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What Donald Trump Doesn’t Get About Trade and Tariffs


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The news was intensifying Tuesday evening as a cable TV spectacle: A porn star sued President Donald Trump for consuming CNN, two on MSNBC about the erratic ways of an apparently drunk former Trump aide, and two on Fox News pundits were engaging in personal attacks against one. Another gave the two of them a hasty farewell before disappointed host Laura Ingraham.

Wow. And, then, there was also the matter of tariffs and world economic stability.

That’s why Trump, our ardent Mar-a-Lago populist, is now the least-appropriate course material for Emily Blanchard, an expert in international economics and public policy at Dartmouth’s Tuck School of Business. Yes, he’s the grist for a pointy-head grinder at New Hampshire’s bucolic Ivy League Enfolds (which he’d probably love to know in private) because of tariffs, not Stormy Daniels.

“I’ve told students it doesn’t add up,” she says, adding that Trump’s well-old warnings of tariffs on imported steel and aluminum prompted a rebuke of retaliatory measures and a European warning against American bourbon (Hello, Kentucky). Senate Majority Leader Mitch McConnell) and Harley Davidson (sorry, Wisconsin House Speaker Paul Ryan), among other proud red-white-and-blue products on the politically-anticipated retaliation list.

He spoke on the day in which Trump’s top economic aide Gary Cohn revealed he was falling apart, clearly disappointed with the president. As an introduction, I mentioned to Blanchard how I once covered the catastrophic decline in organized labor and the auto, steel and other industries beginning in the late 1970s.

I knew the pulse of towns and hoods and the best couples that never healed, even in the midst of the surprising rise of property like other regions and crosses across America. The stories of the families were torn apart. Among the losers who never made a comeback in the midst of American change. Those of them who can no longer imagine holding a MacBook Air or other symbol of post-Rust belt economy, who fear children’s cavities they can’t afford to fill.

cartoon on president donald trump

Certainly, the Trump-inspired debate shows a remarkable free trade consensus that has built up over several decades among society’s elite. But there is also a closer look at inequality and scattered social cohesion. The current public debate, no surprise, isn’t always full of nuance, which is why I initially asked Blanchard about the bigger realities he thinks may have been missed.

In his mind, first is the reality of the business about comparative advantage and how everything has an opportunity cost. Increasing jobs in steel and aluminum is fine, she says, but then tell them what we might not be making. Want to increase manufacturing? In which areas do you shrink? Where do all the workers for the cars you want to take off the assembly line come from?

The second most important point is that the trade deficit is what we think it is: it’s not about exports and competition. “It gets me bananas,” she says. The either-or construction that pervades at least some of the recent discussions is inappropriate. It misses the realities about the relevance of the business in the long run as well as some facts related to buying and selling of assets.

She says the United States is nifty in producing things and offers a lot of growth potential. And many investors around the world would love to own some part of our economy, be it shares of Google stock, Treasury bills, or a fancy house somewhere.

But people forget that our open capital market means we are selling assets. Simply put, the rest of the world buys our wealth. A trade deficit occurs when the world is selling us more goods than they are buying some of our assets. They help fund Apple and Google and the same municipal debt that builds our bridges, or money for children’s education if a family is borrowing.

“When we say let’s get rid of the trade deficit, we’re saying let’s stop borrowing from the rest of the world, or equivalently, let’s no longer have the rest of the world invest in America,” she says. That, she underlines, is a separate conversation whose implications are profound and perhaps not well understood.

That deficit and thus, don’t want to invest remotely? Watch interest rates rise, fewer bridges are built, or more kids go to college or trade schools. “That’s what we mean when we say, ‘minimize the deficit,'” she notes.

So don’t just pick a company or industry, take a business approach and declare that our company is involved in the fight against someone else. It misses how we are borrowing and lending with the rest of the world.

And so, we have the current position on tariffs, which includes the imagination of some citizens that other nations will not retaliate swiftly. “No, no, no,” she says. Everybody loses. If the EU turns its back on our cranberries, motorcycles, bourbon, orange juice, soybeans and rice, that’s no good at all.

