Eric C. Anderson
Peter Navarro, director of the President’s National Trade Council, has brought his ruthless enthusiasm for bludgeoning Beijing from behind the banality of his position in academia to the White House. Nay, right to the President’s desk. And with his Sinophobia firmly in grasp, he is apparently deadset on launching a global trade war.
Sadly, imagine the man who is known for declaring: “I still have some principles, but not as many as you might think because I don’t have any concern at all about making stuff up about my opponent that isn’t exactly true,” serving at the right hand of a President who operates under similar principles. This explains, in spades, the Trump administration’s enthusiasm for Mr. Navarro’s war. A real-world case of “The Tail Wags the Dog.”
At a cost to our allies to the north, south and in Europe.
A lawyerly move, that in declaring an essentially global tariff of 25 percent on steel and 10 percent on aluminum, all under the guise of national security. By avoiding naming of a single nation, well, you might just dodge the World Trade Organization. (Beijing has become efficient at employing an international body we deemed our own—much to Washington’s chagrin.)
Perhaps, not surprisingly, the Chinese did not rise to this verbal bait. Beijing is pragmatic enough to realize the Trump administration’s tendency to reverse decisions—it took less than two weeks for ZTE to go from outcast to a corporate entity confronted with a polite business-like hand slap. One suspects the Chinese expect something similar will happen with the steel and aluminum tariff.
Canada has been less patient. Ottawa immediately announced a tit-for-tat response by imposing tariffs on a list of products ranging from whiskey to orange juice and finished steel.
Europe? Well, let us see how Berlin handles this fray.
All of which brings us to the question of a trade or tariff war. Harken back to 1930, and the Smoot-Hawley Tariff. Formally known as the Tariff Act of 1930—in other words Congress, the House and Senate were allowed to weigh-in—Smoot-Hawley immediately stands out from the new executive dictate as something reflecting the interests of a widespread constituency. Not the product of a man who is self-confessed to “making stuff up about my opponent that isn’t exactly true.”
Then there is the question of impact. Despite popular opinion to the contrary, Smoot-Hawley only raised tariff rates by 19 percent over a two-year period. Similar increases in the past had not caused a depression, or collapse in then, admittedly paltry, international trade. American imports of dutiable goods between 1930 and 1932 dropped by 17-19 percent, but the overall impact was only a decline of 4-6 percent. In other words, consumers—confronted with Wall Street’s sudden demise—were no less likely to import after the imposition of tariffs than they were in the wake of 29 October 1929, when interest in products from outside the U.S. had dropped 15 percent.
Causing economists to endlessly debate if the Smoot-Hawley tariff really imposed anything more than a political impact.
A fair argument, until one considers a few more equations.
Back in 1929, imports were only 4.2 percent of the U.S. gross national product (GNP) and exports accounted for only 5.0 percent. Not nation-stopping figures.
Fast forward to 2016—the latest year for which data is available. In 2016, imports accounted for 14.7 percent of gross domestic product (GDP) and exports explained 11.9 percent.
Yes, this becomes tricky as a comparison, as GNP examines the value for goods and services produced by citizens of any given nation regardless of where they are located. GDP is intended to be more specific, only looking at goods and services produced within a nation’s borders. I, for one, would argue it is now impossible to separate GNP from GDP.
Which brings us to this point. In 2016, and likely 2018, imports and exports account for 26.6 percent of our GNP, versus the 9.2 percent in 2019. I suspect even Mr. Navarro can do that math and see commonsense will come to prevail.
Perhaps it would be best to recognize we have declared an attack on the Chinese, only to be struck down in our own civil war. All at cost to the consumer—also known as Mr. Trump’s support base. Might be time to consider a new director for the National Trade Council.
About the Author: Eric C. Anderson is a retired member of the U.S. Intelligence Community whose work focused on Northeast Asia — specifically China and North Korea. He is also an author. His latest text is “Anubis,” the second book in a trilogy examining the rise of ISIS.