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On Trump’s Trade Policy, A Democratic Echo

If you want to get an unanimous verdict from any gathering of economists, just ask them about Donald Trump’s trade policy. If it were a movie, its Rotten Tomatoes score would be zero. One expert analysis after another has torched it.

A report from the Becker Friedman Institute at the University of Chicago found his tariffs on washing machines cost consumers $1.5 billion, or more than $815,000 per U.S. job saved. A study for the National Bureau of Economic Research concluded that Trump’s trade war has reduced Americans’ real incomes by $1.4 billion per month.

The Tax Foundation says the new tariffs amount to a tax increase of $42 billion on Americans. A team of economists from the University of Chicago, Northwestern and Stanford estimate that tariffs and trade squabbles cut investment in U.S. manufacturing by 4.2 percent last year.

NBER notes that Trump’s tariff hikes “are unprecedented in the post-World War II era in terms of breadth, magnitude and the sizes of the countries involved.” They haven’t worked in the most basic sense. The overall trade deficit in goods, which he promised to eliminate, hit a record high last year, and the imbalance with China.

To the surprise of no economist, his policy of blocking trade, and threatening to do so, turns out to be bad for consumers, producers and the economy. So how are Democrats running for president handling the issue? By offering their own version of protectionism.

On Monday, Bernie Sanders attacked Joe Biden by saying, “I helped lead the fight against NAFTA; he voted for NAFTA.” Like Sanders, Elizabeth Warren opposed the Trans-Pacific Partnership, a mammoth free trade deal among the United States and 11 Pacific Rim nations. Both also oppose the administration’s modest revision of NAFTA, the United States-Mexico-Canada Agreement.

The positions of Sanders and Warren, write Gary Clyde Hufbauer and Euijin Jung of the Peterson Institute for International Economics, “do not differ greatly from President Trump.” Among the other Democratic presidential candidates who opposed the TPP are Kamala Harris, Kirsten Gillibrand, and Amy Klobuchar.

From all this you might forget that the Pacific free trade deal was the proud achievement of Barack Obama — and was described as “the gold standard in trade agreements” by Hillary Clinton. The idea, by the way, originated with Bill Clinton when he was in the White House. You might also forget that it was Clinton who signed NAFTA and Obama who preserved it.

Biden is so far holding firm. In response to Sanders’ broadside, he said he didn’t regret voting for NAFTA. He’s a lonely voice. With the exception of Beto O’Rourke, the other Democrats who lean toward free trade, including Julian Castro, Jay Inslee, and John Hickenlooper, are relative unknowns.

But if the presidential candidates would like to move toward protectionism, their voters are not going with them. A Pew Research Center poll last year found that among Democrats and Democratic-leaning voters, 67 percent think free trade agreements have been a good thing. Only 19 percent take an unfavorable view.

By contrast, Trump has managed to convince a large share of Republicans to abandon their historic allegiance to open global commerce. Pew found that 43 percent endorse free trade deals — down from 57 percent a decade ago. A plurality of Republican and Republican-leaning voters, 46 percent, now regard free trade as a bad thing.

Among the electorate as a whole, however, 56 percent favor free trade and 30 percent oppose it. With his belligerent and destructive trade war, Trump has actually dried up support for protectionism, except in his own party.

Why are so many Democratic candidates advocating policies that are a loser not only with the public in general but with their own party faithful? The harm done by Trump’s import barriers ought to work to the advantage of the opposition. But Democrats may end up with a nominee who, on the topic of trade, is largely indistinguishable from Trump.

At best, a Sanders, Warren, or Klobuchar would be giving him a pass on one of his big vulnerabilities. At worst, they could force many moderate, independent voters to decide that on economic matters, Trump is the lesser of two evils.

Free trade should be a good fit for a party that favors liberal immigration policies, friendly relations with our neighbors, and constructive engagement with the world. Trump has done his best to hand Democrats a winning issue for 2020 and beyond. But that doesn’t mean they’ll take it.

 

Former Fed Chair Yellen Says Trump Doesn’t ‘Grasp’ Economic Policy

Former Federal Reserve Chair Janet Yellen wasn’t renominated to a second term as the head of the U.S. central bank because President Donald Trump wanted to make his own mark on the institution — despite the fact that her replacement holds broadly similar views and she was widely seen as a steady hand at the helm of monetary policy.

And in a new interview published Monday, Yellen had critical — though measured — words about the president and his limited understanding economic policy. Speaking with MarketPlace editor Kai Ryssdal, she was asked to react to Trump’s norm-breaking vocal attacks on the current Fed Chair Jerome Powell.

“President Trump’s comments about Chair Powell and about the Fed do concern me, because if that becomes concerted, I think it does have an impact, especially if conditions in the U.S. for any reason were to deteriorate, it could undermine confidence in the Fed,” she told Ryssdal. “And I think that that would be a bad thing.”

She was also blunt in her assessment of Trump’s understanding of the Fed’s role and economic management more broadly — an area of policy in which the president believes himself to be an expert.

“Do you think the president has a grasp of macroeconomic policy?” asked Ryssdal.

“No, I do not,” said Yellen. “I doubt that he would even be able to say that the Fed’s goals are maximum employment and price stability, which are the goals that Congress has assigned to the Fed. He’s made comments about the Fed having an exchange rate objective in order to support his trade plans, or possibly targeting the U.S. balance of trade. And, you know, I think comments like that show a lack of understanding of the impact of the Fed on the economy, and appropriate policy goals.”

The former fed chair was also critical in the interview of Trump’s aggressive trade policy and liberal use of tariffs.

