An unpopular defense of foreign trade
From the pages of In Business magazine.
Now that foreign trade has become the bastard stepchild of American economic policy — both presidential candidates are running from it like a plague — I’d like to raise my feeble voice in defense of it. I’ll start by asking how we’re going to achieve stronger economic growth without it?
Given the rhetoric of one of the aforementioned candidates, Republican Donald Trump, we could be heading toward a trade war. Far from growing the economy, an exchange of tariffs and retaliatory tariffs could cause economic harm, especially in a strong manufacturing state such as Wisconsin.
Trump argues that manufacturing jobs have been lost due to the nation’s trade deficit, which last year stood at $746 billion. He makes this assertion even though trade has demonstrably helped Wisconsin manufacturers, who export everything from industrial machinery to furniture and bedding.
A healthy supply of jobs in our state exist because Wisconsin-made products are coveted overseas, especially in markets targeted by Trump’s tariffs, which would serve as a tax on imports. Two of Wisconsin’s top three trading partners, Mexico and China, have been threatened with tariffs — China would face a 45% tariff and Mexico would face a 35% duty.
Granted, China’s theft of American intellectual property, its currency manipulation, and its failure to meet environmental and other standards are issues that need a resolution, but in Trump’s zeal to hold China accountable we could lapse into an era of protectionism that would make matters worse.
In the 1930s, protectionist legislation brought disastrous results, intensifying the Great Depression. Both nations in Trump’s crosshairs would likely retaliate with tariffs of their own, making American goods more expensive and less competitive in the Chinese and Mexican markets. What’s more, our tariffs on their goods would prevent U.S. manufacturers from importing the parts they need to make their own products.
Such tariffs cannot be imposed without Congressional approval, but who knows what the makeup of Congress will be after this unpredictable election cycle? A bipartisan coalition of anti-trade lawmakers could give a President Trump the green light, but it would be preferable to resolve trade disputes before the World Trade Organization, which is one of the reasons the WTO exists.
The last time we responded to economic anxieties with soaring American tariffs, a global trade war ensued, but the lessons of history appear to be lost on today’s politicians — none more so than Donald “The Terrible.”
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