January 17, 2020

Trump just ran a two-year trade war experiment. It failed
Fans of free-market capitalism, you have reason to rejoice. Break out those green Adam Smith neckties hanging in the back of your closet. Party like it's 1999 — or, even better, 2000 when the internet-fueled Nasdaq hit a record high of 5000 and the U.S. normalized trade relations with China.The cause for celebration today is President Trump signing a "phase one" trade deal with China. After two years of back-and-forth tariffs that marked the world's worst trade conflict in a century, Beijing and Washington have reached a historic agreement that accomplishes ... not so much, really. It doesn't create balanced trade between the United States and China. It doesn't disentangle the two mega-economies. And it doesn't force China to alter its "state capitalist" economic model built on central planning and subsidies. China doesn't even concede that it has a history of forcing American firms to hand over their technology.But "not so much" isn't nothing. The singular achievement of President Trump's protectionist experiment is to vividly demonstrate on a global stage that protectionism doesn't work. And for that welcome-if-unintentional result, free marketeers should be delighted — though not really surprised. After all, Trump's fundamental economic observation about trade is flat-out wrong. Big trade deficits are not the result of dumb trade deals by corrupt or dumb politicians. They're the result of too much spending and too little saving.While China might buy more stuff from America as a result of the deal, the overall near-term benefit to the U.S. economy will probably be limited. Increases of farm and energy exports to China might be mostly offset by declines in shipments to other countries. That's sure how Goldman Sachs sees things: "Much of the reduction in the trade deficit with China will probably be offset by an increased trade deficit with other countries." Despite all of Trump's trade machinations, the U.S. likely finished 2019 with an overall trade deficit only a bit smaller than the more than $621 billion gap in 2018. So, according to Trumponomics, the rest of the world continues to "bleed America white."The Trump trade war also showed the futility of trying to employ tariffs as a broad instrument of economic nostalgia. Modern-day protectionism didn't bring back those long-departed Rust Belt manufacturing jobs. Economists predicted that while import protection might provide favored sectors a shield from foreign competition, it would also raise their input costs and subject them to foreign retaliation. And that's just what happened. A Federal Reserve study out last month concluded that "the 2018 tariffs are associated with relative reductions in manufacturing employment and relative increases in producer prices."Or just listen to what the manufacturers themselves have been saying. The CEO of Allegheny Technologies told the Wall Street Journal that while he supported Trump's 25 percent tax on imported steel, he also wanted a special exemption from it. Turns out the tariff has made the importation of nickel-bearing stainless steel slabs — which the company then uses to make high-performance alloys — "unreasonably expensive" and put the jobs of "hundreds of Pennsylvanians" at risk. In other words, Econ 101 for the win.There's no doubt that those cold-hearted, hypercapitalists on Wall Street like the China trade deal. But that's not because most investors think it will cause GDP to accelerate or make the economy more competitive. They just think it greatly reduces the chance of further escalation into truly dangerous territory. It's another situation where Trump is solving a problem he started or worsened. And the only reason the tariffs haven't been more damaging is that their impact was lessened by the Trump tax cuts and a looser Federal Reserve. The downside there is it works both ways. The tariffs also made the tax cuts look ineffective in boosting investment and productivity. Definitely not something for market capitalists to cheer.Going forward, the big job for policymakers is to learn from the protectionist failure and fashion a more-or-less bipartisan approach — heavy on targeting specific trade abuses and boosting U.S. science investment — to tackling China's economic, political, and ideological challenge. And understanding what doesn't work should be helpful in accomplishing that.Want more essential commentary and analysis like this delivered straight to your inbox? Sign up for The Week's "Today's best articles" newsletter here.More stories from theweek.com National Treasure 3 is reportedly in the works Mindhunter just got Netflixed Ukraine gives Trump the corruption investigation he asked for
Related Stories
Latest News
Top news around the world
Coronavirus Disease

Coronavirus disease (COVID-19) is an infectious disease caused by a newly discovered coronavirus.

Most people infected with the COVID-19 virus will experience mild to moderate respiratory illness and recover without requiring special treatment. Older people, and those with underlying medical problems like cardiovascular disease, diabetes, chronic respiratory disease, and cancer are more likely to develop serious illness.

Around the World

Celebrity News

> Latest News in Media

Watch It
Remembering Paul Walker: Rewind | E! News
November 30, 2020
0qjs1h05zNk
Disney Honors Chadwick Boseman on His 44th Birthday
November 29, 2020
UlyMVGnb3YA
Who Will Replace Alex Trebek on "Jeopardy!"?
November 29, 2020
2A-h7QSsq3s
Interim ‘Jeopardy!’ host Ken Jennings slammed for wheelchair tweet | Page Six Celebrity News
November 25, 2020
GF8JOA07ZpI
The one with the cast of 'Friends', then and now | Page Six Celebrity News
November 25, 2020
FLlqmbxCjnI
Bill Murray’s brother Ed, inspiration behind ‘Caddyshack,’ dies | Page Six Celebrity News
November 25, 2020
VEzPd5ot58g
The Head and the Heart - Live from My Den
November 30, 2020
L0YrtwPIe44
7 Questions with Jamie Dornan
November 25, 2020
bqZLJEd8Gxs
Why 'Selena' star Christian Serratos Chose to Lip-Sync Selena's Songs
November 25, 2020
FNz_Pal3qeo
Tichina Arnold Says Grammys Epitomize Problem with Award Shows | TMZ
November 30, 2020
S4zo6QxV5oY
Santa-For-Hire Says COVID's Left Some Impersonators Out in the Cold
November 29, 2020
hgd5xnRT1q4
Kamala Not a Shoo-In for 2024 with Black America, Tamika Mallory Says | TMZ
November 26, 2020
YLoz9LmkeJ8
TV Schedule
Late Night Show
Watch the latest shows of U.S. top comedians

