President Trump proved me both wrong and right simultaneously this week: right because the consequences of his actions are precisely what I predicted they would be if he decided to go there, and wrong because for some reason I haven’t fully accepted that if you don’t think Trump will do something, he almost inevitably will.
Earlier this week, I was discussing the highs and lows of a Trump presidency with my co-workers. Some of the major highlights of his rookie year in office were the massive rollbacks in business regulations and record-breaking stock values. I argued that the market’s rise can be attributed not necessarily to anything Trump has done, but specifically to what he hasn’t done. Where investors are confident that they will not be burdened by regulations, penalized for expanding their wealth, and sideswiped by unpredictable and unstable economic policy, they feel confident investing in the economy, and the national market booms.
Any time the government gets overly involved in business, business declines — especially to the detriment of middle-class workers. This has been established time and time again through the Smoot-Hawley Tariff Act of 1930, mandatory wage and price controls under Hoover, the Wagner Act of 1935, the Bush tariffs of 2002, subsidized subprime mortgages leading up to the 2008 housing crisis, and the Fight for 15, which is estimated to cost around 400,000 low-wage jobs by 2022 in California alone.
My co-workers agreed. Not only is it logical, but it’s observably true. The 1987 crash could’ve had far more dire results, after all, if Reagan hadn’t kept his distance from corrective measures.
But leave it to Trump to ruin one of the approximately four good things he had going for him.
When the president announced on Thursday that he would be imposing steel and aluminum tariffs, the Dow Jones nosedived 600 points, recovering about 150 of those by the end of the day. This just one week after his announcement of the imposition of solar panel and washing machine tariffs.
All told, the Dow has fallen 1,200 points since Monday, and it will be far worse once these tariffs are officially imposed. Investors are uneasy, but they can at least hold onto a semblance of hope that the president can be talked out of his suicide mission.
Not only is Trump’s claim that a country without steel isn’t really a country patently ludicrous, but so is his assertion that we can have free, fair, and smart trade together. “Fair” means “controlled;” “smart” means controlled;” “controlled” means “not free.”
As for his claims that the steel industry is in bad shape, he apparently hasn’t cracked open a single study on the matter. As amassed by Daily Wire, steel production rose last year, the U.S. handily controls the market on steel, the nation’s leading steel manufacturers have seen exponential growth in stock, earnings, and wages, and by and large any loss of steel jobs can be attributed to technological advancements (which lead to job growth in other fields) rather than trade deficits.
Speaking of supposed trade deficits, President Trump claims that spending more on a country’s goods than they spend on ours is “not fair or smart.” This is a fundamentally flawed approach to business. I’ve given far more money to Costco than it’s given to me, but presumably, I chose to spend that money because I valued the product higher than the purchase price. In a voluntary transaction, assuming no fraud, both sides are better off.
Trump’s insistence on “America First” to the detriment of America reminds me of one of my local city council members, who campaigned (and won) on the promise that she would only shop within our city limits, even cutting up her Costco card (the nearest Costco is two cities away, a roughly fifteen-minute drive) to emphasize the point.
Here’s the problem: there are hardly any shops or restaurants in my city, due to exorbitant taxes and a hostile business environment. We boast a half-dozen chain restaurants and a Wal-Mart next to our freeway exits, but everything else is an absurdly priced mom and pop shop, and I don’t have the money for that kind of constant virtue. As such, my wife and I almost exclusively drive two cities up on date nights to where we can find virtually every kind of restaurant and store we could hope for.
Capitalism thrives on providing the greatest service for the lowest price, incentivizing innovation and public accommodation. Trade wars excuse local stagnation, allowing businesses to become complacent and cease to progress. That is not good for any economy.
Moreover, foreign imports affect domestic jobs far more than Trump gives them credit for. Tariffs incur higher costs on manufacturers, making production more expensive. This will lead to either price hikes, wage cuts, layoffs, or a combination of the three. Steel tariffs will cost thousands of American auto jobs, and aluminum tariffs will force significant layoffs in the beer industry.
This is rudimentary economic awareness, of which it appears Trump has none.
Finally, this proposal has major international implications. Jean-Claude Juncker, president of the European Commission and leader of the E.U., has declared that if Trump wants a trade war, he’ll get one, according to a New York Times report. Juncker has announced tariffs on Harley-Davidsons, bourbon, and blue jeans, with an intention to match trade penalties tit for tat with the United States.
Still, Trump insists that “trade wars are good and easy to win.” Perhaps he could name one if he’d ever read a book.
One of the great lies of modern America is that free markets led to the Great Depression. In reality, a crash that could have ended after only a moderate recession resulted in a massive, decade-long depression thanks to government intervention by way of a trade war, job stimulus, and the New Deal, and it only ended thanks to World War II’s global devastation and its reallocation of twelve million workers into the military. Trump is on the verge of creating his trade war, and with his proposed $1 trillion infrastructure package, look for the sequel to the Hoover Dam.
If Trump continues down this path, things will get much worse before they get better. Hopefully, if dissenting voices are loud enough, the president will be dissuaded from this disastrous course.
Those who don’t know history are doomed to repeat it, and those who claim to not read books because they already arrive at correct decisions “with very little knowledge other than the knowledge I [already] had, plus the words ‘common sense,’ because I have a lot of common sense and I have a lot of business ability,” don’t know history and clearly don’t know economics.