Did Donald Trump capitulate to end the trade war he started with China? Paul Krugman dissects Trump's "deal".
First and foremost, Trump wanted to slash the U.S. trade deficit. Economists more or less unanimously consider this the wrong objective, but in Trump’s mind countries win when they sell more than they buy, and nobody is going to convince him otherwise.
So it’s remarkable to note that the trade deficit has risen, not fallen, on Trump’s watch, from $544 billion in 2016 to $691 billion in the 12 months ending in October.
And what Trump wanted in particular was to close the trade deficit in manufactured goods; despite giving lip service to “great Patriot Farmers,” it’s clear that he actually has contempt for agricultural exports. Last summer, complaining about the U.S. trade relationship with Japan, he sneered: “We send them wheat. Wheat. That’s not a good deal.”
So now we appear to have a trade deal with China whose main substantive element is … a promise to buy more U.S. farm goods.
Trump’s team also wanted to put the brakes on China’s drive to establish itself as the world’s economic superpower. “China is basically trying to steal the future,” declared Peter Navarro, a top trade adviser, a year ago. But the new deal, while it includes some promises to protect intellectual property, leaves the core of China’s industrial strategy — what’s been called the “vast web of subsidies that has fueled the global rise of many Chinese companies” — untouched.
So why did Trump wimp out on trade?
At a broad level, the answer is that he was suffering from delusions of grandeur. America was never going to succeed in bullying a huge, proud nation whose economy is already, by some measures, larger than ours — especially while simultaneously alienating other advanced economies that might have joined us in pressuring China to change some of its economic policies.
At a more granular level, none of the pieces of Trump trade strategy have worked as promised.The Chinese didn't drop their export prices, meaning those tariffs came out of the pockets of importers and end consumers. Worse, the Chinese retaliated against a critical part of Trump's base - farmers. A guy who is already worried about keeping his base onside to 2020 can't afford pissed off farmers.
Krugman assumes that the American people, having acquired a taste for horse shit, will believe Trump's spin claiming that he forced the Chinese to their knees no matter what their lyin' eyes tell them. Worse, Krugman says this folly, like most Trump policy, has left the US weakened.
On one side, our allies have learned not to trust us. We have, after all, become the kind of country that suddenly slaps tariffs on Canada — Canada! — on obviously spurious claims that we’re protecting national security.
On the other side, our rivals have learned not to fear us. Like the North Koreans, who flattered Trump but kept on building nukes, the Chinese have taken Trump’s measure. They now know that he talks loudly but carries a small stick, and backs down when confronted in ways that might hurt him politically.
These things matter. Having a leader who is neither trusted by our erstwhile friends nor feared by our foreign rivals reduces our global influence in ways we’re just starting to see. Trump’s trade war didn’t achieve any of its goals, but it did succeed in making America weak again.