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Heroes of the Great Patriotic Trade War

Summary:
I’d like to make an important announcement to New York retailers: NEW JERSEY HAS AGREED TO IMMEDIATELY BEGIN BUYING LARGE QUANTITIES OF WHITEFISH SALAD FROM OUR GREAT PATRIOT GOURMET MARKETS.What’s that you say? There was no such agreement? New Jersey doesn’t even have any kind of centralized purchasing mechanism for food products? I say fake news! Conspiracy by the deep state!O.K., you know that I’m not serious. But Donald Trump was serious when he tweeted this:ImageAlso, chocolate rations are increasingCreditTwitterThis tweet raises two immediate questions:1. Why, like so many Trump tweets, does it read like a bad translation from the original Russian?2. What the heck is he talking about?There was, after all, no mention of agricultural products in the statement of agreement. And Mexico,

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I’d like to make an important announcement to New York retailers: NEW JERSEY HAS AGREED TO IMMEDIATELY BEGIN BUYING LARGE QUANTITIES OF WHITEFISH SALAD FROM OUR GREAT PATRIOT GOURMET MARKETS.

What’s that you say? There was no such agreement? New Jersey doesn’t even have any kind of centralized purchasing mechanism for food products? I say fake news! Conspiracy by the deep state!

O.K., you know that I’m not serious. But Donald Trump was serious when he tweeted this:

ImageHeroes of the Great Patriotic Trade War
Also, chocolate rations are increasingCreditTwitter

This tweet raises two immediate questions:

1. Why, like so many Trump tweets, does it read like a bad translation from the original Russian?

2. What the heck is he talking about?

There was, after all, no mention of agricultural products in the statement of agreement. And Mexico, while a big buyer of U.S. farm goods, is a market economy: private businesses, not government officials, decide how much Iowa corn Mexico will buy in a given year.

For what it’s worth, my guess is that Trump vaguely remembered the terms of an abortive trade deal with China, which he claimed included a commitment by China to buy 5 million tons of U.S. soybeans. If my guess is right, Trump is confusing Mexico with China, and has forgotten that talks with China have broken down. Not a good look for the man with his finger on the nuclear button, but whatever.

But leave worries about Trump’s mental state on one side, and think about how much events like the Mexican standoff weaken America’s position in the world.

To be a great power, of course you need the material basis for power — a big economy, a military big enough to make you a force to be reckoned with. But you also need to be a country others can take seriously — a nation that stands by its promises, but also makes good on its threats.

So think about what just happened.

First, Trump recently negotiated a trade deal with Mexico — a deal barely different from the previous deal, which Trump called the “worst in history,” but put that on one side. The whole point of trade deals is that they’re supposed to provide some certainty. The USMCA, like NAFTA, amounts to a promise by all three participants that they won’t arbitrarily impose new barriers to cross-border trade.

Then Trump went ahead and threatened major new tariffs on Mexico, not because it had violated its trade agreements, but because he didn’t like something that was happening on the border, a situation that has nothing to do with trade policy. So the USMCA appears, in practice, to be a solemn promise by the U.S. government not to impose tariffs on Mexican products … unless it feels like it.

If that’s what you get out of making a deal with America, why bother?

And then, after all the dire warnings of what would happen if Mexico didn’t give Trump what he wanted, Trump appears to have backed down in return for a declaration that Mexico will do pretty much exactly what it had already promised to do before the threats.

Now, the business world is extremely pleased that the trade war appears to have been called off. But it does look as if a Trump threat is worth about as much as a Trump promise: There’s no particular reason to believe that he’ll actually go through with it.

The only thing we can be sure of is that whatever happens, Trump will claim to have achieved a great victory.

In the case of the Mexican standoff, this may not seem too bad. But think about what it means when foreign leaders know that the president of the United States is:
(a) gullible
(b) easily susceptible to flattery and
(c) eager to proclaim victory, and unwilling to admit that he didn’t actually get anything significant.

Basically, this turns America into a systematic chump. Hold a summit, flatter Trump’s vanity, let him issue a communiqué claiming vast achievement, then go on doing whatever you wanted to do. Just ask North Korea’s Kim, who snookered Trump into thinking he’d made major concessions, went right back to building up his nuclear attack capacity, and still gets praised by Trump as our allies watch in horror.

Image
Demonstrators in London last year with an effigy of President Trump dubbed the “Trump baby.”CreditChris J Ratcliffe/Getty Images

Again, it’s a good thing that we seem to have avoided a Mexican trade war for now. But the China trade war still appears to be on. And I’m worried about confrontation with Europe, partly because European nations are democracies with free presses, which makes it harder for them to give Trump the kind of imaginary victories he craves.

In any case, the bottom line from the Mexico fiasco is that the U.S. is now significantly less credible and less respected than it was a few weeks ago. And things will probably keep getting worse.

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Paul Krugman
Paul Robin Krugman (born February 28, 1953) is an American economist, Distinguished Professor of Economics at the Graduate Center of the City University of New York, and an op-ed columnist for The New York Times. In 2008, Krugman won the Nobel Memorial Prize in Economic Sciences for his contributions to New Trade Theory and New Economic Geography.

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