Trump’s advisors recognize that his China tariff strategy calls for… What might you call it? A “Trans-Pacific Partnership”, perhaps?

“If getting China to pay what it owes for technology were the goal, you’d expect the U.S…. to make specific demands… and… build a coalition”, a Tran-Pacific Partnership, so to speak: Paul Krugman: The Art of the Flail: “Whenever investors suspect that Donald Trump will really go through with his threats of big tariff increases… stocks plunge…

…Incoherence rules: The administration lashes out, then tries to calm markets by saying that it might not carry through…. If getting better protection of patent rights and so on were the goal, America should be trying to build a coalition with other advanced countries to pressure the Chinese; instead, we’ve been alienating everyone in sight. Anyway, what seems to really bother Trump aren’t China’s genuine policy sins, but its trade surplus with the United States, which he has repeatedly said is $500 billion a year. (It’s actually less than $340 billion, but who’s counting?)… This is junk economics. Except at times of mass unemployment, trade deficits aren’t a subtraction from the economies that run them, nor are trade surpluses an addition to the economies on the other side of the imbalance…..

Now, Trump himself might be O.K. with large-scale deglobalization. But as we’ve seen, his beloved stock market hates the idea, and with good reason: Businesses have invested heavily on the assumption that a closely integrated global economy is here to stay, and a trade war would leave many of those investments stranded. Oh, and a trade war would also devastate much of pro-Trump rural America, since a large share of our agricultural production—including almost two-thirds of food grains—is exported. And that’s why things seem so incoherent…

April 18, 2018


Brad DeLong
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