No fucking shit....

Trump is clueless about the global market

By Michael D'Antonio

If you haven't heard, President Trump is a graduate of the Wharton School at the University of Pennsylvania. He regularly brags about his education because Wharton is famous for its graduate programs in economics. What he doesn't mention is that he was not a graduate student at Wharton, but a lowly undergrad at Penn, which, in fairness, is a prestigious school. But we don't need this key detail to recognize that he's a few credits short of an advanced understanding of economics.

Consider, for example, the issue of trade. With his tariff war threats, attacks on free trade agreements and more recent lambasting of the American motorcycle-maker Harley-Davidson, Trump has affirmed what many experts feared as he ran for president: He really doesn't know how companies function in a global market.

The Harley Davidson case began with Trump picking fights with trade partners in Europe -- They don't play fair! was his complaint -- and announcing tariffs on steel and aluminum shipped to the United States.

The Europeans said that two can play the trade war game, proposing European tariffs that would hit Harley hard, and the American firm responded by announcing plans to make more bikes abroad in order to avoid tariffs and maintain sales. Because he takes everything personally, Trump's reaction included threatening that Harley will be "taxed like never before." Never mind that Harley faces intense competition worldwide and the company's survival depends on selling bikes everywhere.
Setting aside the silly idea that a president can impose extra taxes on a single company (he can't) let's consider what this incident reveals about Trump's crude approach to policy.

With his sudden announcement of tariffs on foreign steel and aluminum, Trump acted on his decades-old belief that other countries take advantage of the United States in trade because prior presidents were weak leaders. He bypassed the kind of careful study that those same cautious presidents devoted to policy and confirmed that he is an abjectly poor student of economics.

Did Trump know that the world has changed in the last few decades when he made comments about the automotive industry that would have made sense in the 1980s? When considering a tariff on steel and aluminum, did he consider how prices would be affected by higher manufacturing costs incurred by US firms using these materials? Did he have a sense of how many jobs could be lost if these costs were to make manufacturing certain products in the United States an impracticality?

Today, orders for sales of American soybeans to China have fallen sharply, Jack Daniels is facing an uncertain future due to potential EU tariffs on American liquors, and at Mid-Continent Nail, America's largest nail manufacturer, layoffs have already begun.

The negative consequences already arising from the trade wars Trump started could worsen if he follows through on threats to kill the North American Free Trade Agreement. Trump is using a hammer to deal with a fly -- attacking the whole sweeping open trade arrangement instead of seeking improvements that are widely supported.

As a billionaire, Trump could be forgiven for not knowing how NAFTA keeps prices on US supermarkets down. However, he should be able to get information on the pluses and minuses of trade from his commerce secretary, Wilbur Ross, or his trade adviser, Peter Navarro.

Wait a minute. That won't work. Ross and Navarro were the two authors of a paper on economic policy that made the bizarre argument that trade deficits, by importing more than we export, "subtract" from a nation's economic growth. They suggest that a solution would be increasing exports and reducing imports, but imports are not expendable commodities in an economy. To understand why, consider an oil-poor country that imports fuels to power its industries. The imports cause a trade deficit. But, as Vox points out, cutting them off would cause the entire economy to grind to a halt. In this imaginary scenario, as in the real world, imports are not the enemy of a healthy economy. As with so many issues, the balance of trade is not the simple matter the Trump team suggests it is.

If Ross and Navarro are the masterminds behind the tariffs, then the president is listening to the wrong guys. Of course, he lost his best economic adviser, Gary Cohn, who worked in finance and seemed to at least understand that America exists in a truly global economy.

In fact, the biggest risk Trump is taking as he bullies and alienates allies and rivals is that the world will move on without the United States. This may be happening already, as Pacific region countries make new arrangements in response to Trump pulling the United States out of the Trans Pacific Partnership (TPP).

The rise of a free market in the Pacific without the United States is just one of the consequences that could have been predicted by almost any knowledgeable expert when Trump killed the TPP. Ask these same experts to forecast the future impact of Trump's lurching policies and you would get similar agreement on the risks he courts. In fact, trends in the bond market have some on Wall Street quite worried about an impending recession.

In the time since he took office, Trump has sought to take credit for good news on the economy when, one could argue, he was riding the momentum created by the policies of his predecessor. Should a downturn occur, Trump should logically shoulder the blame. I know, I know. Trump never accepts blame and is generally unmoved by logic. Voters, however, will surely ask: Is this how we make American great?