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April 28, 2017

TRUMP AND PROTECTIONISM

I see that Trump has slapped a tariff on Canadian timber and read that some construction people have estimated that the tariff will increase the average costs of building a house by as much as $3,000.00. Thanks, Don! Just what we need – higher costs and fewer houses and more laid off people in the building trades. Oh, so more people go to work in the saw mills of Oregon? Not so many, perhaps, with less demand for housing due to higher costs and increased unemployment in the building trades outrunning the increase in employment at the saw mills for an overall net loss in employment while it is not the Canadians but rather American consumers who wind up paying the tariff Trump has imposed. Again, thanks, Don, for increasing our costs while adding to our unemployment rolls.  Brilliant move!

I also hear that he has given our NAFTA partners (Canada and Mexico) six months’ notice of withdrawal from the trade treaty with a view toward its renegotiation. He says this is designed to save American jobs, so let’s look at some more likely effects of his unilateral order “to protect American jobs.”

I am assuming that Canada and Mexico (if they follow historical trade patterns of conduct and refuse to stand still for Trump’s bullying tactics) will slap retaliatory tariffs on imports from our country to theirs and, if so, then we should consider that such tariffs will increase prices in those countries and stifle demand for American exports of goods and services with devastating effects on our export industries and the thousands of employees in our export industries who stand to be laid off as a result. Thanks for protecting our jobs, Don! Add those layoffs to the layoffs in the construction industry and watch unemployment zoom while aggregate demand goes south. Sure glad you “protected American jobs.”

There is also the potential that such trade wars could escalate into a real brawl (and even though we are a huge and proximate market) in which Canada, Mexico, and other treaty and bi-lateral trade states decide they would rather do business with trading partners whose representatives understand that all involved have interests to be considered and are not into being bullying via tariffs on a claim of dumping, ostensibly designed to save American jobs.  Should a real trade war start, China and Germany, for instance, might well become the new and best trading partners for Canada and Mexico while we slide into recession due to lack of demand in our domestic market occasioned by unemployment in our building trades and export and ancillary industries as well as from the continuing and debilitating effects of wage inequality, an inequality made worse by a surplus of unemployed workers from which employers could choose. Trump doesn’t seem to understand that our trading partners have options, too.

He likewise doesn’t seem to understand that our strong dollar has already made our exports costly, that Canada’s weak dollar and Mexico’s weak peso doesn’t help, and that unilaterally slapping a tariff on any Canadian export in such an already delicate situation amounts to throwing gasoline on the fire, a fire that is in neither Canada’s nor our better interests what with the domestic havoc played out in both countries’ markets by his use of such bullying and threatening tactics.

The truth is that Trump doesn’t seem to understand anything and is just lurching from one position to another in a chaotic atmosphere where no policies are being formed and no legislation is being passed, an atmosphere devoid of leadership where TV flourishes in signing mostly meaningless presidential orders is fed to the masses under the pretense that something important is happening. It isn’t; it is soft propaganda being peddled and is designed to mislead the gullible. Trump should return to the real estate business where he has some experience and financial success, though without a look at his tax returns we cannot even be sure of that.

If we the people allow him to pull this protectionist prank on Canadian timber, what will be his next target? Car parts? Bananas? Coffee? Solar panels? Is trade to be totally politicized, too, as with global warming, progressive taxation etc.? Protectionism is costly, and you and I will be paying the piper for Trump’s tariffs which protect domestic monopolies who can then increase prices free of competition. Someone tell him how this works because, as in so many other matters of governing, he doesn’t have a clue.      GERALD      E

 

 

 

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