Blanchard doesn’t really see Trump’s threats in a political context. That’s not his meter. She doesn’t know about the power plays inside the White House beyond the obvious: Trump is displaying expressed views on the campaign trail that are consistent with a zero-sum game analysis. This means looking at business through the lens of competition and not understanding what it considers a necessary larger equilibrium in the economy.

This takes us back to how making more steel can mean not producing as much of anything else. I think of the long-closed US Steel South Works on Chicago’s South Side, which once had 25,000 workers and was the engine of upward mobility, especially for many immigrants in the 20th century. Long gone, the area never revived, with its forgotten handicrafts found in famous structures such as the Gateway Arch in St.

Blanchard has cited both Trump and Peter Navarro, hitherto lesser known trade advisers, as one of the reasons for Cohn’s departure. She presses to be diplomatic. “The economics are not sound,” she says. They don’t see how many pieces of a complex society fit together. How, for example, interest rates depend on openness to trade and capital markets. “It’s hard to turn the mind around, but the trade deficit is business over time,” she says.

As she notes again, the world craves for a variety of American products. This is good, because that foreign investment keeps borrowing costs low and funds many things around us: corporate research and development, pioneering innovation, infrastructure such as new or repaired bridges and roads, As well as education. There is so much more.

But to get its hands on such assets, the world exports more goods and services to the US than imports from the US.” Essentially, it seems the rest of the world is saying ‘Hey, we want to invest in America. We want to buy a stake in the future of the US economy and, in turn, that influx for foreign investment means the US can import more goods and services than it exports today,” she emails. “It is an accounting identity – it must be true – that if the rest of the world (on the net) is investing in the US (i.e. if the US is running a capital account surplus), then the US should be running a current account deficit.”

Now if you decided, as a policy, to force all that trade to roughly balance, then the net inflow of foreign investment would decrease, probably sharply. “America’s borrowing costs will rise, leading to a decline in investment, consumption and (almost certainly) GDP,” she says. “In addition, we will spend more of our taxes to pay off the existing government debt.”

That’s what she tries to underline the students. It is an account of the balance of payments at the national level.

And, yet, she remains sensitive to the citizens I mentioned earlier, who were left behind. If some Dartmouth are dropped by the class, she says, “I’m sorry.”

His frustrations have been ignored for far too long, including his own profession. The effects of trade and technology were not fully felt. There was a view that, at least, wishful thinking about the winners was somehow compensating for the losers.

“That’s not happening,” she observes, raising the fundamental questions of what we do now. The view that comes through in some of the pro-Trump reactions, and they exist on multiple levels, is that a slight rewinding of the clocks can bring about a more equitable income distribution.

political cartoon on economy

“But we can’t go back even if we want to,” she says. That would mean reducing the size of the big pie and, at the same time, creating a myth of a past that wasn’t so grand (as a woman, she knows the gender inequalities in the old market all too well). As Dartmouth’s Blanchard colleague Doug Irwin, whom I tracked down in New Zealand, says, “Trump is a 1950s man who thinks we have to produce a lot of coal, cars and steel with a lot of men. should.”

Raising tariffs will not bring us back to a golden age. It forgets how technology will replace bodies and robots will be responsible for any increased production (automation is a topic consistently overlooked by Trump as both a candidate and president). Look around any workplace and see how more is done with less. As is often mentioned, we are actually talking about the precious few steel and aluminum jobs we get through tariffs, a tiny slice of the jobs that would be lost if the rest of the world stopped buying our stuff. Is.

She asks for a critical national conversation that, of course, would be difficult in a Twitter-driven-discourse world with civic engagement and even debatable growing media illiteracy (just for Robert Mueller’s campaign Read the recent indictment of the Russians to see how they laughed at our inability to recognize their fake news). And feverish immersion in “hot” like the 15-minute scenic pedestrian on Stormy Daniels’ trial, which opened the CNN prime-time show Tuesday evening.

How can we make work more valuable and better target our labor force? And it can’t just be a factory-by-factory, city-by-city discussion. It should be big and broad and cohesive. Tariff discussion is important, but also a distraction from the issues facing us of education, infrastructure and related issues and policies.

“We need to have a really deep conversation about the value of our individual efforts and work by everyone.”

Trump, born a New Yorker, has never experienced it himself. But the pain he exploits is actually real.



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