Tales from the Trade War

So good. So easy to win.

Via the New York Times: Trump Gives Farmers $16 Billion in Aid Amid Prolonged China Trade War.

President Trump on Thursday unveiled a $16 billion bailout for farmers hurt by his trade war with Beijing, signaling a protracted fight ahead that is already prompting some American companies to shift business away from China.

Mr. Trump, flanked by farmers and ranchers in cowboy hats during remarks at the White House, said China had “taken advantage” of the United States for far too long and vowed to protect an industry that has been “used as a vehicle” by Beijing to hurt America’s economy.

“Farmers have been attacked by China,” Mr. Trump said, adding that if the United States is in a trade war, “we’re winning it big.”

The definition of winning here is, of course, delusional. If the net result of the policy is that farmers are suffering losses that require the federal government to step in and subsidize farmers to the tune of billions (approaching $30 billion) is not any definition of winning any rational person could deploy. This is doubly true if the long-term results of Trump’s policies is that China simply acquires new long-term trading partners (such as for Brazilian soy beans).

Even if one thinks that this is short-term pain for long-term gain (which I think is also delusional), it is impossible to empirically state “we’re winning it big” at this current moment (see, e.g., stock market volatility of late).

Also: for all the current concern about “socialism” in some quarters, it is worth noting that whatever one might wish to call the above-described maneuvers by the Trump administration, it is not free marketeering. Trump is directly interfering with the market via the tariffs, and then further distorting the situation via the subsidies.

Hopes for a quick resolution to the China trade fight have faded, with both countries hardening their positions after a trade deal collapsed this month. Treasury Secretary Steven Mnuchin said on Wednesdaythat no additional meetings with Beijing were scheduled and that he was encouraging American firms to reorient their supply chains and source their products elsewhere.

[…]


Mr. Trump has been fighting several trade wars at once, wielding tariffs against metals from Europe, Japan, Canada and Mexico as well as goods from China. In response, trading partners have hit back at American farmers, imposing punishing tariffs on items such as peanut butter, soybeans and orange juice.

While there are issues that need correcting vis-a-vis China, a man-made, unnecessary, and illogical disruption to major trading relationships is not good for the global economy and, therefore, not good for the US.

This policy is one of those areas that makes intelligent commentary difficult as one ends up wanting to simply wax into snark. But while I suppose a supporter can be enthused by the nationalistic nature of sticking it to China, or one might have some vague hope that all of this will turn out like Trump promises, the reality is that this is a foolish policy.

On its face that subsidies alone are proof of failure, not success. Further, Trump has actively demonstrated both utter ignorance of how tariffs work, as well as about how international markets work. The emperor has no clothes here. Even if one thinks that the basics of global trade need restructuring, or if one has a more nationalistic view of trade policy, one still has to see how reckless and inefficacious this all is (or so one would think).

FILED UNDER: Donald Trump, International Trade, US Politics
Steven L. Taylor
About Steven L. Taylor
Steven L. Taylor is Professor of Political Science and Dean of the College of Arts and Sciences at Troy University. His main areas of expertise include parties, elections, and the institutional design of democracies. His most recent book is the co-authored A Different Democracy: American Government in a 31-Country Perspective. He earned his Ph.D. from the University of Texas and his BA from the University of California, Irvine. He has been blogging since 2003 (originally at the now defunct Poliblog). Follow Steven on Twitter

Comments

  1. Jay L Gischer says:

    Yeah, it always seemed that the Republican Party was the reason America didn’t do stuff like this. Apparently that was never a priority among the voters? Or maybe the current set of R voters is very different than the R voters of 20 years ago? They don’t seem to be fighting him very hard.

  2. HankP says:

    At some point the preference for emotional bluster and bullshitting over reasoning and expertise is going to cause a big problem. It’s seriously damaged the US reputation for being a self-interested but consistent partner in negotiations, which people don’t appreciate until it’s gone.

  3. Kit says:

    When we say that Trump has “unveiled” a bailout, does that really mean the Congress has allocated money?

    I think this was worth highlighting from the NY Times article:

    The Federal Reserve Bank of New York said on Thursday that Mr. Trump’s tariffs will cost the average American household $831 annually.

  4. OzarkHillbilly says:

    This policy is one of those areas that makes intelligent commentary difficult as one ends up wanting to simply wax into snark.

    Sarcasm, it beats killing people.

    Even if one thinks that the basics of global trade need restructuring, or if one has a more nationalistic view of trade policy, one still has to see how reckless and inefficacious this all is

    We are talking about Republicans here Steven, so no.