Sports

Latest sport results, news, videos, interviews and comments
Latest Events
30
Nov
ENGLAND: Premier League
West Ham United - Aston Villa
30
Nov
ENGLAND: Premier League
Leicester City - Fulham
30
Nov
SPAIN: La Liga
Real Betis - Eibar
30
Nov
ITALY: Serie A
Genoa - Parma
30
Nov
ITALY: Serie A
Torino - Sampdoria
30
Nov
ASIAN CHAMPIONS LEAGUE: Group Stage
Chiangrai United - Melbourne Victory
30
Nov
ASIAN CHAMPIONS LEAGUE: Group Stage
Shanghai Shenhua - Perth Glory
30
Nov
ASIAN CHAMPIONS LEAGUE: Group Stage
Beijing Guoan - FC Seoul
30
Nov
ASIAN CHAMPIONS LEAGUE: Group Stage
F.C.Tokyo - Ulsan
29
Nov
ENGLAND: Premier League
Chelsea - Tottenham Hotspur
29
Nov
ITALY: Serie A
Napoli - Roma
29
Nov
ENGLAND: Premier League
Arsenal - Wolves
29
Nov
ENGLAND: Premier League
Southampton - Manchester United
29
Nov
ITALY: Serie A
AC Milan - Fiorentina
29
Nov
SPAIN: La Liga
Barcelona - Osasuna
29
Nov
ENGLAND: Championship
Nottingham Forest - Swansea City
29
Nov
GERMANY: Bundesliga
Bayer Leverkusen - Hertha Berlin
29
Nov
GERMANY: Bundesliga
Mainz - Hoffenheim
29
Nov
SPAIN: La Liga
Real Sociedad - Villarreal
29
Nov
SPAIN: La Liga
Celta Vigo - Granada CF
29
Nov
ITALY: Serie A
Cagliari - Spezia
29
Nov
SPAIN: La Liga
Getafe - Athletic Bilbao
29
Nov
ITALY: Serie A
Bologna - Crotone
29
Nov
ITALY: Serie A
Lazio - Udinese
28
Nov
GERMANY: Bundesliga
Stuttgart - Bayern Munich
28
Nov
GERMANY: Bundesliga
Borussia Dortmund - Koln
28
Nov
SPAIN: La Liga
Real Madrid - Alaves
28
Nov
ENGLAND: Premier League
Brighton - Liverpool
28
Nov
ENGLAND: Premier League
Manchester City - Burnley
28
Nov
ITALY: Serie A
Benevento - Juventus
28
Nov
ITALY: Serie A
Sassuolo - Inter Milan
28
Nov
SPAIN: La Liga
Valencia - Atletico Madrid
28
Nov
GERMANY: Bundesliga
Borussia Monchengladbach - Schalke
28
Nov
ENGLAND: Premier League
West Bromwich Albion - Sheffield United
28
Nov
ITALY: Serie A
Atalanta - Verona
28
Nov
ENGLAND: Premier League
Everton - Leeds
28
Nov
SPAIN: La Liga
Huesca - Sevilla
22
Nov
ITALY: Serie A
Napoli - AC Milan
22
Nov
ENGLAND: Premier League
Liverpool - Leicester City
22
Nov
ENGLAND: Premier League
Leeds - Arsenal
22
Nov
ITALY: Serie A
Inter Milan - Torino
22
Nov
ITALY: Serie A
Roma - Parma
21
Nov
SPAIN: La Liga
Atletico Madrid - Barcelona
21
Nov
ENGLAND: Premier League
Tottenham Hotspur - Manchester City
21
Nov
GERMANY: Bundesliga
Hertha Berlin - Borussia Dortmund
21
Nov
ENGLAND: Premier League
Manchester United - West Bromwich Albion
21
Nov
ITALY: Serie A
Juventus - Cagliari
Find us on Instagram
at @feedimo to stay up to date with the latest.
Featured Video You Might Like
zWJ3MxW_HWA L1eLanNeZKg i1XRgbyUtOo -g9Qziqbif8 0vmRhiLHE2U JFCZUoa6MYE UfN5PCF5EUo 2PV55f3-UAg W3y9zuI_F64 -7qCxIccihU pQ9gcOoH9R8 g5MRDEXRk4k
Copyright © 2020 Feedimo. All Rights Reserved.