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Trump has walked back most of his comments on trade.
Trump appears to be ready to take major steps toward safeguarding the American steel industry, which has been threatened by foreign-made steel. But before your praise him for his trade policies, it’s important to look at the bigger picture.
During his campaign, President Donald Trump focused on renegotiating NAFTA, labeling China a currency manipulator, and bringing back lost manufacturing jobs. Instead, Trump has backed away from some of his promises on China and NAFTA, and is taking on smaller efforts. If Trump moves ahead with protecting the domestic steel industry, it will be one of the few trade moves that would correspond with his campaign promises. But on the whole, Trump’s trade policy is completely incoherent.
The Commerce Department has been considering whether steel imports are an economic security and national security threat. On Monday, Commerce Secretary Wilbur Ross confirmed that Trump would take “bold action” to address these supposed threats.
Robert Scott, senior economist and director of trade and manufacturing policy research at the Economic Policy Institute, said there are a number of good reasons to take a broad approach that affects all sectors of the steel market, including downmarket steel production, to restore a fairly traded market and get rid of the steel glut hurting U.S. producers.
Scott said unfairly traded steel imports in 2014 helped to kill 14,000 direct jobs in the U.S. steel industry between January 2015 and December 2016, and that thousands more were eliminated in industries supported by the steel industry. “If we use trade policies to ensure steel is fairly traded, then the prices will tend to gravitate toward a long-run natural market equilibrium. If not, then domestic producers will get put out of business and we will be vulnerable to these import suppliers who will be able to charge whatever they want for steel.”
But the steel industry is just one smaller issue that is part of a much bigger program, Scott said. Scott sees the Trump administration as “tinkering at the margins with small problems” and ignoring the bigger picture. As policymakers and the media focus on his approach to steel imports, they may forget to look at his broader trade policy agenda, which has been incredibly scattered and unproductive thus far.
“It’s not by any means sufficient to deal with our manufacturing and trade unemployment crisis,” Scott said.
The Trump administration isn’t paying very much attention to currency manipulation and exchange rates and is focusing on trade deals with one country at a time. Trump has been very focused on trade deficits, particularly the trade gap with Mexico, which is $63 billion. However, 40 percent of the parts of an average Mexican product are made in the United States. His fixation on Mexico is also not productive because Mexico is not contributing to our trade problems as much as China, Germany, Japan, Korea, and Taiwan.
“I think the single biggest misconception [about NAFTA] is that countries like Mexico are a big problem. The countries we have the biggest trade problems with are countries with the biggest trade surpluses with the United States, and not just with us, but the world as a whole — China, Germany, Japan, Korea, Taiwan,” Scott said. “Those are the countries we should be targeting. Those are the countries contributing to the global trade imbalance that threatens to upend the global economy as it did ten years ago in the Great Recession.”
Trump has also backed down from his campaign rhetoric currency manipulation. In April, the Treasury Department’s semi-annual report on currency practices of trading partners did not name China as a currency manipulator. The president tweeted that he would make a trade deal that would be helpful to China if China assisted him with “the North Korea problem,” indicating he would cave on a number of promises he made about trade with China during the campaign.
It’s also highly unlikely that Trump would seek major changes to NAFTA. For example, Commerce Secretary Wilbur Ross has indicated he would like to change the “rules of origin,” which affects the percentage of content that has to be made in North America, to be more favorable to American auto manufacturers — but the proposed changes are not dramatic ones.
“My concern is that during the campaign, Trump told people NAFTA was a terrible trade deal, and I think a lot of people in the general public felt that way. It was a successful campaign strategy, but if you look at the actual changes and details, what he is talking about doing it is similar to what Obama administration proposed to do under the TPP,” Scott said.
Instead, the Trump administration has been focused on policies that would benefit the wealthiest Americans and would benefit Trump’s businesses. Owners and shareholders of what are called pass-through entities, which means they are not subject to income tax, would pay taxes for their businesses at a tax rate of 15 percent instead of 39.6 percent if Trump’s tax reform dreams came true. Most of Trump’s businesses are pass-through entities, according to CNN. He would also eliminate the alternative minimum tax, the estate tax, and the ACA surcharge on investments. The Trump administration’s waffling on trade policy, its tax plan, and its proposed budget cuts, including a 21 percent cut to the Department of Labor, suggest that for all of his talk about the U.S. manufacturing crisis, Trump is not invested in helping the people who most affected by it.
Trump’s trade rhetoric was key to his campaign. Now it’s totally incoherent. was originally published in ThinkProgress on Medium, where people are continuing the conversation by highlighting and responding to this story.
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