Interesting WSJ column today analyzing Trump's China trade policy, and how it really wasn't very effective:
In a recent editorial we critiqued President Trump’s proposal for a 10% border tax on anything and everything imported by the U.S., and the self-proclaimed Tariff Man has upbraided us in a letter. This is a good debate to have, and Mr. Trump begins his missive by boasting that while he was in office the trade deficit with China was falling before Covid-19 hit.
But that’s not close to the full story. The goods trade deficit with China did dip somewhat after Mr. Trump launched his global tariff campaign in 2018. At the same time, however, the deficits with Mexico and the rest of the world went up. A trade surplus or deficit isn’t a good measure of success, but since Mr. Trump thinks it is, see the chart nearby. President Biden has left Mr. Trump’s policies in place, so the figures run through last year.
Since 2017, when Mr. Trump entered the Oval Office, goods imports to the U.S. in nominal dollars have increased 174% from Vietnam, 116% from Taiwan, 96% from Bangladesh, 89% from Thailand, 76% from India, and 62% from South Korea. Maybe Mr. Trump should start giving out campaign hats that say “Make Vietnam Great Again.”
Kidding aside, as Beijing turns up the temperature in the Pacific, it’s good for the U.S. to have diverse supply chains, and Mr. Trump’s tariffs no doubt played a role. On the other hand, a shift was probably inevitable, given China’s behavior since Mr. Trump took office.
That includes its regulatory assault on successful private companies, its crushing of Hong Kong, its increasingly documented abuses in Xinjiang, its machinations to extend Xi Jinping’s rule, and its coverup of the origins of the Covid virus. Commerce Secretary Gina Raimondo said recently that U.S. companies tell her they see China as “uninvestable.”
If Mr. Trump’s goal was to nudge businesses to friendlier locales, a better U.S. policy was to join the Trans-Pacific Partnership trade agreement that excluded China. But Mr. Trump rejected that deal. The Pacific pact would have boosted trade among a dozen countries, including Vietnam, while offering companies an incentive to set up shop in those places. This approach would have avoided the collateral damage from Mr. Trump’s blunderbuss tariffs, and here we part ways with him again.
He says our editorial cited “debunked talking points from corporate-funded studies,” but the economic evidence is unambiguous that border taxes are passed on to consumers, and Mr. Trump’s tariffs have cost Americans tens of billions of dollars. Readers can look at the analyses and make up their own minds.
But that isn’t all: After other countries retaliated, Mr. Trump bailed out farmers with tens of billions from taxpayers. If a U.S. business found itself suddenly uncompetitive after tariffs raised prices on imported parts or materials, it had to beg a Commerce Department bureaucrat for an exclusion to stay alive.
And for what? As of 2022, the bilateral goods deficit with China was roughly back to where it was in 2017, at least in nominal terms. This isn’t exactly a decoupling. Mr. Trump promised that metal tariffs would revitalize foundries, but U.S. Steel wants a buyer and doesn’t seem saved, and the industry’s job count has hardly budged. America’s total crude steel production last year was slightly lower than in 2017, according to the World Steel Association.
Mr. Trump’s answer, as usual, is to quintuple down in a second term. A universal 10% tariff would “raise taxes on American consumers by more than $300 billion a year—a tax increase rivaling the ones proposed by President Biden,” the Tax Foundation says. Including expected retaliation, it would “shrink the U.S. economy by 1.1 percent and threaten more than 825,000 U.S. jobs.”
Slapping 10% tariffs on everything made by Vietnam, South Korea and other U.S. partners would have the effect of abandoning them to China’s economic sphere, which is the opposite of America’s geostrategic interests.
Mr. Trump’s great mistake is his belief that trade is a zero-sum exercise. But countries and companies trade because they see a mutual advantage. When American consumers buy clothing and Scotch on a global market, while American producers sell soybeans and Boeing jets, the magic is that both sides benefit.
https://www.wsj.com/articles/donald-tru ... opin_pos_1