“I think my own view is that those shifts are likely to be adverse for the U.S. economy, to the extent that some of these things are bargaining chips, with the hope of lowering trade barriers generally,” she said. “I suppose the outcome of that, if it’s successful, could be positive …

“It’s a big ‘if,’” said Ryssdal.

“It is a big ‘if,’” Yellen replied. “And when I continually hear focus by the president and some of his advisers on remedying bilateral trade deficits with other trade partners, I think almost any economist would tell you that there’s no real meaning to bilateral trade deficits, and it’s not an appropriate objective of policy.”

She also said she would have liked to have served a second term as Fed chair and that she misses working there, though she has confidence in current chair Jerome Powell.

Read the full interview here.

IMAGE: Federal Reserve Chair Janet Yellen holds a news conference following the Federal Open Market Committee meeting in Washington in this file photo from September 17, 2015. REUTERS/Jonathan Ernst/Files

Screwed By Trump Trade Policies, Voters May Reject Republicans

Reprinted with permission from Shareblue.com.

Fear and anger continue to mount among Midwestern Republican leaders over Trump’s unfolding trade war with China. Because it is red state farmers who stand to pay a massive price for his reckless agenda.

“It’s like he’s microtargeting policy to screw his own supporters,” one frustrated GOP strategist tells Bloomberg.

“We knew this was hanging over our heads,” one Kansas farmer said. “When we heard the news, it was still just devastating to us. It’s really going to put the hammer to our price prospects.”

In fact, 12 of the 15 states that will likely take the biggest tariff hits are red states, according to a new analysis from the Brookings Institution.

On March 1, Trump announced new tariffs on foreign steel and aluminum. China responded by promising to impose a 25 percent tariff on more than 180 American products, including pork and potentially soybeans. Many of those goods are closely associated with states that backed Trump in 2016.

Now, frustrated red state Republicans are getting an up-close look at what it’s like dealing with an erratic, illogical president. Trump has insisted that trade wars are easy to win. Incredibly, he also suggested it’s farmers’ patriotic duty to take this economic hit for America.

The party’s reasonable fear is that anger over trade will suppress turnout among these traditionally loyal voters.

When Iowa Sen. Joni Ernst lamented that the White House doesn’t understand today’s global economy, that may have been one of the year’s biggest understatements. After a group of farm-state Republicans met with Trump earlier this month to spell out their concerns, none of them seemed to think anything had changed for the better.

Yet some Midwestern Republicans actually remained aligned with Trump and his trade war. In Indiana, soybean farmers will be among those who pay the highest price for Trump’s rash policies as China, one of the world’s largest soybean importers, turns off the spigot to Hoosier harvests.

Yet when asked last week if he would “side with the president or the farmers,” Rep. Todd Rokita, who is running for Senate, was clear where his loyalties lie. “Right now it’s with the president,” he openly declared.

Trump may have a friend in politicians like Rokita, who put party over country. But it’s unlikely American farmers will remain that loyal as Trump’s policies take aim at their livelihoods.

IMAGE: Grain silos are seen in Haverhill, Iowa, United States, July 18, 2015. REUTERS/Jim Young 

China Critic Lighthizer Named As U.S. Trade Representative

WASHINGTON (Reuters) – U.S. President-elect Donald Trump on Tuesday named Robert Lighthizer, an official in the Reagan administration and harsh critic of China’s trade practices, to be his chief trade negotiator, responsible for better deals aimed at reducing U.S. trade deficits.

Trump, who promised during his presidential campaign to renegotiate international trade deals like NAFTA and punish companies that ship work overseas, said in announcing his choice that Lighthizer would help “fight for good trade deals that put the American worker first.”Lighthizer is a former deputy U.S. trade representative under former Republican President Ronald Reagan who helped to stem the tide of imports from Japan in the 1980s with threats of quotas and punitive tariffs.

His return to the agency follows nearly three decades as a lawyer representing U.S. steelmakers and other companies in anti-dumping and anti-subsidy cases.

Lighthizer has argued that China has failed to live up to commitments made in 2001 when it joined the World Trade Organization and that tougher tactics are needed to change the system, even if it means deviating from World Trade Organization rules.

“Years of passivity and drift among U.S. policymakers have allowed the U.S.­-China trade deficit to grow to the point where it is widely recognized as a major threat to our economy,” Lighthizer wrote in 2010 congressional testimony.

“Going forward, U.S. policymakers should take these problems more seriously, and should take a much more aggressive approach in dealing with China,” he wrote.

Lighthizer is regarded as an experienced tactician with an intimate knowledge of trade tools that were widely used before the WTO was created in 1995, including “Section 301” tariffs used to stem a tide of imports of Japanese steel and vehicles in the 1980s.

During his tenure, Reagan struck the 1985 Plaza Accord currency deal with Japan, Germany and other major trading partners that brought down the dollar’s value and encouraged more foreign companies to set up U.S. manufacturing plants.

“Bob Lighthizer is very smart, very strategic and totally fearless,” said a Washington attorney who has worked with him for three decades but asked not to be named. “You can expect him to use every tool available to create leverage to get China and anyone else to stop the cheating. He is no fan of the WTO.”

Still, Lighthizer is not expected to be the Trump administration’s leading voice on trade policy. Last month, Trump’s team said that task would fall to the U.S. Commerce Secretary nominee, billionaire investor Wilbur Ross..

Trump, who takes office on Jan. 20, has also named Peter Navarro, an economist and adviser who has urged a hard line against China, as the head of a newly formed White House National Trade Council.

(Additional reporting by David Alexander; Editing by Susan Heavey, Chizu Nomiyama and Jeffrey Benkoe)