results. Despite clear evidence that tariffs never work, every administration – Republican or Democrat – implements this mercantilist measure. Whether they were instituted in the 1930s or in the early 2000s, tariffs have not achieved their intended objective.
Trade Wars Are Unpredictable
In March 2018, the president said on Twitter that “trade wars are good, and easy to win.” It was an interesting claim because trade wars have decimated entire U.S. industries at the expense of others. Also, considering how administration officials have participated in exhaustive trade negotiations and have yet to etch out a deal, it shows how it is not as simple to declare victory. Tariffs are only going up, billions of dollars have been lost, and geopolitical tensions are escalating. Is this what winning looks like?
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