The Wonderland of sincere protectionists is truly a crackpot unreality.
The trade war is heating up. Unfortunately, the Fed’s current framework will exacerbate the damage.
If a government manages to undervalue its currency in terms of foreign currencies, it subsidizes the consumption of foreigners who purchase its country’s exports. And while gains are reaped by those of its citizens who work to supply goods for export, currency undervaluation makes most of that country’s citizens poorer.
Because this is a tool the president can actually use — and because it bypasses the much more difficult task of having to persuade Congress of the merits of his ideas — Trump is using the tariff weapon more and more to address matters further and further removed from trade.
If we persist in reducing their brilliant progress to anything other than hard work being matched with freedom, we risk turning the biggest consumers of all things American against the United States. The economic consequences for the American people will be unfortunate.
The Trump administration pulled back from the brink of disaster in trade relations with Mexico — but there is reason to doubt that this unusual display of good sense indicates a change in intellectual orientation, much less a lasting shift in policy. The man-made trade mess of the last year and a half is likely to get more bizarre before it gets better.
Should these threatened tariffs come to pass, it will be hard to argue that we have seen a more anti-business U.S. President, from either party, in recent memory.
The greatest risk to the US dollar may, in fact, come from within. The imposition of tariffs and sanctions create an opportunity for other countries to engage in bilateral trade. The decision to withdraw from the free trade initiatives such as the TPP and T-TIP weakens not only the prospects for US trade but also the preeminent position of the US dollar.
Knowing and seeing the pattern here makes it no less alarming but it does help reveal that these economic/political cycles are not arbitrary. And if history is our guide, we can also see that the efforts of the reactionaries against freedom will fail.
The prospect that the US president would conclude that tariffs cause growth has always been the downside of good economic numbers. Good performance of the macroeconomy only encourages his worst instincts to impose more harmful trade policies.
Anyone who maintains that a $75 billion income tax cut helps the economy must also agree that a tariff hike of $45 billion or more must harm the economy. This study looks back on the unprecedented developments in international trade that happened in 2018.