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The Establishments war on Donald Trump
See other The Establishments war on Donald Trump Articles

Title: A trade war Canada will lose to its larger, louder counterpart [Trump]
Source: National Post
URL Source: http://nationalpost.com/opinion/and ... -its-larger-louder-counterpart
Published: Jun 3, 2018
Author: Andrew Coyne
Post Date: 2018-06-03 20:26:39 by Tooconservative
Keywords: None
Views: 4954
Comments: 44

Presumably Donald Trump was warned of the furious response he could expect from the United States’ trading partners were he to proceed with his threatened tariffs on their exports of aluminum and steel. He went ahead and did so anyway.

This is one problem with trade wars: they seek to achieve in retrospect what they failed to achieve in prospect. Were he likely to have been deterred by retaliatory tariffs, of the kind that Canada, Mexico and the European Union have just applied to a fantastic assortment of U.S. goods, he would have been already.

And yet, deterrence having so conspicuously failed, they feel obliged to carry out the threat regardless. It is difficult to see how the reality of a trade war is more likely to succeed than the anticipation, especially when dealing with a man who tweets “trade wars are good and easy to win.”

Perhaps its advocates are right to believe that retaliatory tariffs will so focus congressional and public anger on Trump, notably in the states most affected, that he will be forced into a humiliating retreat. Perhaps Trump is right to calculate that people do not necessarily put cause and effect together quite so logically — his people in particular.

They may even be moved to rally around their besieged (as they see it) president and country. Wasn’t it precisely to “fight back” against these scheming foreigners, with their long history of preying upon American naivety, that Trump hit them with the tariffs in the first place?

Canada has treated our Agricultural business and Farmers very poorly for a very long period of time. Highly restrictive on Trade! They must open their markets and take down their trade barriers! They report a really high surplus on trade with us. Do Timber & Lumber in U.S.?— Donald J. Trump (@realDonaldTrump) June 1, 2018

At any rate, while we are testing this theory, matching the U.S. tariffs we decry as madness and ruin with mad, ruinous tariffs of our own, it is our consumers and businesses who will be the victims. This is the other problem with trade wars. In a real war, the guns are pointed at the other guys. But tariffs are self-inflicted wounds.

This is a hard point to get across in the heat of battle. Suggest that retaliation is unlikely to work against them and certain to hurt us, and the response is a volley of patriotic oaths: We have to do something! So you’re saying we should just sit there and take it? You have to stand up to a bully! Why don’t you just take out U.S. citizenship then?

It is neither appeasement nor treason to refrain from costly, futile measures that at best are unlikely to succeed and at worst will trigger an escalating series of attacks and counter-attacks. It is simply facing facts. The U.S. economy is more than 10 times as large as ours. Its exports to Canada account for two per cent of its GDP; our exports to them are 25 per cent of ours.

Even in concert with the other countries targeted, it is unlikely that we can cause Trump to alter course, for the simple reason that he is Trump. A normal president in possession of a rational mind might well be dissuaded by the united opposition of much of the democratic world. Trump is not that president. If he were he would not have slapped the tariffs on us in the first place, in open defiance not just of economic sense or international trade law, but of the very “military security” invoked as its justification.

This is a point that bears repeating. The sheer enormity of Trump, the impossible combination of every conceivable malignant quality in one man — comprehensive ignorance, pathological dishonesty, thoroughgoing corruption, and a seeming determination to use his time in office to cause as much damage in as many ways as he possibly can — is a constant invitation to denial. The mind does not want to believe what the eyes and ears are telling it, that an emotionally disturbed man-child has control of the White House. But it’s true. The nightmare is real.

It is folly, then, to expect him to respond as other presidents might. What we can do is learn from this experience. Trump cannot be reasoned with, and he cannot be appeased; he can be flattered, but not with any expectation it will be repaid. His word is worth nothing, and while he can be frightened or bought, he absolutely cannot be relied upon. He will do what he will do, and there isn’t a lot the rest of us can do about it. This goes far beyond the odd tariff.

It was evident from the start that Trump represented a total break with all previous norms and expectations of how a president should behave or what he should believe in. Among those norms, it is now incontrovertible, is much of the international order successive American presidents helped to build over many decades.


Poster Comment:

Trump will crush that Trudeau punk and make him cry.

Trump wants to dump NAFTA and have one treaty with Canada, a separate treaty with Mexico. And they will lose a lot more than we will in any trade war. And they know it, just as they know that Trump will not be deterred or appeased or bought off.

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Begin Trace Mode for Comment # 36.

#3. To: Tooconservative (#0)

Trump will crush that Trudeau punk and make him cry. Trump wants to dump NAFTA and have one treaty with Canada, a separate treaty with Mexico. And they will lose a lot more than we will in any trade war. And they know it, just as they know that Trump will not be deterred or appeased or bought off.

