What would Reagan think of Trump’s trade war?
Published 8:12 pm Sunday, June 10, 2018
We should beware of the demagogues who are willing to declare a trade war against our friends, weakening our economy, our national security and the entire free world, all while cynically waving the American flag.”
Those words were spoken by none other than President Ronald Reagan in a radio address. They were unearthed by Bryan Riley, and retweeted by Bill Kristol, the editor of the conservative Weekly Standard. I even watched that radio address.
Among modern conservatives, it’s fashionable to either be a fan of Ronald Reagan, or Donald Trump. In some cases, the same person likes both presidents. But given how radically different their policies turned out, that’s now an inconsistent position.
We just declared a trade war on our allies, Canada, the European Union, and Mexico. These alliances are not just technicalities. We’ve signed on the dotted line with NATO countries in 1949, Western Hemisphere countries in the Rio Pact in 1947, and the Bogota Pact of 1948, establishing the Organization of American States (OAS). Every U.S. President during our “great” years has upheld and honored those alliances. We’re a country whose word and deed could be trusted, or at least we were.
Any country that has a trade dispute handles it through the World Trade Organization (WTO), with an impartial referee that rules on disputes that we have with allies. We’ve done this since 1995, and before that with GATT, going all the way back to the latter years of World War II. And those rules, institutions and cooperation, with the U.S. as the leader of the Free World (tax-free trade and democracy) made us great, not a few tycoon corporate raiders.
We created these alliances and institutions for a reason: to learn the lessons of Hitler and Fascism. As the Great Depression unfolded, countries couldn’t wait to slap each other with taxes, which are tariffs on trade. Without any economic cooperation, there was no political and military cooperation to stop Hitler, Mussolini and Tojo, until it was almost too late.
Learning the lesson of this disaster, Democrats like FDR and JFK, as well as Republicans like Ike and Reagan, sought to keep these economic and military alliances. We teamed up to win the Cold War against the Communists, besting the Soviet Union and holding off the Chinese.
Of course, the Russians and Chinese resented losing that contest. That’s what motivated both to try harder to undermine such powerful alliances. Those two stand to gain the most from a trade war, which hurts free markets, not authoritarian command economies.
Want to know who is going to lose? I spoke to a friend who has a firm involved in products supposedly protected by such tariffs. I asked how business was.
Lousy, he replied. Because of the tariffs, everyone domestically is charging more. And that hurts his bottom line, his employees and his customers. And soon, it will come to hurt you.
America may have low unemployment numbers (they’ve been falling since 2009) and good economic growth numbers (they’ve been growing since 2009).
Don’t expect either to last. Don’t count on Reaganesque growth of the 1980s and Clintonlike growth of the 1990s.
We’re headed all the way back to the 1930s, Smoot-Hawley Tariff rates and bad economic news.