Tag: trade

Jim Geraghty of National Review and Chad Benson of Radio America congratulate President Donald Trump for appointing more judges to regional circuit courts than any president has at this point in his term. They also criticize big businesses that are supporting Democrats in 2018 because of Trump’s trade and immigration policies. And they think the only major support for a Bill Kristol 2020 presidential campaign would come from the Kristol household.

Trade Wars Are Easy to Win

 

The President demonstrated his ignorance of the basics of trade once again this morning with a classic tweet:

Donald Trump’s Trade Travesty

 

The presidency of Donald Trump has been marked by a war between two totally inconsistent intellectual mindsets: his disastrous trade policy and his wise domestic policy. Let’s start with the good news first.

On the domestic front, Donald Trump has largely followed, to great positive effect, the classical liberal playbook, which spurs growth through a combination of low taxation and market deregulation. Under Trump’s leadership, removal of the government’s heavy foot from the throat of the economy has paid off. The key move was to junk the popular Keynesian paradigm with its flawed assumption that one or more low-interest economic stimulus programs could spend the United States back to prosperity. But these glorified transfer programs only take from Peter in order to pay Paul. Their net effect is virtually always negative. Making money cheap encourages borrowing, but it also discourages lending, creating at best a wash. The administrative costs of aggressive monetary policy, coupled with high levels of economic uncertainty it engenders, are a net drag on the overall economy, leading to the anemic growth levels and relative wage stagnation of the Obama years.

In contrast, neither Trump’s rollback in domestic regulation nor his implementation of lower corporate tax rates indulge in these legislative shenanigans. To the contrary, this one-two punch reduces barriers to voluntary exchange, increasing the volume of win-win transactions that spell growth for the transacting parties and for the third parties who receive additional opportunities for trade. Of course, successful markets always leave disappointed competitors, who fall into two camps. The first are those who go out of business, which yields the social benefit of letting assets be redeployed into more productive uses. The second are those parties who regroup existing businesses to find new niches in an ever-expanding economy. Systematically, competitive losers are part of a large process often described by the phrase “a rising tide lifts all boats.” The great forgotten Americans that Trump pledged to help during the 2016 campaign have already been helped, but not by his pointless bluster against American companies that take business overseas or import goods from foreign countries. No: The expanded economy creates new opportunities that make American workers more competitive than before—and better able to face foreign competition by profiting from doing business with foreign firms.

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In part one of this series, I explained the Cheney Doctrine which governed the GOP’s fiscal and trade policies in the 2000s.  The Cheney Doctrine can be summed up as “give the voters low taxes and cheap foreign goods, and everyone will be happy.”  This led to utter economic and political disaster in 2008 and […]

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[This is a two-part series. In part two I’ll explore whether Trump has invented a new fiscal strategy for the GOP] The Cheney doctrine, first articulated by Dick Cheney in the early 2000s, is that fiscal deficits do not matter. As the 2000s wore on, the doctrine was expanded to include trade deficits. This expanded […]

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Milton Ezrati joins Seth Barron to discuss President Trump’s talk of tariffs, China’s vulnerability in a potential trade war with the United States, and the history of the global trade order.

A tumultuous recent meeting of the G7 nations, trade disputes with Canada, and tariff threats against China all point to a shakeup of world trade. While the global economy would likely suffer in a trade war, Ezrati argues that the U.S. actually has the upper hand in trade negotiations with Beijing.

Begun, It Looks Like the US-China Trade War Has

 

It appears the war of words is over between the US and China. Or, more accurately, the conflict is moving beyond just words. The Wall Street Journal reports: “Beijing said it would retaliate immediately after the Trump administration announced Friday that it will impose tariffs on $50 billion of goods from China, raising the potential for a trade war between the world’s two biggest economies.”

So, escalation. But how does it end? Probably not with China tweaking its state capitalist economic model anytime soon. That would require, if anything, a sustained, multiyear effort where, for instance, Chinese firms benefiting from theft of American intellectual property would face severe sanctions. As my colleague Claude Barfield argues, “Should Beijing remain obdurate against market-opening reform, the US should progressively close off sectors to Chinese investment and operations in this country. Further, in a progressive ratcheting up, Chinese companies should be excluded from US capital markets, including stock exchange listings and the use of American underwriters for capital offerings.”

And this from AEI’s Derek Scissors: “With China effectively closing its market through protection of state-owned enterprises and coercive technology transfer, the US is not obligated by any reasonable standard to open our market fully to Chinese goods, services, capital, or people.”

The $200 Billion Question: What Exactly Is the US Trying to Accomplish with Its China Trade Talks?

 

US Trade Representative and member of US trade delegation Robert Lighthizer leaves a hotel in Beijing, China, May 4, 2018.

This isn’t a shock: China’s Foreign Ministry now says Beijing hasn’t offered to cut its nearly $400 billion trade surplus with the US by $200 billion. Well, yeah. This rumor — perhaps just 3-D psychological chess from Team Trump — always appeared dodgy.

Tariffs and the looming threat of a trade war, the White House shaking up its economic team, and the president suggesting another round of tax cuts begs the question: what next in Washington, DC? Dr. Michael J. Boskin, a Hoover Institution senior fellow and the Tully M. Friedman Professor of Economics at Stanford University, discusses what President Trump can do to keep the economy growing and takes a look at the financial health of California—the scene of this week’s visit by President Trump.

