Rarely has an economic policy been repudiated as soundly, and as quickly, as President Trump’s Liberation Day tariffs—and by Mr. Trump’s own hand. Witness the agreement Monday morning to scale back his punitive tariffs on China—his second major retreat in less than a week. This is a win for economic reality, and for American prosperity.
Make that a partial win for reality. The Administration agreed to scrap most of the 145% tariff Mr. Trump imposed on Chinese goods on April 2 and later. What remains is his new 10% global base-line tariff, plus the separate 20% levy putatively tied to China’s role in the fentanyl trade, for a total rate of 30%. In exchange, Beijing will reduce its retaliatory tariff to 10% from 125%. The deal is good for 90 days to start, as negotiations continue.
Investors are cheering at this border-tax reprieve, since this is a step back from mutual assured trade destruction. Dan Clifton of Strategas calculates that Mr. Trump’s trade walkbacks add up to some $300 billion in tariff relief. That’s a huge tax reprieve.
The 30% tariff is still exceptionally high for a major trading partner, but the 90-day rollback spares both sides from what looked like an impending economic crackup.
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If there’s a silver lining to this turmoil, it is that markets have forced Mr. Trump to back down from his fever dream that high tariff walls will usher in a new “golden age.” The age didn’t last two months, and it was more leaden than golden. White House aide Peter Navarro, the main architect with Mr. Trump of the Liberation Day fiasco, has been repudiated.
Mr. Trump will not want to admit it, but he started a trade war with Adam Smith and lost. He’s not the first President to learn that lesson.
Iain Murray explains that Trump’s trade ‘policy’ “is a humanitarian and geopolitical disaster.” A slice:
I asked Marian Tupy, co-author of the book Superabundance, to sum up the role of trade in this transformation. He told me, “From Hong Kong and Singapore to Taiwan and South Korea, trade liberalization helped transform nations from third world to first-world status within two generations. More recently, China’s and India’s partial embrace of globalization lifted hundreds of millions out of absolute poverty. Today, absolute poverty is largely confined to sub-Saharan Africa, the least globalized and most aid-dependent region in the world.”
Yet this trade hasn’t just been advantageous to the developing world; it has helped America, too. Obviously, we get the imports (which, pace the President, actually represent a consumer surplus) but we get other things too. The cash we exchange for the imports comes back to the US in the form of investment, allowing us to gain jobs and infrastructure. Some of it buys treasury bonds, which allow us to invest in our military and national security.
Yet an under-appreciated aspect of US trade policy relates not to the tangible benefits, but to the increase in what students of geopolitics call “soft power,” usually defined as international influence without coercion. America’s policy of “Trade, not aid,” allowed it to increase its international soft power without as many of the problems that come with international aid, such as funds being diverted into warlords’ pockets (warlords are terrible for business investment) or questions about waste back home.
“Trump’s tariffs and immigration policies destroy thousands of acres of tomato crops in Florida.”
Mitch Kokai is correct that trade deficits are not bad economic news. A slice:
If your household — or the federal government — runs up a spending deficit, the result is debt. Spending beyond your means carries long-term consequences.
Pairing the word “trade” with “deficit” is different.
“A trade deficit is just a bookkeeping entry, not a debt that has to be paid,” Kevin Williamson wrote for National Review in 2018.
Put simply, a “trade deficit is when people in one country buy more from another country than the other country’s people buy from them,” as the late economist Walter Williams wrote in 2016.
Brian Gross’s letter in today’s Wall Street Journal is superb:
Scott Bessent writes in “Trump’s Three Steps to Economic Growth” (op-ed, May 5) that “it’s Main Street’s turn to share in the prosperity” that markets have enjoyed since 1980. This, he adds, is the administration’s “guiding ethos.”
Beyond stock brokers, hedge-fund managers, private-equity executives and the like, who exactly does Mr. Bessent think has benefited from market gains over the past 50 years? What about pension and retirement funds, annuity investments, 401(k)s and individual retirement accounts, and health- and education-savings accounts? All the gains made in the markets benefit the three-fifths of Americans exposed to Wall Street through these and other investment vehicles.
The implication is that perhaps Wall Street needs to do a bit worse, with the promise that the pain and cost inflicted by tariffs in an effort to remake the domestic economy, along with global trade, will benefit Main Street. My fear is that Mr. Bessent and company, in trying to re-engineer the greatest economy in the history of the world, will kill this engine of prosperity, innovation and job creation in the name of an Orwellian ideology that “less is more.”
Mr. Trump’s plan to take the Qatari jet is a political gift to Democrats. The GOP objected, rightly and loudly, to Hunter Biden’s influence peddling abroad while his father was in high office, followed by his selling art at inflated prices while President Biden sat in the White House. Now the Trump family is making much money in opaque sales of crypto-coins, while Mr. Trump says it’s simply good sense to accept a free jumbo jet from Qataris bearing gifts.
Andrew McCarthy of National Review calls Trump’s ‘deal’ with Qatar “plane old grift.” A slice:
In seeking to defend his indefensible acceptance of a $400 million “palace in the sky” Boeing 747-8 aircraft from his new friends in Qatar’s sharia supremacist regime, the president and his flacks again demonstrate that they don’t grasp the concepts of constitutional duty and conflicts of interest. (This lack of comprehension — or, better, this excess of insouciance — is a leitmotif of the Trump family crypto venture, on which I’m in the midst of a series of columns.)
In this long essay, Jonah Goldberg explores the embrace of many American conservatives of Trumpism. A slice:
In other words, the conservative project in America has been, perhaps not wholly but certainly in large part, to defend the classically liberal project of the founders. Again, American conservatism is about more than merely defending that project. But defending that project—the way William F. Buckley Jr., Ronald Reagan, and Barry Goldwater did and the way George Will, Thomas Sowell, and various “freedom conservatives” continue to—is inseparable from ideological conservatism. Consider that, with the exception of defeating the Soviet Union, the most successful conservative enterprise of the last century has been the conservative legal movement led by the Federalist Society, which is “committed to the principles that the state exists to preserve freedom, that the separation of governmental powers is central to our Constitution, and that it is emphatically the province and duty of the judiciary to say what the law is, not what it should be.” That is a liberal project, because the Constitution is a (classically) liberal charter.
Free markets, limited government, the rule of law, and the sovereignty of the individual are more than sufficient scaffolding around which to construct an actual ideology. And that ideology, or “worldview” if you prefer, is what inspired generations of conservatives. Their ideology didn’t “negate”—as Kirk tediously insisted—their conservatism, it gave them a practical program for how to engage in politics.
