Dr. John Rutledge
Summary: I did a CNBC Power Lunch hit on Thursday to talk about whether the Trump Administration has a trade policy. (The answer is yes - they have several of them.) You can view a short video clip of the spot by clicking here or by clicking on the graphic below.
Does the US have a trade policy? Before every show, the producers send me a series of questions about the topic and I send talking points to help the anchors prepare for the spot. This time there wasn't much warning so I had to do the talking points by phone so can't copy them here for you. the gist of the topic was whether the Trump Administration has a trade policy, why the back and forth announcements on trade, whether we just declared a trade war on our closest allies, and what we can expect from Wilbur Ross's trip to China?
My answers in brief? 1) No. 2) Because we have as tong war in the White House. 3) Yes, and it's really stupid to do it. 4) Absolutely nothing. And I should apologize in advance for being rude on camera dealing with a fellow guest from a business lobby group. Tried to hold it back. Failed.
The press conferences all talk about China but tariffs on steel and aluminum are not tariffs on China. To a first approximation we don't buy steel from China. They are tariffs on our closest allies: Canada, Mexico, and the EU, especially Italy. The only way a President can impose them is to make the (fake) case that they are needed for national security matters. It is impossible to say how offensive that is to Canada, whose soldiers have died alongside ours.
Not shockingly, our allies all said they would reluctantly impose tariffs of equal value on American products
I have seen this movie before - twice. In 2007 I appeared at the National Press Club in Washington DC with former Speaker of the House Dick Armey to voice our opposition to a tariff measure. The same day the Wall Street Journal ran a full page ad with the signatures of economists - including this one and some in the White House today - who agreed this would be a bad idea, just like President Hoover's Smoot-Hawley tariffs were a bad idea in 1930. I have copied the letter below as a reminder.
The reason the Wall Street Journal ran the page was because they ran a similar page in 1930, reproduced below. In the letter, 1028 economists asked Hoover to veto the bill. He refused. The resulting tariffs and their retaliation were one of many factors that led to the collapse of the global economy we call the Great Depression. Trade wars are simply dumb.
International trade and finance are the most complicated and complex topics in economics. Trade policy is hugely important. It should not be used to score political points and should be conducted carefully by people who know what they are doing.
JR