China is a big player in economic and geopolitical matters, including trade, global aspirations, and finding a solution to the escalating tensions with North Korea. Michael Auslin, Hoover’s inaugural Williams-Griffis Fellow in Contemporary Asia, discusses North Korea, China, trade wars, tariffs, ICBMs, China’s one belt one road plan to link the infrastructure and trade of Eurasian under Chinese auspices, as well as many other topics including China’s presence in the Arctic.

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While I would never claim to understand something completely, which I don’t, I do try to use common Sense. And my common sense tells me that free trade is good for everyone. Sure, some people might lose at the outset, when new products arrive on the market. But such is the nature of things. If […]

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Richard Epstein opines on whether Donald Trump or Barack Obama deserves more credit for the current economic expansion, then tackles the policy agenda the president laid out in his State of the Union address.

The Looming NAFTA Disaster

 

The North America Free Trade Agreement (NAFTA) among Canada, Mexico, and the United States was put into place in November 1993 with the staunch support of the Clinton administration. A sweeping agreement that lifted major trade barriers among these three nations, NAFTA had its share of problems when it was implemented, including the dislocation of some workers. But the mutual gains from free trade dwarfed any losses associated with the agreement. Now, over twenty years later, NAFTA needs to be updated to take into account new technologies, such as those associated with the digital economy. As the agreement gets renegotiated, all three parties should make as few changes as possible to bring the agreement up to date without altering its fundamental structure. But that might not happen. Each of the three signatory nations has adopted a tough bargaining position that could result in a breakdown of the treaty, which would be the greatest trade disaster in recent years.

The American public seems to be mixed on free trade. On the one hand, during the recent presidential campaign, much of the electorate, including many Republicans, turned against the Trans-Pacific Partnership (TPP), a free trade deal among Pacific Rim nations, while still announcing their support for free trade in the abstract. But upon taking office, Donald Trump proudly but foolishly withdrew from the TPP, and since that time has taken every opportunity to denounce free trade and to express his frustration with NAFTA. Today, his demands on NAFTA, as communicated through his trade representative Robert Lighthizer, have effectively deadlocked negotiations going forward.

Trump’s position is particularly galling because of the total discontinuity between his approach on domestic and foreign economic issues. Just last week, I wrote a column that strongly defended Trump’s efforts to introduce competition and choice into the health care market. The same principles that work to make a domestic economy great apply with equal force to the international one. Giving consumers many choices induces suppliers to provide those goods and services that people want at prices that they can afford; otherwise, the suppliers will lose business to their competitors. To achieve success, firms must not only develop their own workforces, but deal with other firms to acquire the needed inputs, which are often more cheaply purchased than made. Some of these inputs will be acquired from overseas sources, so the objective of a sound trade policy should be a seamless interface between domestic and foreign markets—which is precisely what NAFTA helped achieve when it integrated the economies of its three separate signatories.

Recorded on September 26, 2017

The largest nation on the other side of the Pacific Rim plays an outsized role in economic and geopolitical matters, including trade, global aspirations, and finding a solution to the escalating tensions with North Korea. Michael Auslin, Hoover’s inaugural Williams-Griffis Fellow in Contemporary Asia, discusses just how communist China is, decades after Mao and the changed state of US relations with Donald Trump in the White House.

Trump’s Flawed Protectionism

 

In the midst of the din over Charlottesville, let’s not overlook the Trump administration’s controversial stance on free trade. This smoldering problem has risen to the surface in the delicate negotiations that the United States now is undertaking with China over the status of American intellectual property rights, and with Mexico and Canada over the North American Free Trade Agreement. Before looking at the particulars of these two disputes, it is instructive to set out the intellectual case for free trade, which Trump has consistently misunderstood.

The basic insight here is that ordinary contracts between private parties are not neutral; they produce gains for each party. If I swap my horse for your cow, it is tempting, but wrong, to say that no value has been added for the parties because we have the same horse and cow after the transaction that we had before it. So why worry, the argument goes, if the trade does not take place? This facile argument ignores that these transactions are costly to complete. Why would two parties waste money to organize a trade from which neither side has gained? Even this simple trade is a positive-sum game that produces for each side a net advantage that exceeds the costs of putting the deal together. I could desperately need a cow for milk or breeding, and you might need the horse to pull a plow. The trade allows both of us to get greater value by the more efficient deployment of existing resources. That short-term advantage has long-term effects, by letting me breed horses while you breed cows.

But there is a catch. In general, bartering is inefficient because it is rare that any random pair has the goods that the other side wants in just the right amount. But introduce money, so that the sale of each animal no longer depends on the purchase of the other, and the gains from trade become ever more salient.

In this AEI Events Podcast, AEI’s Claude Barfield and Michael Strain host the Right Honorable Liam Fox MP, the UK’s Secretary of State for International Trade, to discuss international trade policy in the wake of Brexit. Dr. Strain welcomes Dr. Fox back to AEI and delivers introductory remarks.                                 

Following Dr. Strain’s introduction, Dr. Barfield sits down with Dr. Fox to discuss the steps the UK is taking domestically to form a sovereign trade policy and the future of UK-US trade relations. Dr. Fox is leading the effort to redesign the UK’s trade policy after the departure from the European Union. He believes the UK undoubtedly will leave the EU by March 2019 — the question that remains is the process by which it will leave.

This week on Banter, Dr. Desmond Lachman discussed the UK’s June election and its implications for Brexit negotiations. Dr. Lachman is a resident fellow at AEI where he studies the global economy. He previously served as deputy director in the International Monetary Fund’s (IMF) Policy Development and Review Department. This week, Dr. Lachman hosted a seminar at AEI on the likely outcome of Brexit negotiations and Brexit’s effect on the UK and European economies. The link below will take you to the full event video.

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