On the day they explained how tariffs work at Wharton, I guess the very stable genius in the back row must have been out playing golf. Because what Donald Trump doesn’t understand about his own trade policy could fill a couple of container ships.
First the president ran around saying that China would pay the $200 billion in new tariffs (and a possible $300 billion more after that) at American ports, until his top economic adviser, Larry Kudlow, made headlines by “admitting” to Fox’s Chris Wallace that no, in fact, American companies would be the ones paying.
To be clear, that’s like admitting the earth revolves around the sun. It really shouldn’t be news when the White House acknowledges knowing a totally knowable thing.
Trump also insists his tariffs are driving a huge economic boom, even though Kudlow himself — and just about every reputable analyst — says they’re actually holding back growth by some modest amount.
“The unexpectedly good first quarter 3.2% GDP was greatly helped by Tariffs from China,” the president tweeted this week. “Some people just don’t get it!”
On that last point, at least, he gets no argument.
Look: I’m not going to tell you that Trump’s march into a trade war is absolutely the wrong policy, or that it can’t leave us better off than we were before.
No one really knows that for sure, and you can certainly make a case that nothing else we’ve done to this point has dissuaded the Chinese from pursuing unfair trade advantages, like subsidizing key industries and stealing intellectual property.
The more immediate problem here is that if you can’t communicate to voters how a trade war works, you stand very little chance of winning it.
Let’s just step back for a brief moment and take a very rudimentary look at what tariffs actually do. You never know — the president might be reading.
When you slap a tariff on foreign goods, it means that anyone who wants to import those goods on American shores has to pay a tax. So if you’re an American company selling products made in China, or bringing in Chinese parts you need to make your products here, then it’s going to cost you extra cash.
(What this means, by the way, is that when Trump crows about all the money now flowing into the federal Treasury as a result of tariffs, he’s crowing about a tax hike on a lot of American businesses, even as he takes credit for slashing corporate taxes in 2017. Dizzying, isn’t it?)
In some cases, the company paying that tariff is going to employ fewer people and make fewer investments as a result. Or it’s going to pass on the added cost to you, in the form of higher prices for your phone or your sweatshirt or whatever.
In other cases, though, American importers might choose to find new suppliers in different countries or, better yet, to start making their products here rather than in China. And this is the central objective of a trade war — to exert pressure on the Chinese, who rely heavily on exports to the American market, and create more manufacturing jobs at home.
Even if you achieve that end, the hardship is bound to be significant. Analysts have suggested that the tariffs could increase costs for American consumers by as much as $800 per household annually. That’s a lot, and I wrote about what it might portend, not just economically but socially, in this column a year ago.
At the same time, the Chinese will retaliate with their own slate of tariffs, which will cost American exporters — especially farmers — a crucial market, because Chinese consumers will look elsewhere.
You might ask how it is that the first self-proclaimed billionaire president, and the first to emerge directly from the business world, can exhibit so little grasp of how this works.
Maybe it’s because Trump never actually made anything. The only commodity he ever sold, really, was his own Barnum-esque persona, and you can’t slap a tariff on that. (Apparently, you can’t even tax the profits.)
But it’s also possible that Trump gets all of this more than he’s letting on, and he’s just doing what he so often does, which is to spread a lot of disinformation and try to make you believe his critics are the ones lying and the winning will never end.
Either way, the president has a problem. Because unlike with a political campaign, you probably can’t prevail in an economic standoff unless you tell people the truth.
There’s a reason we call it a trade war, rather than a dispute or even a crisis. Wars have casualties. Winning them always comes with a cost, and it’s a cost the citizenry has to be willing to bear.
As in any war, people need to know why they’re sacrificing, or they lose faith, and you end up surrendering.
In the case of a trade war, a reasonable argument could be made that some business sectors and a lot of consumers are going to have to suffer real pain, possibly for a long while, in order to arrest the slide of American factory towns and create a new long-term balance between American and Chinese trade partners.
A better president, seeking the same policy ends, might go out and prepare people for what’s ahead. My guess is a lot of Americans, and especially those who voted for him, would be receptive.
(Personally, I’d give up plenty if Trump could promise to get rid of the Chinese-language telemarketers who bombard me daily, and always with the sad strains of a piano in the background, which makes me wonder if they’re selling burial plots.)
But that’s never Trump’s way. He’s Mr. Easy Answers, and everything else is fake news.
And of course much of the Republican Party is, as ever, perfectly content to follow him off the cliff. Just this week, Tom Cotton, one of Trump’s favorite senators, basically said that American farmers would be whiners if they couldn’t handle a little bit of inconvenience.
“There will be some sacrifices on the part of Americans, I grant you that, but I also would say that sacrifice is pretty minimal compared to the sacrifices that our soldiers make overseas, that our fallen heroes that are laid to rest in Arlington make,” Cotton told CBS’s Gayle King.
Well, that’s a talking point, I guess. You may have to sell the farm, but you won’t die, so just man up.
It’s one thing to tell people that you’re solving a problem in North Korea, even if you aren’t, because nobody spends a lot of time at the kitchen table worrying about Communist missiles.
But telling people your tariffs are nothing but a windfall, while they’re buying fewer Christmas gifts because the prices at Walmart are up, might prove to be more problematic.
One of my favorite bits of political wisdom came from Ken Mehlman, who ran George W. Bush’s reelection campaign in 2004 and liked to say, “Hope is not a strategy.”
I’d argue that ignorance isn’t much of one, either.
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