Donald Trump is going to make America great again. But you already knew that.
The question many voters have, is how exactly he plans to do it. The frontrunner has thrown some rather vague ideas out there, some of which focus on trade. Everyone has by now heard the “Trump stump”: “We don’t win anymore. We’re getting killed on trade. We make terrible deals. We’re losing to China.”
Trump’s solution - at least as it relates to China and Mexico - is to impose tariffs. Specifically, he’s suggested he would slap a 35% import tax on goods from Mexico and a 45% tax on goods from China.
As The New York Times noted earlier this month, Trump’s trade policy is a throwback to the mercantilism of a bygone era. It’s a simplistic way of looking at trade wherein running a deficit is equivalent to running a money losing company.
Of course to call it simplistic isn’t necessarily to call it misguided or completely wrong. The US manufacturing sector has been gutted. It’s one thing to build a services-driven economy wherein consumer spending accounts for the majority of economic output. It’s another entirely to create a kind of feudal society wherein the labor market becomes a waiter and bartender creation machine that exists to serve the 1% and in which breadwinner jobs all but vanish along with the country’s capacity to actually produce anything tangible.
“I will call the head of Carrier and I will say, ‘I hope you enjoy your new building,’ ” Trump said in February, referring to Carrier’s decision to eliminate 1,400 jobs in Indianapolis (see here). “‘I hope you enjoy Mexico. Here’s the story, folks: Every single air-conditioning unit that you build and send across our border — you’re going to pay a 35 percent tax on that unit.’"
"Critiques like Mr. Trump’s resonate in part because economists have oversold their case. Trade has a downside, and while the benefits of trade are broadly distributed, the costs are often concentrated," The Times writes. "Everyone can buy a cheaper air-conditioner when Carrier debarks for a lower-cost country, but a few hundred people will lose their livelihoods."
Right. But the problem is that when you look out across US manufacturing, it's more than "a few hundred." US manufacturing has simply vanished, leaving behind nothing but rust, poverty, and despair in America's once thriving industrial centers. And therein lies part of Trump's appeal (and Sanders' appeal by the way).
But a return to a kind of draconian protectionism probably isn't the answer and if you ask Tom Donohue, CEO of the U.S. Chamber of Commerce, Trump's tariffs would get him impeached. Here's the clip from Bloomberg:
http://www.bloomberg.com/api/embed/iframe