I think you miss the point and so does Trump. Trade is two way. That the US hasn't come out on top is a reflection of the fact that the US can no longer dominate world trade, they have become a smaller part of it. What was the idea behind NAFTA, that the market might expend? But it did expand to take advantage of lower costs. The EU has been advantaged by creating a single market, The US should be similarly advantaged but it cannot be forced. Unless the people of Mexico have industries and employment they cannot buy US goods

paraclete  posted on  2018-06-03   22:14:31 ET  Reply   Untrace   Trace   Private Reply  


#4. To: paraclete (#3)

We will get a better trade deal with Canada. There is no doubt. Trump won't even have to flood them with illegal aliens to make them give in.

I think it is very likely that Trump will prevail and get a much better trade deal with Mexico as well. Our leverage isn't quite as strong with Mexico but it is still huge.

With the EU, the picture is more complex. This is the perfect time for Trump to pick a trade fight with them because he is lowering the boom slowly on them over the Iran deal, giving them until fall (for the most part) to conclude all business with Iran and join our new sanctions regime against Iran. Since Trump is already pursuing that, this is the perfect time to go after their trade deficits with America as well. Even more so considering what a pack of weak sisters they are as NATO allies, especially Germany. But there are another half-dozen that pay nothing for their own defense, others that cheat and try to count things like military pensions as defense spending, etc.

We're going to find out who our allies are and who we can rely on. Good allies will have more favorable trade with us. As long as they kowtow to our Iran sanctions as well.

It wouldn't take that much for Trump to just destroy the cohesiveness of the EU. Don't imagine that he couldn't. They hate him so much because they know it. They are close to falling apart already and it would take so little to push them over the edge, a nightmare for France and especially Germany.

Trump is pursuing multiple trade and economic policies at once, not a piecemeal approach that has worked to our disadvantage for so many years.

Tooconservative  posted on  2018-06-03   22:32:01 ET  Reply   Untrace   Trace   Private Reply  


#5. To: Tooconservative (#4)

Trump is pursuing multiple trade and economic policies at once, not a piecemeal approach that has worked to our disadvantage for so many years.

Trump only has one policy, turn trade in favour of the US, but tariff walls are a bad idea because the US has more to loose than it has to gain

paraclete  posted on  2018-06-03   22:37:48 ET  Reply   Untrace   Trace   Private Reply  


#6. To: paraclete (#5)

tariff walls are a bad idea because the US has more to loose than it has to gain

That's where you're wrong.

They are the ones with trade barriers and trade deficits and we don't need them nearly as much as they need us. Yes, a trade war would be mutually destructive but it would hit them a lot harder than it would hit us.

That's before we even start meddling with their supply of Mideast oil and our own oil production. We are the petrodollar economy, in addition to being the top trading partner of all these countries.

They can just suck it up or suffer the consequences. I don't care whether they like it or not.

Tooconservative  posted on  2018-06-03   22:52:06 ET  Reply   Untrace   Trace   Private Reply  


#7. To: Tooconservative (#6)

. I don't care whether they like it or not.

yes back to the old beggar my neighbour policies of yesteryear, not much enlightenment there

paraclete  posted on  2018-06-04   0:16:18 ET  Reply   Untrace   Trace   Private Reply  


#8. To: paraclete (#7)

yes back to the old beggar my neighbour policies of yesteryear, not much enlightenment there

Is there some reason that you think we owe Europe, with its larger 500M population, not only a NATO defense by America but the right to put up trade barriers to our exports?

What would you consider to be "enlightened" policy? More giveaways to our rotten NATO allies in the EU who have practiced unfair trade against us for decades?

Tooconservative  posted on  2018-06-04   0:20:15 ET  Reply   Untrace   Trace   Private Reply  


#19. To: Tooconservative (#8)

What would you consider to be "enlightened" policy?

Well you could stop being world policeman. You should have pulled out of Europe years ago. Your excuse for being there died with the Soviet Union. This would have forced Europe to look after its own defence, some thing it is fully capable of.

You either have trade barriers or free trade, you must make up your mind which you want

paraclete  posted on  2018-06-04   9:20:12 ET  Reply   Untrace   Trace   Private Reply  


#23. To: paraclete (#19)

You either have trade barriers or free trade, you must make up your mind which you want

I want regulated trade that makes sense for American employment rates.

So, for example, absolutely free and open trade in bananas, mangoes, coffee, tea, cinnamon and chocolate: we can't grow that stuff here at all, we like it, and there are countries whose economies rely on those exports.

There is no good reason to have a blanket tariff cover any of that. Such a tariff would not protect American jobs at all: we don't have people growing bananas because our climate won't permit it. All the tariff will do, in that case, is damage the foreign producer's economy and make bananas more expensive for us, with only a small revenue going to the treasury. Absolute free trade with the banana republics is good for them and for us.

There are very good reasons to have protective tariffs against China. The Chinese use slaves - literally slaves - to power part of their economy. Otherwise, they dump goods, they lack environmental standards, they pay their workers very very little, they have no labor protection laws, and they steal our intellectual property.

