As I noted in a previous post, Jamieson Greer, the US Trade Representative, made the case for Trump’s tariffs in an NYT column a few days ago. How much of what he said was true, and what was false?
Here is my analysis:
- TRUMP HAS UPENDED THE SYSTEM OF INTERNATIONAL TRADE: This is true. Trump has no regard for international organizations or attempts to create wins for everyone. He wants American dominance, and he wants the rest of the world to acknowledge its subservience to him. Using huge tariffs as a form of bilateral leverage is his principal means of getting the point across.
- TRUMP HAS IMPROVED AMERICAN ACCESS TO FOREIGN MARKETS: Partly true. Improving access for exports was never his primary goal; otherwise, he would have accepted the zero-zero offers that were made early in the negotiations. In addition, alienating consumers in other countries with bluster is not a particularly shrewd way to market American products, and it remains to be seen if lowering already minimal tariffs and eliminating a few health regulations will have a meaningful impact on American exports. With all of that said, it is clear that the agreements have improved access to foreign markets at least a little bit.
- THE PROVISIONS IN THE AGREEMENTS RELATING TO INVESTMENT ARE ENFORCEABLE: Mostly false. The agreements aren’t even remotely done yet, and what we know about them is hardly encouraging. The Japanese don’t accept Trump’s version of the investment vehicle, and the EU isn’t even pretending that its “commitments” can be imposed on the private sector.
- THE INFLATIONARY IMPACTS OF THE TARIFFS WILL BE LIMITED AND TRANSITORY: TBD. American businesses have largely been eating the tariffs to date or have dealt with them by stockpiling inventory. Now that the system is more or less in place, it is highly unlikely they will continue to accept lower profits for years to come. That means increased inflation; whether it will result in an inflationary spiral remains to be seen. It could go either way.