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Does the Trump Doctrine Risk a Trade War? Understanding What Trump is up to on Trade


Last week, President Donald Trump dialed back his earlier call for a punitive and blanket tariff on imported steel and aluminum. Good decision. The financial markets rallied as this new plan will target the tariffs toward the countries like China and Russia that are cheating and stealing.  
It was a reminder that with Trump it always comes down to the art of the deal.  
Trump's original call for punitive blanket tariffs got the world's attention and was a reminder to world leaders that Trump doesn't bluff.  
That's a useful lesson going forward for our friends and foe‎s alike.  
I was opposed to the steel tariffs. Trump makes a strong case that many of our trading partners – most notably, China – are violating trade agreement rules left and right and stealing American patents and intellectual property protections. And they have been doing so for years and years with impunity.
China is estimated to be pirating more than a half-a-trillion dollar's worth of American technology, inventions, drugs, vaccines, and computer software each year. That is theft and it cannot stand. Since intellectual property is an ever larger share of what America produces each year, the costs get exponentially higher. Why do we let this happen?

Trump is right that we've tolerated these abuses under a belief that to challenge them would violate principles of free trade. There has also been a resignation in Washington that there isn't much America can do about it to retrieve this half-trillion annual loss of GDP. Nonsense. We are being played as suckers and Trump is right that the rest of the world laughs behind our back.  

Trump has introduced a new strategic doctrine on trade and though I have some reservations, it's important that we understand it and realistically assess its merits.  

The Trump Doctrine as I see it, and based on my conversations with him on this subject, is predicated on the undeniable truism that nations like China and Russia need America far more than we need them. We both benefit from the transaction, but they benefit more than we do.  
Trump wants to exploit that American advantage. The idea here is very simple: If you have a really nice restaurant that everyone lines up to get into on a Saturday night, a good businessman raises the prices on the menu.   
This strategic free trade stance is designed to monetize the advantage that America has as a result of having the largest and most lucrative consumer market. Since we are the global alpha male, we can make the rules rather than hand them off to the feckless bureaucrats at the WTO (World Trade Organization).
‎Trump wants to use trade policy to advance America's national and economic security priorities. He wants to make access to US markets contingent on foreigners playing by the rules (for example, paying full price for the research costs of our technologies). He also wants to demand that our trading partners purchase more American-made products – whether it is our corn, cotton, cars, or computers. If they don't cooperate, they will pay a toll or tariff. You might call this the "weaponization" of trade, but it is designed to put the interests of American companies and workers first. 

The Chinese aren't going to like having to conform to these new rules, but what alternative will they have? The steel and aluminum tariffs will hit their bottom line for sure, but any tit for tat retaliation will hurt them far more than us. If we lose access to their cheap goods and services, we pay more for clothes and toys and toothpaste at Walmart. If they lose access to our markets they crash into recession. Who loses more here?  
This doctrine can also be used effectively to advance our national security goals as well. We could and in my opinion should force China to cooperate in the nuclear disarmament of Beijing's lap dog, North Korea, ‎or they lose access to American markets.  
Does the Trump doctrine risk a trade war? Hopefully not, but it could happen to everyone's detriment if other nations don't stand down. 
The goal here is to enable the United States to seize a larger share of the gains from trade. These gains have been enormous for everyone. The expansion of international trade from 1980-2005 launched the greatest period of poverty reduction in world history with one billion people moved out of abject poverty.

Trade across borders is undeniably good as Adam Smith taught us some 250 years ago. But strategic trade rules that give America a bigger share of the global winnings and keeps us rich and safe is even better. ‎ Certainly, our farmers, our technology and pharmaceutical companies, and our industrial blue-collar workers would applaud that. Trump's election proves that a sizable number of voters in both parties aren't buying into the unfettered unilateral free trade posture of the US government for the last several decades. 

Trump may be on to something here, and I don't know if I'd endorse his Trade Doctrine, but it's worth considering and not dismissing out of hand.

Stephen Moore is an economic consultant with Freedom Works and Washington Times columnist.

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