  5. @Kit:

    When we say that Trump has “unveiled” a bailout, does that really mean the Congress has allocated money?

    It is not a new congressional action (there is no way he could get the House to agree to this). He is using preexisting emergency powers for these actions. Of course, he is the source of the emergency.

  6. Kit says:

    @Steven L. Taylor: I thought that with his wall, Trump declared an emergency and then diverted funds from elsewhere. Is something similar happening here? I’m basically wondering where this money comes from.

  7. @OzarkHillbilly:

    We are talking about Republicans here Steven, so no.

    I am struggling to balance the fact that there are partisan filters that affect the way many view these things and the knowledge that there are people who vote Republican who are capable of assessing actual evidence if they will allow themselves to do so.

  8. @Kit:

    I’m basically wondering where this money comes from.

    Here is the basic answer: USDA Announces Details of Assistance for Farmers Impacted by Unjustified Retaliation.

  9. Pete S says:

    @Steven L. Taylor: “Unjustified Retaliation”? I had to follow the link to see that was a real thing. It sounds like the logical pretzel you need to twist yourself into when you start a (trade) war and believe it is wrong for the other guy to fight back.

  10. @Pete S: Yup. Trump’s corrupting influence over the US government is seen in that headline, since it is an official USDA link.

  11. Andre Kenji de Sousa says:

    @Jay L Gischer:

    Or maybe the current set of R voters is very different than the R voters of 20 years ago?

    They did not realize what is hitting them, yet, because everyone is underestimating Brazil, Paraguay and Argentina. Brazil and Paraguay in practice does not have snow, and there is not really snow in the provinces of Argentina that are used for soybean production. And the ports in Santos, Paranagua and Buenos Aires have good location toward China, with waterways and railways providing easy transport of grains.

    And there is the possibility for China of importing grains from Russia. People are expecting the Chinese to go back to buying from the United States as soon as this idiocy is over, but there is no reason to be so sure of that.

    When the people in Iowa and Missouri note what hit them will be too late.

  12. @Andre Kenji de Sousa: So. Much. This.

    The global economy is global, like it or not. Trump is acting like the relationship is purely bilateral. It is is insane and the long-term damage is going to be immense.

  13. The abyss says:

    if they will allow themselves to do so. [emphasis added]

    Aye laddie, thar’s the rub.
    ETA:

    it is wrong for the other guy to fight back.

    Wait, the other guy gets to fight back? Sez who?

  14. Teve says:

    @Andre Kenji de Sousa: Planet Money ep #907 on April 19 featured a long discussion with a peanut farmer who wasn’t able to sell his crops this year for anything like a normal price. He was expecting to make a lot of money this year, then the trade war happened. When he was asked about it, he said “the Good Lord didn’t see fit” for them to make all that money. Who did he vote for? Trump. Did he still support Trump? You bet. he said it may hurt in the short-term but it had to be done because China was taking advantage of us.

  15. Just nutha ignint cracker says:

    @Teve: Even Ernest Angley admitted that Jesus can change your heart but stupid will stay with you forever.

  16. Andre Kenji de Sousa says:

    @Teve: These people are being delusional. Brazil, Argentina and Paraguay have pretty good climate for agriculture(No snow and predictable wet weather), there is no reason for China to keep buying these crops from Iowa and Missouri.

    Trump is destroying farming in the Midwest.

  17. Kit says:

    @Andre Kenji de Sousa:

    Trump is destroying farming in the Midwest.

    Farmers (and fishermen) balance out their impressive political clout with equally impressive ignorance and short-term thinking.

    In the very short term, farmers are obviously suffering. Still, supply and demand should roughly balance, so one market closing should entail another opening. Well, that’s the theory, and it certainly works that way with oil.

    In the medium term, non-US producers could certainly expand and, ah, eat away at American farmers’ share of global markets. Agriculture has always been heavily protected by tariffs, and the US could find itself locked out. I’d be interested in learning more about this.

    The flip side is that American farmers will forever be protected because their votes ultimately come cheap, despite all the subsidies thrown at them. And I fully expect farmers to be at the head of the line once ties with China are re-established.

    In the end, I cannot say what will happen, but it’s hard to vote against the status quo, against tomorrow eventually looking like yesterday.

  18. Teve says:

    The more I hear from Trump voters the more I believe that democracy is a dumb idea.

    But then I remind myself that several million more voters were smarter than that.