If you recall, last week I wrote an article about the current “trade war” between the US and China. It would now appear that this war has spilled over into Europe and Canada. So what gives? To be blunt, this is President Trump doing what Trump does best. For anyone who has read Trump’s book “The Art of the Deal,” you know that Trump always starts negotiations from a “strong” position and “forces” people to the negotiation table. And his current approach to trade is pretty much par for the course.
Recently, Trump imposed tariffs on many of our trade partners in direct response to the unfair trade practices with which the American taxpayer has been burdened for decades. Of course, we now know that this triggered a run of retaliatory actions by these same trade partners. For example, his aluminum and steel tariff policies triggered retaliatory tariffs from Canada and the European Union.
But of course, that did not stop Trump. During the first week of July, Trump imposed new tariffs on China. This new tariff assesses more than $30 billion on Chinese electronic equipment and consumer goods. And of course, China is now threatening to retaliate. This all went exactly like I said it would in the aforementioned article.
But here is the interesting twist to the story…and I am stunned (sarcasm) that there is little to no opposition by liberals about this obvious and blatant attempt by China to manipulate and meddle in our elections. Let me explain.
China is implementing a “tit-for-tat” retaliatory trade tariff policy. But if you look closely you will see that their sanctions are intentionally targeting those industries in Midwestern and Southern states. Why? To specifically antagonize Trump voters. They are using these tariffs as a political weapon. But of course, you hear nothing out of the left. No surprise there. The left actually seems to champion and applaud the moves by China.
China’s intent is to inflict the maximum amount of economic pain on top agricultural producers and various manufacturers in order to force Trump to rescind his tariffs and, if they’re lucky, get him to go back to the status quo.
But what they fail to realize is that this is never going to happen. First, it’s not Trump’s style to retreat. Further, there is such a huge trade imbalance affording Trump a lot more wiggle room than China. In short, it is a game China can’t win. Even if they executed their “nuclear” option it would cause such a disruption on the world economic stage that would create more problems than resolutions.
So what is Trump’s game plan? What is the end state he is looking for? “Free trade” and a policy that puts America first or, at the very least, on a level playing field.
How might this play out? First of all, Trump is going to reclaim the moral high ground and show and explain to the American people how our trading partners have been hoodwinking us for decades. According to a report from the White House Council of Economic Advisers, China’s tariffs are on average about 10 percent while our tariffs are closer to 3.5 percent, and we buy three times as much from China as they buy from us.
Of course, this does not take into account the other trade hurdles (non-tariff) that China imposes on American companies, making it damn near impossible to do business in China.
For example, as Stephen Moore so eloquently said: “[M]any U.S. companies complain, with justification, that to do business in China, they have to disclose trade secrets and patents, and in some cases, surrender ownership rights of the firm. How is any of this ‘free trade’?”
Our European allies have treated us no better. In fact, the argument could be made that they have treated us worse than China. On average, European tariffs are about 30 percent higher than those we impose on them. Adding insult to injury, they slap another ten to twenty percent “value-added” tax the minute American goods hit Europe.
How is this considered “free” or “fair”?
At the G7 summit, Trump challenged the other leaders by proposing: “We should at least consider no tariffs, no barriers — scrapping all of it.” Of course no one at the time was interested in discussing trade. Why? Because the G7 countries are much more interested in deriding Trump while simultaneously protecting and maintaining the status quo of their own “indefensible” protectionist trade policies.
As reported by Larry Elliot of The Guardian, Trump sees trade negotiations as one of his business deals: the aim is to get the other side to make concessions. He may be right in his assumption that other countries will blink first. America is, by global standards, a relatively self-contained economy: trade is 28 percent of GDP. That compares with 41 percent in China and 51 percent in Germany, leaving them in a much more exposed position.
Trump has repeatedly and emphatically stated that he is all about “free trade” but that it must be fair and “reciprocal.” Because it is not…Trump, true to his word, took the actions he promised the American people.
So Trump does what he does best. He changes the terms of the negotiation. By imposing tariffs he changes the dynamic of the conversation. Remember, the US imports far more than we export. So we win the tariff war anyway you want to slice it. Sure, it will be painful and many will sacrifice, but in what war does that not happen?
He changed the terms. Guess what happened? Europe blinked first. On July 4, Angela Merkel stated emphatically that “the European Union will make every effort to avoid a trade war with the U.S.”
Trump’s ultimate game plan is exactly what he previously stated: “Free Trade.” Remember, he said “scrapping all of it.” That is what he wants. Zero tariffs is the ultimate victory. It would be totally free and fair market trade. Capitalism at its finest.
This is the best route for the United States. We already impose the lowest trade barriers of any industrialized nation. So we lose an average of 3 percent in tariffs, but imagine the rewards we would reap by being able to export our goods and services without restriction or penalty. We could once again be a major player on the world stage and perhaps even do something about our deficit.
Let us not forget Trump’s position on NATO and NATO members’ defense spending. This is just one more lever Trump is using to force our allies to the negotiating table. It is pure genius.
Germany has now promised to increase its spending on defense per the 2014 NATO agreement that required allies to start spending more on defense with the goal of devoting 2 percent of GDP within 10 years.
Yet again, Europe blinks first. On July 4, Angela Merkel stated: though spending is rising “relative to what others are doing in terms of their gross domestic product, that is far from sufficient.” She added that “that is why we have committed to spend 1.5 percent of gross domestic product for this by 2025.”
How fitting that both of these statements came during our Independence Day celebration. I have said this before and it is worth repeating: Trump is playing chess while everyone else is playing checkers.
Mark my words, folks: this is not about a trade war, despite the liberal media trying to give it life. This is typical Trump. He is rewriting the rules and forcing the conversation; so far, it seems to be working. Just look at his achievements over his first 18 months in office. This will just be one more to add to the list. Trump said it best: “we will have so much winning if I get elected that you may get bored with winning.”
So, are you tired of winning yet?