American businesses cannot compete with that. When labor is at slave wages, there are no workplace safety, working hours limits or environmental protections, those things right there give the Chinese an invincible advantage over any American manufacturer of comparable products. When the Chinese practice of wholesale theft of intellectual property is added to it, it makes it that much harder. The China Price cannot be beaten in the free market, because the low, low China price is built on a foundation of overlapping crimes against humanity and crimes against the environment. We must not have free trade with China. All that free trade with China MEANS is that those Americans involved in the trade itself, the middlemen, as well as the financiers, make a killing from the price differential, but whole industries in the US - such as clothing manufacturers - are put out of business, with massive unemployment. Now, the overall profits into the US economy may be the same, but the DIFFERENCE is that then you have millions of Americans on WELFARE in order to eat, instead of making socks for a paycheck in order to eat, and the taxes that pay for that welfare come primarily from the middle and upper middle class, not from the super-rich middlemen and financiers in the China trade. They externalize the costs and socialize the bad effects, but privatize the profits.

Economists of a certain unrealistic and autistic mindset - good with numbers, pathological with human beings, and "assume a can opener" levels of realism with regards to the actual world - look at numeric balance sheets and observe that the GDP numbers, in the abstract, are higher on both sides of the Pacific because of the China trade, but this is a childish and completely unreal way to look at it: the externalities are ignored.

Nobody ever changes their minds about any of these things, though. So we have to resolve it through brute force politics. Trump won in large part because huge numbers of Americans suffer too much from the existing politics, and therefore the ideas of economists, a much smaller portion of people, have to be set aside in favor of policies that favor American work over welfare, at the opportunity cost of lost trading profits and a nominally higher GDP.

You say that we have to have either free trade or trade barriers, one or the other.

But actually we can have free trade with SOME countries, and set trade barriers with other countries differently, in order to level the playing field on a country-by-country basis. We do not have to be consistent across the board at all.

Vicomte13  posted on  2018-06-04   9:41:43 ET  Reply   Untrace   Trace   Private Reply  


#36. To: Vicomte13 (#23)

You say that we have to have either free trade or trade barriers, one or the other.

All tariff barriers do is increase the cost to the consumer, but it is a way of taxing the consumer and balancing the budget. You want tariff free bananas, great, what are you willing to trade for them?

paraclete  posted on  2018-06-05   8:05:01 ET  Reply   Untrace   Trace   Private Reply  


Replies to Comment # 36.

#37. To: paraclete (#36)

All tariff barriers do is increase the cost to the consumer,

Not really. They impose a tax on the importer. The importer then ATTEMPTS to pass along the cost to the consumer.

Economists oversimplify things (and they do it for political reasons) when they say that taxes are "merely passed along to the consumer". That's not true. Rather, when taxes of any sort - including tariffs - are imposed, the importer/vendor/manufacturer ATTEMPTS to pass the cost along to the consumer, to the extent it can. But the commerce in any item is elastic. Raise the price, and people may just pay the price and go on - if the demand curve is inelastic - or they will buy less of it, or none of it at all. Vendors cannot simply "pass along the costs". They can try, but if the consumer won't buy at the inflated price, the vendor has to start taking a cut to its own profit margin: it pays the part of the tax that it can't pass along.

Of course, there comes a point where the part that it has to pay cuts so deeply into its profit margin that it decides that it cannot continue in the business. With real actors this does not happen at the first penny, or the first dollar, any more than it does with consumers. There is a degree of stickiness in all behaviors, precisely because transitions are not free. To be selling a product, an importer/vendor has spent money creating a supply chain, creating a retail point of sail, creating an accounting system, advertising, etc.

This was set up under conditions of a certain (transitory) profit margin for their goods that is sufficient to make it worthwhile to do so. Once those costs have been sunk and that system is in place, if an intervening event such as a tax hike comes, of course the vendor will TRY to pass that along to the consumer, but he can only do so the point that the market will bear it. If the price hike causes a substantial fall off in sales, the lost revenue from reduced sales with overwhelm the additional revenue from the price hike. Vendors do not have the ability to hike their prices in an unlimited fashion to pass along new costs to the consumer - that's the point.

If the vendor petulantly stops his little feetsies and takes the attitude that if he cannot continue to collect his previous profit margin by passing along new costs, he will get out of the business completely, he may do so, but at the cost of the loss of all of those sunk costs. Somebody else will step in and take his market share. The overall profit margin will be reduced because the full impact of a new tax usually cannot be completely passed off onto the consumer.

So, what the tariff barrier does is increase the cost of the foreign good to both the consumer and the importer. At a certain tariff point, the foreign good is no longer economically competitive with the domestically-produced good, and natives will substitute the native good for the foreign. This, then creates jobs in the country (or preserves them, which is a key purpose of the tariff.

Bref: a tariff, or any other tax, does more than simply increase costs to consumers. It changes consumer behavior, and it changes vendor behavior. And that's the POINT. The tariff isn't there to raise taxes. It is there to prevent foreign enterprises from exploiting an imbalance between the two systems to the disadvantage of native producers.

Vicomte13  posted on  2018-06-05 08:34:57 ET  Reply   Untrace   Trace   Private Reply  


#38. To: paraclete (#36)

You want tariff free bananas, great, what are you willing to trade for them?

Dollars.

Vicomte13  posted on  2018-06-05 08:35:21 ET  Reply   Untrace   Trace   Private Reply  


End Trace Mode for Comment # 36.

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