National Review‘s Charles Cooke explains that Trump’s trade war is needless. Two slices:
How do I hate President Trump’s capricious levying of tariffs? Let me count the ways. They are constitutionally suspect, statutorily usurpative, diplomatically toxic, and culturally chaotic; they represent a profound political risk for the new administration — the potential upsides of which are insufficient to warrant the gamble; and, in both form and implementation, they serve as precisely the sort of insult to our balanced system of government that the Framers of our civic order disdained. To adapt the prayer of St. Francis, the practice brings discord where we need harmony, error where we desire truth, and doubt where we aspire to faith. It is an ugly imposition — and a needless one at that.
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Apologists for Trump dispute this characterization, proposing that tariffs give the United States “leverage,” which it is using to . . . well, there’s the rub. That part seems to be made up on the fly. Not only did Trump’s latest order apply more strictly to our allies, Mexico and Canada, than to our adversary, China, but it is not at all obvious how the proximate impetus that Trump is obliged to cite — this time, it was the continued scourge of fentanyl on America’s streets, but it varies — is connected to his coveted remedies. Neither, as a more general matter, is it clear what is wrong with the status quo, given that its guiding framework — the United States–Mexico–Canada Agreement Implementation Act — was negotiated by Donald Trump, signed into law by Donald Trump, and championed by Donald Trump as a “tremendous victory,” as the “largest, most significant, modern, and balanced trade agreement in history,” and as a win for “hardworking Americans.” Prior to his new tariffs going into effect, Trump told reporters that there was “nothing” the countries to which they applied could do to prevent them — which means that, in effect, Trump has supplanted his own bipartisan bill with a series of start-stop unilateral edicts that boast no explanatory support. “Leverage,” apparently, has become a synonym for inconstancy.
One of the core purposes of the U.S. Constitution is the prevention of monarchical whimsy. It is for this reason that the document vests the lawmaking power in Congress rather than in the presidency, and why the legislature, not the executive, is accorded the “power to lay and collect taxes, duties, imposts and excises,” and all other fundraising apparatus. Since 1928, the Supreme Court has permitted some delegation of the “duties” power to the executive, but only in such cases as that delegation contains an “intelligible principle.” As a foundational constitutional matter, I remain extremely skeptical that this standard can be squared with the earlier confirmation that “all legislative powers herein granted shall be vested in a Congress of the United States.” But, even if it can, I cannot see how the statute that President Trump is using — or the manner in which he is using it — would pass that doctrinal test. Under the 1977 International Emergency Economic Powers Act (IEEPA), the president may impose tariffs if there exists “any unusual and extraordinary threat, which has its source in whole or substantial part outside the United States, to the national security, foreign policy, or economy of the United States, if the President declares a national emergency with respect to such threat.” If, in practice, this means that the president has been accorded carte blanche to impose any tariffs he wants, contingent upon nothing more than his own declaration of an “emergency,” then there is no limit upon his power, and there is no “principle” to speak of — “intelligible” or otherwise.
Historically, the utilitarian case made in favor of the delegation of the tariff power was that the presidency was less likely to be corrupt, self-dealing, and parochial than was Congress, and that it thus made sense to put the legislature’s negotiating powers in his hands. Markets operate best when their terms are stable, predictable, comprehensible to the average citizen, and lacking in jury-rigged exemptions that have been inserted to placate well-connected foes. If handing over authority to the White House created that outcome, this theory held, then the argument in its favor was self-evident. Perhaps, at one point, this was true. Evidently, though, it is no longer the case. Nearly a century has elapsed between the Supreme Court blessing Congress’s abdication of power, and our new status quo which has the president of the United States imposing arbitrary tariffs at arbitrary rates for arbitrary periods of time for arbitrary reasons, while members of the legislative branch that has the capacity to stop him issue “pleas” that call for their constituents to be granted a narrow exemption. This is absurd, and it ought to remind us of the ineluctable risk that comes along with any transfer of power between assemblies and individuals. Sometimes, the king is a wise, humble, judicious sort of man — and sometimes he’s absolutely bonkers.
There are many contradictions in President Trump’s economic policy mix, but one of the largest concerns tariffs and the dollar. Mr. Trump likes tariffs and wants more of them, but he also wants a weaker dollar to promote U.S. exports, and the two desires are in conflict.
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A stronger dollar is a predictable consequence of the tariffs, all other things being equal. Reducing American purchases of foreign goods reduces demand for those currencies as companies convert fewer dollars into their home money. Even if the tariffs work as Mr. Trump hopes and more companies build more factories in the U.S., expect the dollar to gain in value amid higher demand for dollars to fund those investments.
This is at cross-purposes with Mr. Trump’s oft-stated desire for a weak dollar. The President has a mercantilist view of exchange rates, which is that weakness is strength. He thinks a weak dollar helps the competitiveness of U.S. exports, which in turn will reduce the U.S. trade deficit with the world.
Reason‘s Eric Boehm is correct: “Trump’s theory of tariffs makes no sense.” A slice:
The high tariffs that America imposed during the late 19th century did not make America rich and did not make American manufacturing strong. It’s also absurd to claim that the country was at its wealthiest in an era when most people did not have access to indoor plumbing, electricity, or modern medical care—and when the average person was, objectively, much poorer.
