Digesting the actions of Donald Trump — our volatile, reality-TV-star-turned-president — on a daily basis is often not an easy task, as Thursday’s…
Digesting the actions of Donald Trump — our volatile, reality-TV-star-turned-president — on a daily basis is often not an easy task, as Thursday’s 420-point stock tumble revealed.
The latest case of market indigestion was caused by Trump’s drastic move of placing 25 percent tariffs on imported steel and 10 percent tariffs on aluminum — actions that sparked fears on Wall Street of a possible trade war.
Trump, long a businessman and real estate entrepreneur before he got involved in NBC’s “The Apprentice,” claims to love the free markets, but he spent much of the 2016 campaign demanding “fair trade” and bashing free-trade agreements.
Candidate Trump threatened trade wars with China and bashed the North American Free Trade Agreement, saying the US was losing jobs to Mexico. In reality, most of those manufacturing jobs were fleeing to Asia — beginning long before NAFTA.
Of course, much of what Trump has said on the dire impact of free trade is nonsense.
Trump loves to tout his love for making things right for the American worker. What he’s less willing to brag about is the impact of Reagan’s tariffs in the 1980s on cars, motorcycles (to protect Harley-Davidson) and semiconductors from Japan. Those moves produced a mixed bag of results.
Yes, US manufacturers got some protection from Japanese “dumping” of cheap products on our markets, but for the most part, consumers got hosed with higher prices and the automobile industry continued to bleed jobs.
Then there’s the canard that somehow, the country will return to the 1950s manufacturing nirvana if we start making it difficult for the rest of the world to sell their goods here.
But today, the world is a big, integrated place. A US economy that was once built on being an industrial powerhouse is now more modern and efficient and produces more jobs in the service sector than it does in manufacturing. Those services are consumed by our overseas trading partners.
Meanwhile, raw materials are made in China and shipped to plants in the US, so American factories can remain competitive and keep people employed.
To be sure, most economists outside of the “fair trade” brigade inside the White House (economist Peter Navarro and Commerce Secretary Wilbur Ross) know that the “fair trade” remedies of tariffs and tearing up NAFTA are foolish ideas.
And maybe Trump does as well, and perhaps all his saber-rattling on trade is just him pulling a page from “The Art of the Deal” and looking to negotiate better terms from our trading partners.
Or maybe it’s not and Trump really believes the “fair trade” nonsense. If that’s the case, be ready for some more 400-point plunges for the Dow Jones industrial average in the days and weeks to come.
