At the risk of understatement, I’ve been rather critical of Trump’s protectionism.
But not always. Last year, I praised him for floating the idea of zero taxes on trade between nations (even if I didn’t think he was serious).
And I point out in this interview that he is right about protectionism hurting financial markets.
Just in case you don’t believe me, here’s what Trump actually said, as reported by Business Insider.
President Donald Trump said Wednesday that the Dow Jones Industrial Average would be thousands of points higher if it weren’t for the trade war with China, which he started last year
in an attempt to address trade practices that officials said put the US at a disadvantage. “Let me tell you, if I wanted to do nothing with China, my stock market, our stock market, would be 10,000 points higher than it is right now,” Trump told reporters at the White House. “But somebody had to do this. To me, this is much more important than the economy … It was out of control. They were out of control.”
Incidentally, what Trump is saying at the end of the excerpt could be true. There are times when growth should be a secondary concern.
To take an obvious example, it’s perfectly reasonable to have laws prohibiting companies from selling advanced military technology to potentially hostile governments.
My concern is that the president is too fixated on China’s largely irrelevant bilateral trade deficit. After all, that’s simply the flip side of America’s enormous investment surplus with China.
Instead, Trump should be pressuring Beijing to get rid of subsidies, cronyism, and other mercantilist policies (ideally by using the WTO).
Such reforms would help American companies since they would be competing on more of a level playing field.
And China’s economy would benefit even more since there would be less government intervention.
In other words, there’s a potential win-win conclusion to this trade war. But I’m not overly confident that President Trump or President Xi have the right goal in mind.
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Image credit: The White House | Public Domain Mark 1.0.
