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Not very well, according to Mercatus Center economist Veronique de Rugy who wrote this week in the New York Times and examined the wild claims made by Mr. Trump and his team of unrepentant protectionists/mercantilists about what their big tariff hikes and aggressive negotiating tactics would achieve. She picked the top five claims and asked the question: Have any of those five wild claims about Tariff Man’s insane trade war actually panned out? Unsurprisingly, the answer is a resounding “No.” Here’s a shortened version of Veronique’s excellent op-ed:
Claim 1. On March 2, 2018, when Fox Business asked whether China would retaliate against the metal tariffs, Mr. Trump’s economic adviser Peter Navarro replied, “I don’t believe any country in the world is going to retaliate for the simple reason that we are the most lucrative and biggest market in the world.”
He was wrong: Everyone has retaliated against us.
Claim 2. The president said that tariffs are “a powerful way to get companies to come back to the USA.” Trump points to anecdotes of companies relocating to the United States. But the broader trend tells a different story. Most companies can’t afford to shift their supply chains to use domestically produced parts or move their production back home. Data show that when companies move out of China, they’re relocating to other countries in Southeast Asia. Rising production costs in the United States means that to stay competitive, an increasingly large number of businesses will shift their production abroad.
The bottom line: It means fewer manufacturing jobs here than otherwise, not more.
Claim 3. On that same day that Mr. Navarro was talking nonsense, the president tweeted that “trade wars are good, and easy to win.” Wrong again. Instead, we found out that they are bad and difficult to wind down. We are nowhere near a trade deal with China. In fact, apart from a deal with South Korea, which required no congressional approval, no comprehensive and better trade deals are yet on the books, and most pending agreements are subpar when compared with what was agreed to in the Trans-Pacific Partnership.
Meanwhile, the trade war has pushed our trading partners to sign trade deal agreements — not with us, but with one another. The list includes Japan and Europe, Europe and the Mercosur zone in South America, and Europe and Mexico.
Claim 4. “Our great Patriot Farmers will be one of the biggest beneficiaries” of the trade war with China, Mr. Trump tweeted in May. Also wrong. Farmers have suffered on all fronts in this trade war. Farmers have been devastated by the retaliation from many countries. For instance, soybean exports to China will most likely — and perhaps permanently — be one-third of what they were last year. Exports of dairy products to China have dropped more than 50 percent, too. Obviously, if farmers did so well under Trump’s trade war, he wouldn’t need to provide them with $28 billion in aid.
Claim 5. During his campaign, Mr. Trump said that he would wipe away the trade deficit. Aside from the fact that this is a foolish goal, his trade disputes have achieved quite the opposite. As my colleague Daniel Griswold documents, “During President Obama’s second term in office, from 2013 through 2016, the monthly trade deficit in goods and services averaged $40.7 billion; under President Trump the monthly deficit has averaged $50.1 billion.”
Bottom Line: Pretty much everything Mr. Trump promised on the trade front by imposing tariffs hasn’t panned out, even if the president persists in saying the opposite.
MP: It’s really too bad that there’s apparently no academic discipline that has studied international trade, mercantilism, tariffs, trade policy, protectionism, and trade wars over several centuries — one that might even be worthy of a Nobel Prize? — that could have predicted the adverse outcomes described above that have resulted from the Mercantilist-in-Chiefs misguided and ill-advised trade war.
Writing in the New York Times this week, Mercatus Center economist Veronique de Rugy asked the question: How do Trump’s claims about tariffs and trade deficits stack up to reality? Unsurprisingly, the answer is “Not very well.”
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