3 Reasons Trump’s Trade Wars Are Dumb and Dangerous

August 2018

ROBERT REICH

ROBERT REICH


Donald Trump has gotten America into a trade war with all our major trading partners. He’s put tariffs, which are essentially taxes, on what they sell to us. And they’ve retaliated by putting tariffs on what we sell to them.

Trump’s trade war is dumb and dangerous for 3 reasons:

First: American companies make and sell things all around the world, employ people all over the world, and are owned by investors all over the world.

At the same time, foreign companies are here, employing Americans, and exporting from the United States. BMW, a German company, is the biggest automobile exporter from the United States.

Second: Tariffs hurt American workers.

They drive up prices of inputs used by American workers to make all sorts of things – thereby making our workers less competitive internationally. Tariffs on steel hurt American workers who use steel in making cars, appliances, and motorcycles. Tariffs on chips, wires, and circuits hurt American workers who use them for making high-tech products.

Tariffs also drive up the prices of goods bought by American consumers from all over the world, reducing the purchasing power of American wages. They’re the equivalent of a wage cut.

And tariffs push foreign governments to raise tariffs on American exports, thereby making American workers even less competitive. Europe puts a retaliatory tariff on Harley-Davidson’s motorcycle exports, and what happens? Harley moved production to Europe.

The trade war that began in 1930 with the Smoot-Hawley tariff ended up worsening the Great Depression.

Third: The best way to increase the competitiveness of American workers has nothing to do with tariffs. It’s to invest in America.

– Invest in the skills and know-how of our workers, starting with early-childhood education, through better schools, access to world-class technical education, and access to college;

– Also invest in future knowledge, through government support for basic research and development.

– Invest in the infrastructure that links American workers to their jobs, to other American workers, and to the global economy. This means world-class roads, bridges, rapid transit, container ports, access to high-speed Internet, and more.

– Invest in the health of American workers through universal health care

But Trump and Republicans have been cutting all these investments.

Trade wars may make Trump feel tough, because he loves tests of his dominance. But they hurt average working people.