Monday , December 17 2018
Home / Project Syndicate / Trump’s Trade Gimmickry

Trump’s Trade Gimmickry

Summary:
The imbalances and inequities generated by the global economy cannot be tackled by protecting a few politically well-connected industries, using manifestly ridiculous national security considerations as an excuse. Such protectionism is a gimmick, not a serious agenda for trade reform. CAMBRIDGE – US President Donald Trump’s bark on trade policy has so far been far worse than his bite. But this may be changing. In January, he raised tariffs on imported washing machines and solar cells. Now, he has ordered steep tariffs on imported steel and aluminum (25% and 10%, respectively), basing the move on a rarely used national-security exception to World Trade Organization rules. The Year Ahead 2018 The world’s

Topics:
Dani Rodrik considers the following as important:

This could be interesting, too:

Jared Bernstein writes Blog repair…and a request for questions.

Tyler Cowen writes Sunday assorted links

Alex Tabarrok writes The Crypto Anarchist Manifesto

Miles Kimball writes John Locke: Legitimate Taxation and other Appropriation of Property by the Government is Limited as to Quantity, Procedure and Purpose

The imbalances and inequities generated by the global economy cannot be tackled by protecting a few politically well-connected industries, using manifestly ridiculous national security considerations as an excuse. Such protectionism is a gimmick, not a serious agenda for trade reform.

CAMBRIDGE – US President Donald Trump’s bark on trade policy has so far been far worse than his bite. But this may be changing. In January, he raised tariffs on imported washing machines and solar cells. Now, he has ordered steep tariffs on imported steel and aluminum (25% and 10%, respectively), basing the move on a rarely used national-security exception to World Trade Organization rules.

Many commentators have overreacted to the possibility of tariffs, predicting a “trade war” and worse. One expert called the steel and aluminum tariffs the most significant trade restrictions since 1971, when President Richard M. Nixon imposed a 10% import surcharge in response to the US trade deficit, and predicted that, “It will have huge consequences for the global trading order.” The Wall Street Journal wrote that Trump’s tariffs were the “biggest policy blunder of his Presidency” – a remarkable claim in light of the administration’s missteps over Russia, the FBI, North Korea, immigration, taxation, white nationalism, and much else.

The reality is that Trump’s trade measures to date amount to small potatoes. In particular, they pale in comparison to the scale and scope of the protectionist policies of President Ronald Reagan’s administration in the 1980s. Reagan raised tariffs and tightened restrictions on a wide range of industries, including textiles, automobiles, motorcycles, steel, lumber, sugar, and electronics. He famously pressured Japan to accept “voluntary” restraints on car exports. He imposed 100% tariffs on selected Japanese electronics products when Japan allegedly failed to keep exported microchip prices high.

Just as Trump’s policies violate the spirit, if not the letter, of today’s trade agreements, Reagan’s trade restrictions exploited loopholes in existing arrangements. They were such a departure from prevailing practices that fear of a “new protectionism” became widespread. “There is great danger that the system will break down,” one trade lawyer wrote, “or that it will collapse in a grim replay of the 1930s.”

Those warnings proved alarmist. The world economy was not much affected by the temporary reversal during the 1980s of the trend toward trade liberalization. In fact, it may even have benefited. Reagan’s protectionism acted as a safety valve that let off political steam, thereby preventing greater disruptions.

And once the US macroeconomy improved, the pace of globalization accelerated significantly. The North American Free Trade Agreement, the WTO (which explicitly banned the “voluntary” export restraints used by Reagan), and China’s export boom all followed in the 1990s, as did the removal of remaining restrictions on cross-border finance.

Dani Rodrik
I am an economist, and a professor at the Harvard Kennedy School. My most recent book is Economics Rules: The Rights and Wrongs of the Dismal Science (Norton, 2015). I was born and grew up in Istanbul, Turkey. I still follow Turkish politics very closely, as you will find out if you spend any time with this blog.

Leave a Reply

Your email address will not be published. Required fields are marked *