But leave all that aside for a moment. Let’s assume that Trump sincerely holds this belief: that tariffs are a wealth-generating tool, and that their implementation will return the country to its proper place as the wealthiest, most successful, most respected nation on the planet.
If all that’s true, then how to explain what Trump did this morning?
“President Donald Trump held off Monday on his tariff threats against Mexico for one month of further negotiations after Mexican President Claudia Sheinbaum agreed to send 10,000 members of her country’s national guard to the border to address drug trafficking,” the Associated Press reported.
Wait, what happened to endless prosperity and success? If tariffs are as great as Trump says they are, he should be implementing them no matter what the leaders of any other silly little countries say or do. We can tax our way to prosperity, Trump claims, but we’ll just…not do that, I guess?
That’s the problem with Trump’s theory about tariffs. Either tariffs are an inherently good and prosperity-generating policy that enriches America, or they are a threat to get other countries to do as Trump says. Both things can’t be true.
[DBx: Pedants might protest by pointing out that, in theory, tariff threats can promote domestic prosperity if they succeed in pressuring other governments to reduce or eliminate their own protectionist measures. And, indeed, such a story can be – and has been – told. (It was acknowledged even by Adam Smith.) In reality, however, this exception to the case for a policy of free trade is practically worthless – even dangerous given that it’s prone to being abused. Further, Trump’s decades-long pronouncements about trade reveal that what Eric Boehm says above about him and his trade ‘policies’ is correct: Trump to his core is a unreconstructed mercantilist who believes not that a world of freer trade is positive-sum and in Americans’ interest but, rather, that global trade is a zero-sum game at which some countries win and others lose – and that Americans ‘win’ the more we export and the less we import in return. It’s pure idiocy, yet idiocy vigorously peddled and widely believed.]
O Canada! Don’t pretend you don’t know what you’ve done to deserve this.
For years we have tolerated your provocations. You’re curious “bacon.” Your cloying niceness. The whole French thing. You may not be responsible for burying us in fentanyl (a total of 43 pounds seized at the border last year, according to U.S. Border Patrol), but you’ve sent us a lot of noxious material over the decades: Justin Bieber. Jim Carrey. Tim Horton. And the annoying way you pronounce words—“about” sounds like “a boat”? You thought you could get away with that, eh?
And don’t get me started on Mexico.
I tried. There may be some better justification for what the Journal’s editorial board has called “the dumbest trade war in history,” but I can’t think of one.
What is the objective here behind President Trump’s imposition of 25% tariffs on most imports from Canada and Mexico (10% on Canadian energy), with a 10% charge on Chinese products?
Let’s not dwell on the idea that we are somehow “subsidizing” a country with which we run a trade deficit. And let’s not rehearse the details of how U.S. tariffs hurt American consumers as much as they hurt the producers of the tariffed country, as well as American producers that depend on imported parts.
Phil Magness, at his Facebook page, asks a germane question:
The US has a huge and persistent trade deficit with Hungary. Viktor Orban is clearly ripping us off. So when are the NatCons going to unveil their emergency 25% tariff on all Hungarian goods?
And so the trade war begins, oh so predictably: “China Hits Back at Trump With New Tariffs on U.S.”
Samuel Gregg ponders the preservation of liberty in these illiberal times. A slice:
As for economic freedom, we are a long way from the days in which center-left figures like Bill Clinton expressed positive views of markets and acknowledged welfare’s downsides. Throughout Europe and America, the left has firmly recommitted itself to demand-side economic management.
Economic policy is where parallel illiberal trends are becoming visible on parts of the right, particularly its nationalist-populist faction. Since 2015, we have witnessed a steady drift towards protectionism and a willingness among some conservatives to entertain using industrial policy, despite the documented failures of such interventions, or even to lend their support to labor unions.
Phil Magness’s letter in today’s Wall Street Journal is excellent:
Jacob Berger suggests that a subtle philosophical kinship links the Trump movement to an unlikely ally, Karl Marx (“Why MAGA Folks Should Read Marx,” Review, Jan. 25). He detects an anticapitalist undercurrent in the MAGA movement and suggests the right’s economic anxieties make them receptive to Marx’s doctrines.
Mr. Berger’s diagnosis contains a kernel of truth, but his proposed solution of studying Marx assumes that Marx offered a useful solution to economic problems. As most economists have known since the late 19th century, Marx built his system on an erroneous theory of value. He prophesied the coming immiseration of the working classes under a perpetual state of capitalist exploitation, making violent revolution their only recourse. Instead, industrial capitalism delivered an unprecedented rise in living conditions and economic abundance for the masses.
Marx owes his salience today not to the validity of his theories but to the fluke success of the Bolshevik coup d’état in 1917. Vladimir Lenin rescued Marxism from a state of relative obscurity and absolute economic error, then deployed the full resources of the Soviet treasury to spread its gospel. Yet as Friedrich Hayek observed, Marx’s doctrine “has never and nowhere been at first a working-class movement.” Instead, the intellectual elites in university humanities departments took up the charge and presumed to speak on behalf of a working class they barely knew.
By reading “Das Kapital” (1867) certain “postliberal” intellectuals on the right will almost certainly find commonalities with the Marxist left’s disdain for capitalism. But that disdain is still the product of what John Maynard Keynes described as “an obsolete textbook . . . without interest or application for the modern world.”
