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Though hard to explain to the outside world, AEI scholars often disagree on important issues, and there is no official AEI position on anything. In that spirit, I want to register a dissent from my colleague Marc Thiessen’s article in the Washington Post: “Trump is Using Tariffs to Advance a Radical Free Trade Agenda.” President Trump does indeed have a radical agenda, but it is not in the cause of free trade.
On a more general level, one cannot be counted a free trader if one subscribes to the flat-earth equivalent theory that trade deficits (or surpluses) can be changed dramatically by trade policy rather than by changes in a nation’s savings/investment ratio — or indeed that bilateral trade deficits are evidence of “unfair” trade practices or the US being “raped” by its trading partners.
One cannot be a free trader if one supports, as the president does, a “Buy American” policy, no matter the ultimate cost to US businesses and consumers. One cannot be a free trader if one prostitutes the concept of national security by invoking it for purely protectionist trade actions against historical allies. One cannot be a free trader, or free market leader, if one compounds protection with outsized subsidies, as the president contemplates with a $12 billion farm bribe.
Sen. Ron Johnson (R-WI) got it right when he labeled Trump’s tariff/subsidy system a “Soviet type of economy . . . Commissars . . . figuring out how they are going to sprinkle around benefits.”
As to the US-EU informal trade agreement, the only redeeming feature that saves it from being a “nothingburger” is the fact that — for the moment — additional tit-for-tat tariffs on autos are off the table. Trump’s boast in the Midwest that he got a new ironclad agreement from the EU to buy more soybeans and liquefied natural gas (LNG) is typical hyperbole. As Europeans have steadfastly noted since the Juncker visit, all they said was that given that the US-China trade battle had depressed soybean prices, it would be natural for EU companies to take advantage of the forced sale. As for LNG, they merely stated that there was no reason not to expect their rising energy needs would produce more imports.
As to a future US-EU trade deal with no tariffs, no subsidies, and no-nontariff barriers, good luck. The deep regulatory differences that stymied the EU and the Obama administration remain in place. Despite the president’s claim that other countries, including the EU, place “massive” tariffs on US goods, the truth is tariffs around the world are low and not an important issue for trade policy. For OECD countries, the average is 3–4 percent. But every country has a few sensitive sectors where tariffs are higher: Hence the EU’s 10 percent tariff on autos. To focus just on one or two items, however, is deceptive cherry-picking. In any case, I haven’t heard Trump yet offer up the United States’ 25 percent tariff on light trucks.
Finally, Thiessen’s statement that “Trump knows that most of our trading partners don’t really want free trade; they want managed trade” underestimates the United States’ highly developed ability to “manage” trade. Just ask foreigners who want to compete for inland waterway traffic, or producers of raw sugar who want to export to the US, or, as AEI’s Vincent Smith has noted, producers from developing countries who want to compete against vast US farm subsidies.
In sum, Thiessen made a valiant effort to craft a silk purse out of sow’s ear. But, given their vehement protests over Trump’s tariffs, it seems that even pig farmers aren’t buying it.
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