Bill Owens: Is Trade Another Misdirection?
The answer to that question requires reading the latest tweet. In terms of the two countries that have the most direct impact on the North Country, Canada and China, the game is still “on”.
The Trump administration is actively engaged in negotiations with Mexico with a heavy emphasis on the auto industry. Canada has been largely left out of this process, although the US trade representative seems to be indicating that all three countries are working towards a revision of NAFTA. Canada, on the other hand, is reaching out to other countries around the world in an attempt to broaden their trade relations as the actions of the Trump administration remain erratic, inconsistent, and without any clear pattern.
If we look at the impact of the Trump tariffs’ on steel and aluminum coming from China and Canada, and add into that calculus, the additional tariffs which President Trump is proposing the numbers are significant. President Trump is also proposing to increase tariffs of 25% on up to $500 billion in goods. This would generate $125 billion in revenue to the US Treasury assuming China did not let the yen weaken. A cynical thought might creep into your mind that the Trump administration is looking to try and reduce the deficit created by the tax reductions by increasing tariffs (taxes). Unfortunately, trade with China is not $5 trillion. If it were, you might just erase that trillion dollar deficit, but I digress.
The July jobs numbers released last week demonstrate that the economy is continuing to expand. A deeper dive in those numbers reflects that the industries which are intended to be the beneficiaries of the tariffs, that is manufacturing, are not seeing a growth in jobs, and certainly not growth in high paying jobs. Mr. Trump’s expressed purpose in imposing the tariffs, of course, is to bring back manufacturing jobs to the US. If that is not occurring, then the imposition of the tariffs and any trade deal that he might negotiate arising out of the imposition of the tariffs will not fulfill the ultimate goal. One could certainly argue that this may be a long-term play, and that we can’t anticipate a quick resolution to something that has been unfolding for forty or more years. The North Korean summit appears to be another in Mr. Trump’s pattern of misdirection as is the recent summit with Mr. Putin neither of which resulted in significant changes in the attitudes nor actions of either. North Korea did surrender the remains of some US servicemen, but at the same time, it is reported to be building new missiles. Mr. Putin continues to deny that the Russians had any hand in interfering in the 2016 election, while all of the major security agencies of the Trump administration are, in fact, pinning the blame on the Russians, and believe there is adequate proof available to those who might have an interest. Mr. Trump’s stands alone in denying Russian interference. I wonder if Mr. Cohen has more information to share than just about paying-off women who had sex with Mr. Trump, maybe there is much more there for Mr. Trump to be frightened about.
The impact of the tariffs on American business will likely not play-out for many months, although, what I am hearing from manufacturers and importers in Clinton County is that their access to necessary materials for manufacturing are fast dwindling, and that products normally on the market for the fall and the holiday season may well not appear, or be significantly higher priced. If you are an American consumer, and a supporter of Mr. Trump, that support may be tested in your pocketbook. Unfortunately, it will also test the pocketbooks of those of us who don’t support him. The most surprising development is the impact of Chinese tariffs on AG products which by all reports is taking a significant economic toll, in fact AG exports were down 5.3% in July. The result Mr. Trump’s political support is dropping by as much as 20% with the AG community.
It may well be that Mr. Trump has some grand scheme that will result in freer trade, but if one does any analysis of that hypothesis, it is difficult to see how freer trade produces more manufacturing jobs in the US. He seems to be talking out of both sides of his mouth, as in one breath he says I want free trade, and then in the other, that he wants manufacturing jobs brought back to the US. These are two almost diametrically opposed outcomes. If one accepts Mr. Trump’s statements that he looked toward and favors a no-tariff trade system then one must accept the economic reality that goods will be produced in the location with the lowest cost, which is rarely the United States. He will be unable to achieve, under any circumstances, greater free trade and more jobs in the US in the manufacturing sector. This is not to suggest that there may not be job growth in other sectors, but it is not going to occur in manufacturing.
I remain confused by the meanderings and trust you are too.
Mr. Owens is a former member of Congress representing the New York 21st, a partner in Stafford Owens in Plattsburgh, NY and a Senior Advisor to Dentons to Washington, DC.
The views expressed by commentators are solely those of the authors. They do not necessarily reflect the views of this station or its management.