Washington Post: OK fine, Trump's trade threats are working

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Published by: Dan Calabrese on Monday July 10th, 2017

But they'll still fail, because they have to!

Something surprising happened on the left's expected road to global ruin, courtesy of Donald Trump. We all know that Trump is not a big fan of many existing trade agreements, and that vowed throughout his campaign to rip up these agreements - followed either by renegotiation or, in some cases, imposition of tariffs against nations that would not deal in the manner Trump preferred.

I'm as big a free-trader as anyone, and I am not eager to see protectionist policies imposed by the U.S. government because they usually end up costing U.S. consumers more than anyone else. But I also recognize what Trump has long understood about negotiations: In order to get the deal you want, you have to be willing to walk away with no deal at all. The left was sure that Trump's bluster would prompt other nations to impose new trade barriers against U.S. goods, triggering a global trade war that would jack up prices on just about everything and shut off our access to global markets.

And if that had happened, it would have been an economic disaster. But now one of the biggest Trump-haters of all, the Washington Post, is forced to admit that, at least so far, Trump's trade rhetoric appears to be working exactly as he intended:

The world’s largest economies have responded to Trump’s trade threats with less protectionism, not more, according to a new study by Global Trade Alert, which has monitored protectionism among countries in the Group of 20 since 2008.

Since January, G-20 countries have imposed 29 percent fewer protectionist policies than they did in the same period in 2016. And it’s not because the United States is playing nice: Since January, U.S. policymakers have imposed 26 percent more protectionist policies on its G-20 peers than during the same period a year before, according to the report.

Caroline Freund, an economist at the Peterson Institute for International Economics, calls this a “backlash to the backlash against globalization.” Trump’s bellicose talk around trade seems to be producing a pause in protection, and even liberalization in the rest of the world, she said.

It’s also a demonstration of the allure of the U.S. market. While countries may chafe at Trump’s demand for new trade terms, they do not want to risk jeopardizing their companies’ access to one of the world’s largest economies by retaliating.

“If he is going to go on a trade rampage, they don’t want to attract extra attention by imposing new measures,” Freund said.

But while the approach appears to have yielded some short-term benefits, events this week at the G-20 summit underscored the longer-term risks of Trump’s approach.

No, they really don't. There is always some risk when you're trying to negotiate a deal with another party, because there's always the chance that the deal will go bad, or that there will be no deal at all because the two sides simply can't agree. And as much as you'd like to do business in theory, you can't find a way to make it work in practice. If Trump's tougher stance on trade terms causes some short-term disruption of global markets, that's easier to manage than being locked into long-term deals that are contrary to our best interests.

This was the trap Barack Obama and John Kerry constantly fell into. We ended up with horrible deals like the Iran nuclear deal and the liberalization of our Cuba policy because they went in thinking any deal was better than no deal at all, and the other parties knew they were desperate to get some sort of agreement - even if it was a bad one. So bad ones were precisely what we got.

GDP growth for Obama's final year? A measly 1.6 percent

It must have killed the Post to write this story, even as it drips with the clear implication that the policy is bound to fail eventually simply because it's Trump's policy and therefore it has to. Knowing the Post, their motivation in writing was probably at least in part to provide a placeholder to which they can go back later and say, See? We weren't fooled! We knew it would appear to be working at first but it would fail eventually!

But without a doubt, the Post would rather be writing a story that says the policy is already failing. They can't do that, because it isn't. Nations can see that Trump is serious about protecting U.S. interests. And what Trump understands that the media do not is that people in other countries want to be able to purchsae U.S.-made goods, preferably without having to pay artificially jacked up prices. They're not going to let us dictate all the terms of how we trade, but they're going to respect that we need to protect our own interests and they will allow us to do that if they can.

That's why this is working. Unlike Obama, Trump understands that you can stand up for U.S. interests and other nations will respect that. They have as much interest in doing business with us as we do in doing business with them. If your priority is to pursue what's most beneficial for the United States, you understand how to use that leverage. The problem with Obama is that he didn't care about U.S. interests, which is why he never hung tough or demanded anything. Trump's approach may seem strange to Beltway media, but it's what most responsible leaders do. I guess that's why they're so surprised it's working.

Dan's new novel, BACKSTOP, is a story of spiritual warfare and baseball. Download it from Amazon here!