America Set To Learn Hard Truth About “Free Trade”

Good piece in Washington Post on the first U.S. casualties of a trade war with China.   You can see it the charts China has targeted it retaliatory tariffs to hit Trump where it hurts.

While the largest urban and suburban counties are home to almost as many people working in tariff-exposed industries as rural areas, the rural concentration is far higher, about 1 job in 33. In the big cities, it’s 1 job in 200.

Tariff-exposed jobs are more than twice as likely to fall in counties that voted for Republican Donald Trump in 2016 than in counties won by Democrat Hillary Clinton. There are more than 1 million jobs exposed to China tariffs in more than 2,600 counties carried by Trump, and fewer than 564,000 exposed jobs in Clinton’s counties.  — Washington Post,  June 22

July 6^th Deadline

We do hope they strike a deal before July 6^th, the date U.S. tariffs on Chinese imports take effect, and same day China’s retaliatory tariffs are expected to launch.  We are not that optimistic, however,  unless the financial markets crater on trade war fears and force the president to cave, and move negotiations to the WTO, where it will have more leverage to extract concessions from China.

Furthermore,  we don’t believe President Trump is a free trader at heart but more of a protectionist and neo-mercantilist.  There is no “Art of the Deal” – see his waffling on immigration  – and no method to the administration ’s madness to negotiating anything, for that matter,  but only driven all impulse and myopia.   We hope the markets awaken to this reality before it’s too late.

The administration also fails to understand the overall trade deficit is a function of America’s savings deficit and not cum sum of trade microaggressions.

The upside to this mess is that Americans will finally realize that trade creates both winners and losers and that the majority of the country is better off with free trade even if it is not perfectly fair and reciprocal.  The “best” policy for the majority is to expand trade and remain engaged with the global economic community but also provide a strong safety net the losers of free trade.

The slouch toward tribalism will destroy the United States and global economy.