Posts Tagged ‘tariffs’

It’s your economy, stupid

March 25, 2018

Presidents are usually judged mainly on the economy, which most voters care most about. (“It’s the Economy, stupid.”) Yet in truth a president’s economic performance is mainly just luck. He doesn’t run the economy; his actions normally have very little impact on it.

The start of Obama’s term was a rare exception, an economic crisis where he was looked to for leadership. Influencing the economy more than the actual measures he took was their psychological effect. You can argue all day about those measures, but they did combat pessimism, which shaped people’s behavior, and thus boosted the economy. So it’s fair to give Obama some credit.

Trump came into office lucky on the economy. It was doing great. And the prospect of tax cuts and deregulation added to the fizz. All Trump had to do, really, was not screw things up. Which — given a president’s limited ability to actually impact the economy — should have been a piece of cake.

But Trump is a poster boy for the Dunning-Kruger effect I’ve written about: the dumber people are, the less they recognize their dumbness. Trump understands nothing about the global economy while feeling certain he understands everything. A deadly combination.

And he managed to find the one thing within his power to screw up the economy. He can’t set interest rates, regulate the money supply, or by himself make tax and spending policy. But he could start a trade war.

I’ve explained before why this is so dumb. It doesn’t take a PhD in economics to understand that import tariffs — virtually always — hurt more people than they help and weaken the overall economy in multiple ways. U.S. businesses mostly become less competitive, consumers pay higher prices, jobs are lost not gained, interest rates rise, our exports become costlier and hence fall, so our trade deficit is more likely worsened than improved.

And that’s even without other countries retaliating. When they do, as China and others are, that hurts U.S. businesses, jobs, consumers, and our trade position even more.

But do those other countries also take a hit? Oh yes. Tariffs make the whole world poorer. It is a “beggar thy neighbor” policy. An overall poorer world is not good for America — not for our economy, nor our national security.

It’s true that China is guilty of bad things in the realm of trade and commerce (like stealing intellectual property, to name just one). But the self-inflicted wounds of tariffs are surely not the right answer. A far better one would have been the Trans-Pacific Partnership trade deal, which America had negotiated with 11 other Asian nations, precisely to combat China on trade. Trump pulled out of TPP on his first day.

His tariffs make Trump like the character in “Blazing Saddles” who took himself hostage by pointing a gun at his own head. Trump has pulled the trigger.

Dow down another 1150 points.