The Truth About Trump’s Trade Tariffs

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(4 minute read)

By Rick Amato

A largely misunderstood and under reported story is that of Donald Trump’s use of tariffs as a tactic to grow American jobs and the economy. If the same strategy and early results had occurred during the Barack Obama years, the mainstream media would have labeled the former President a “brilliant, intelligent, global tactician”.  But as former CIA agent and Whistleblower Kevin Shipp recently said, ‘too often the mainstream media has an agenda that has little to do with real news’.

Which brings me back to the use of tariffs. If you listen to the news then you believe that Trump is either a racist (with the threat of tariffs against Mexico), colluding with Russia (threat of tariffs against the European Union) or simply unstable and volatile (in the case of Canada).  And just for good measure as a Capitalist who supports trade barriers, a hypocrite.  But the facts and early developments don’t support these agenda-driven narratives.

Let’s start with why so many free market economists who normally oppose trade barriers at all costs are now supporting Trump’s tariffs.  Their reasoning can be summed up in one word: Leverage.

While the initial reaction of countries who are the target of tariffs may be one of anger and defiance the fact is they have little or no leverage over America on the issue of trade.  Long term we hold all- or most- of the cards.

Consider this:
* The U.S. trade deficit with China is at a record high of $375 billion.
* U.S. trade deficit with the EU is $147 billion.
* U.S. trade deficit with Mexico is $63.6 billion.
* U.S trade deficit with Canada is $12.1 billion.

Unlike previous presidents from both parties who either didn’t know or didn’t care Trump understands that America has all the leverage it needs in the trading relationships with our partners.  What are they going to do? Buy less American goods?  They’re already doing a bang up job of that with their own use of high taxes and tariffs on U.S. made products.  Hence the trade deficits they now enjoy.

A growing number of free market economists concur that the tariffs with create short term pain but long term gain for the U.S. economy.  Surprisingly we are already beginning to see the early returns of the long term gains.  Example:

* While the EU response was initially one of anger, they have now backed-down and agreed to trade concessions in hopes of avoiding a trade war.

* Largely ignored by the U.S. media is the recent meeting between Mexico’s Secretary of Economy, (Mr. Ildefonso Guajardo) and Trump trade representatives last week in D.C.  Both countries emerged from the meeting upbeat and cautiously optimistic about our near term trade future.  So much so that President Trump declared a policy of ‘zero tariffs with Mexico’ was within reach.  Of course closely watching all of this is Canada the third leg of the stool in NAFTA.

China however is believed to be a longer term play with more strategic elements to consider given their aggressive economic and military global goals.  But once again their leverage options too are limited.

During the 2016 presidential campaign voters from both parties gave Donald Trump high marks on the issue of the economy and it looks like the President is about to prove them right.  But don’t expect too many in the media to take notice.

Click below to watch my TV interview with CNN Economic Analyst Stephen Moore on Trump’s trade tariffs and the most recent Jobs Report.

Watch ‘Politics and Profits with Rick Amato’ on Roku, Amazon Fire TV, Apple TV and of course here at AmatoTalk.  And soon to be on Dish TV and Direct TV,

Trumponomics: The Art Of The Deal

(image via flickr/Andrew Magill)

By Rick Amato

For a candidate who scored high marks on the economy with voters during the campaign, President Trump certainly didn’t disappoint during his first 24 hours on the job.  In a whirlwind of activity the newly elected President: signed executive orders to speed up the approval of the Keystone and Dakota Pipelines, signed an executive order to renegotiate NAFTA, withdrew the U.S. from the Trans-Pacific Partnership, said he would “cut taxes massively” for both middle class individuals and American companies, and in a W.H. meeting with a dozen American manufacturing CEO’s promised he would cut regulation possibly by as much as 75%. That was Monday.  Well to be fair the Keystone and Dakota pipeline executive orders occurred first thing Tuesday morning.

Is it any wonder why Trump economic adviser Stephen Moore told me in a ‘Politics and Profits’ podcast, “In the first 24 hours Donald Trump did more to help the U.S. economy than Barack Obama did in 8 years.” ?

To be sure President Trump is walking a thin line on some of these decisions as they are not without their potential major pitfalls.  As Moore told me he doesn’t agree with the President on everything and the exiting of the Trans-Pacific Partnership is one which concerns him. The TPP was written to exclude China, as part of an Obama Administration strategy to write Asia’s trade rules before Beijing could, establishing U.S. economic leadership in the region.  Now with the withdrawal from TPP, America’s Asian allies are feeling somewhat abandoned while China’s influence in the region rises.

Then of course there’s NAFTA.  As Stephen Moore told me, and forgotten or not known by many Americans, while signed into law by President Clinton it was Ronald Reagan who first actually began NAFTA.  Based upon the premise that a free trade deal which helps lift the economic status of those in need while benefiting American companies is a good deal. As of today there are reports that Mexico may pull out of NAFTA altogether as opposed to face stiff re-negotiations with President Trump. That would not be a positive development with our southern neighbors despite all their problems with drugs, immigration, crime, etc.  As Reagan believed, it is free trade which can help lift them out of their economic condition while providing Americans opportunities here at home.

Be all that as it may the major pitfalls can be avoided.  The devil is in the details.  And as Moore points out a devilish detail that can turn a good trade deal into a bad one – or vice versa- is its taxation.  Why tax the production of a product (the job creation source) when instead you can tax the consumption?  Today, on NAFTA for example American companies face too many hurdles, taxation and others, which de-incentivizes those companies from keeping their manufacturing jobs here in the U.S.  The success of Trumponomics depends upon those trade details being worked out to intelligently favor the U.S., while not forcing our partners to feel abandoned and compelled to walk away.  Or to put it differently, it’s all  in the art of the deal.

You can listen to my full interview with President Trump Economic Adviser Stephen Moore by clicking the image below:

Exclusive: Interview with Trump Economic Adviser Stephen Moore

(image via wikimedia/Gage Skidmore)