Tuesday, July 10, 2018

Trump's trade war will do most harm to his own supporters

Some (many?) of us on the left looked on with marvel (dismay?) as Trump blared crazy stuff about what we knew wasn’t so. His ignorance of economics ensured that his promises could not be kept. (Consider the futility of bringing back coal jobs.) Nevertheless, in spite of record dishonesty (6.5 lies/day), his promises to middle-America snared the votes of those in red counties. It was only a matter of time until Trump’s economic alternative reality started to crumble, taking down those voters most worshipful of Him. Trump’s trade war is the stimulus for that collapse. The irony is that those who voted for Trump are those Americans under the biggest threat of job insecurity and higher cost of living.

Greg Sargent (Washington Post/The Plum Line) explains why Trump’s delusions are about to blow up in his own voters’ faces.

With the exception of the big, beautiful wall that is already being built on the southern border (in President Trump’s mind, anyway), the issue that taps most directly into the most visceral strains of Trumpism is his escalating trade war with China. Given how often he preens about his “toughness” toward China before roaring, worshipful rally crowds, it’s hard to see how he’ll back down, no matter what the consequences.

Numbers provided to me by the Brookings Institution suggest that those consequences will most directly impact the counties that voted for Trump. Indeed, the numbers show that China has taken aggressive steps to sharpen its targeting of Trump counties in the latest round of retaliatory tariffs it just announced.

This morning, Politico reports on the backstory leading up to Trump’s trade war. Trump has been ranting for decades about other countries “ripping off” the United States on trade. Now that hostilities are escalating, Politico notes that Trump has “no clear exit strategy and no explicit plans to negotiate new rules of the road with China, leaving the global trade community and financial markets wracked with uncertainty.” But Trump loyalists say he’s playing a long game and won’t buckle. As Stephen K. Bannon puts it, Trump “has preached a confrontation with China for 30 years,” making this a “huge moment” that pits “Trump against all of Wall Street.”

Despite this phony populist posturing about Trump targeting “Wall Street,” Trump counties are the ones most likely to take a hit. The Brookings Institution, which keeps detailed county-by-county data on employment by industry, looked at all the counties that have jobs in industries that China is targeting, and broke them out by counties that voted for Trump and Hillary Clinton. Brookings provided me with this table showing the results:

Trade war fallout for Trump voters

Nearly two-thirds of the jobs in industries targeted by China’s tariffs — a total of more than 1 million jobs — are in more than 2,100 counties that voted for Trump. By contrast, barely more than one-third of the jobs in China-targeted industries — just over half a million — are in the counties that voted for Clinton. (This is based on 2017 county/employment data.) This doesn’t mean those jobs will definitely be lost; it means that they are in industries that are getting caught up in Trump’s trade war, making them vulnerable, depending on what happens.

China’s retaliatory tariffs are mainly aimed at U.S. exports of agricultural and food products such as soybeans, cereal, seafood, meats, fruits and nuts, and dairy, as well as intermediate goods and transport equipment, including vehicles.

Mark Muro, a senior fellow at Brookings who compiled this data, tells me that the jobs targeted by Chinese tariffs include well over 200,000 in poultry processing; nearly 140,000 in other animal slaughtering; over 120,000 in automobile manufacturing; and tens of thousands apiece in industries involving the manufacture of light trucks, utility vehicles and construction machinery, among others. As maps compiled by The Post show, many of these industries are concentrated in the Midwestern heartland and in the South.

The rub here, Muro tells me, is that China’s new retaliatory tariffs actually go further in targeting red counties than its previously threatened list did. “These tariffs will touch down in very specific places,” Muro said. “They appear calculated to have that effect. In its final iteration the list became significantly more rural and agricultural and red.”

It’s sometimes said that this trade war might have a negligible effect on the U.S. economy overall. But Muro points out to me that, by targeting industries that are particularly important in their geographic areas, the tariffs could have outsize impact in concentrated localities. “These counties rely pretty heavily on these industries,” Muro says. “Certain places could be hit quite hard.” Red places, to be precise.

As Paul Krugman points out, Trump’s trade escalation is built on a foundation of delusions: the idea that trade wars are easy to “win” or that the country with the largest trade surplus has secured some sort of conquering status; the refusal to grasp that disrupting complex international supply chains hurts people on all sides, including U.S. companies and workers; the lie that the United States is getting “ripped off” by punishingly high tariffs. We don’t know how far Trump’s trade war will go. But given how deeply entangled it has become with Trump’s own megalomania and with the simplistic, rage-addled vision he has nursed about international trade for decades, does anyone want to wager that Trump will find a way out anytime soon?

AND TRUMP’S TRADE WAR COULD HURT U.S. EXPORTERS, TOO: The Wall Street Journal’s Greg Ip points out that Trump’s trade war, by taxing imports, could also deprive our trading partners of money to buy our exports, in addition to taxing those exports:

Though completely counterintuitive, theory and evidence show that taxes on imports act just like a tax on exports. Though it’s early, the Trump administration’s recent round of tariffs is already rippling out to exporters: Soybean farmers face plunging prices as China raises tariffs, Harley-Davidson will move production of motorcycles destined for the European Union out of the U.S., and BMW says foreign retaliation may hit exports from its South Carolina plant.

Who knew trade policy could be so complicated?

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