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sábado, 10 de marzo de 2018

DARREN BRUNO: Trump’s tariffs are not protectionist. They’re a return to free trade.

On Monday, President Trump announced new tariffs on imported steel (25%) and aluminum (10%) and just about everyone lost their minds. The media started calling it the beginning of a “trade war” and the market reacted as though the sky had just fallen.

A fight seems to have broken out between “protectionists” and “free traders” both in the White House and throughout the country. But all the hysterics are just that — hysterics.

That’s because this is not about free trade vs. protectionism, it’s about creating genuine free trade.

Chicken Little’s Stock Market

Almost immediately following Trump’s tariff announcement, Europe threatened retaliatory measures on bourbon, Harley motorcycles, and blue jeans (among other things) — attempting to strike at quintessentially-American exports. China, the real source of the problem, also threatened retaliatory measures if Trump persists.

For about three days, ending with the announced departure of Trump’s advisor Gary Cohn (a free trade advocate) from the White House, the stock market went on a roller coaster ride, each day ending lower than the last.

The market stabilized Thursday when the president announced that Canada and Mexico, our NAFTA partners, would be exempt from the tariffs.

CNBC and other major media outlets brought on a slew of guests talking about tariffs, trade war, the detriment that these measures will have on the market, on our political relationships with other countries, and so on.

Nearly everyone had the same refrain: “Trade wars are bad!”

A Trade War?

Is that what’s really happening here? Well… kind of.

The truth is that the United States has been involved in a trade war for decades. It’s just been pretending that the war wasn’t taking place while being on the losing end.

Trump isn’t kicking off a trade war, he’s just punching back – as is his style. And he’s just the first one who will probably get away with it, unlike Bush in 2002.

There’s been a war on American goods practically since Nixon warmed Chinese-American relations. That’s because the Chinese have been subsidizing their country’s production while “dumping” these commodities in foreign markets like our own.

From the middle of the 20th Century until the start of the millenium, America was a major producer of aluminum. In fact, in 2000, America was the biggest aluminum producer (around 30%) while China didn’t even come close. Now, America is the 6th greatest producer and China is the largest.

This is due directly to Chinese protectionism.

China isn’t playing fair, but the United States is expected to just roll over? Isn’t countering the Chinese government’s intervention in the global market actually leveling the playing field?

Yes, it is.

And that’s what free trade is: every country operating on the up and up. No unfair subsidies, no overproduction, just true competition.

The American Aversion to Tariffs

America is a classically liberal country where both major political parties agree on the benefits of global free trade. This consensus has created a knee-jerk reaction to anything that even smells like protectionism.

But that’s not what’s happening here.

The reality is that most Republican and Democrat elites are too busying getting rich in a bull market to bother thinking of middle-income manual laborers in Kentucky and Ohio. They don’t really care if those people see an increase in wages or if their decrepit towns are revitalized from new plant openings.

Elites tout the importance of free trade because it’s easy, virtuous, and profitable. It’s similar to supporting amnesty for illegal immigrants while one benefits from cheap labor at the expense of the Americans who are here already.

For any and all of Trump’s faults, he seems to understand this intuitively, and he’s spot on. Middle-class Americans are tired of getting shafted while the rich benefit at their expense. This is exactly why so many people who have been negatively impacted by global “free trade” found hope in his campaign promises.

This trade war rhetoric, which is a subtle continuation of the age-old capital vs. labor conflict, isn’t merely about dying industries in a global market. It’s about the exploitation of, or at least reckless indifference to, one’s own countrymen. All to make a higher profit.

All the talk about protectionism is an unhelpful diversion. Don’t get caught up in it because it’s not the whole truth.

Americans want free trade and equality, and that’s what these tariffs will create.