A long-time U.S. trade guru joked last week that as a rule of thumb, he favors trying to manage only one trade war at a time, not multiple trade conflicts at once as the U.S. is attempting.
As the danger of costly missteps and negative consequences with international partners becomes more evident, the United States needs a serious debate over the current approach and making course adjustments. The alternative could leave the U.S. trying to recoup after paying the price at home and abroad.
{mosads}The U.S. has imposed new tariffs on steel and aluminum targeting nations that are long-time allies and friends in Europe and North America for “national security” reasons, rather than focusing on rival and trade bad-boy China, sparking alarms from pundits and experts from across the political spectrum.
The U.S. tariffs have engendered billions of dollars in promised retaliatory tariffs from Canada, Mexico and the European Union, which argue that U.S. tariffs violate trade rules and are unjustified and counterproductive.
Using the “national security” rationale for U.S. trade actions could also damage U.S. producers over the longer term if other countries argue that their security is compromised by importing U.S. corn, soybeans or airplanes and thereby seek to block imports and escape commitments made in the World Trade Organization or bilaterally.
If, on top of this, the U.S. gets into a tit-for-tat exchange with China over legitimate U.S. concerns about Chinese trade practices, it will be more costly for U.S. businesses and farmers given the $650 billion U.S.-China trade relationship.
There is broad agreement that China should change harmful trade-related practices, but great dismay that the U.S. has scattered its fire by taking on U.S. allies rather than focusing on China and mobilizing allies to help bring pressure for changes in Chinese steel overproduction or forced technology transfers.
According to press reports, the U.S. is seeking Chinese commitments to buy U.S. farm and other products in the latest bilateral talks, but it is not clear what commitments are being discussed on the longer-term systemic changes needed in Chinese economic policies.
Serious studies warn of the costs flowing from new U.S. tariffs and others’ retaliation. America’s farmers will suffer heavily from the retaliatory tariffs targeted on farm products by countries that view the U.S. trade moves as unjustified.
America’s farmers fear losing major parts of their three largest markets — Canada, Mexico and China — as fallout from these conflicts. U.S. business groups have consistently warned about the negative effects of mishandling the North American Free Trade Agreement (NAFTA) and other trade issues including with the new U.S. tariffs.
In the case of NAFTA, millions of U.S., Mexican and Canadian citizens will suffer if the U.S. pulls out, as President Trump and his aides are again threatening to do.
The president is now floating the idea of splitting NAFTA into two negotiations apparently to gain leverage, while some Canadian and Mexican voices are saying no NAFTA is better than a bad NAFTA.
America’s image in the world as a trusted partner is also suffering. U.S partners seriously question the “national security” rationale for the new tariffs and the legitimacy of the U.S. actions.
Such practices will affect other nations’ willingness to work with the U.S. on other international issues, whether it is misbehavior of Iran, Russia or China, or in the case of Mexico, combatting drug trafficking and illegal migration.
Trade and economic disputes are hard to understand and assess. It is easier to pick up catch phrases about “fair” trade agreements or allegedly harmful “trade deficits,” than to absorb the complicated analyses about trade, deficits and their relationship to the massive economic transformations that have swept through America this century.
Yet, not demanding serious explanations and justifications for the current U.S. trade approaches and not pressing for immediate adjustments as merited could well cost the U.S. dearly.
Hardball trade tactics will negatively affect all Americans. Independent trade research firm Trade Partnership Worldwide, for example, finds that the new U.S. tariffs on steel and aluminum will cost the U.S. a net loss of 470,000 jobs (18 jobs lost for every steel/aluminum job gained).
Another study by that same group finds that potential new 25-percent U.S. tariffs on imported autos will result in a net loss of 157,000 U.S. jobs (three jobs lost for every one gained) and a decline in GDP.
The respected Peterson Institute for International Economics argues separately that new auto tariffs would cost 195,000 U.S. jobs and cause a drop in auto production.
Another study by the Peterson Institute argues that tariffs the U.S. has proposed against China will do serious harm to U.S. technological competitiveness, and the Trade Partnership Worldwide predicts serious U.S. job and output losses from reciprocal U.S. and Chinese tariffs.
The U.S. moves shocked traditional friends. Canadian Prime Minister Trudeau protested that the imposition of tariffs on Canadian steel and aluminum exports for “national security” reasons comes when the U.S. actually sells more steel to Canada than Canada sells to the U.S.
It also neglects the fact that Canada has been a trusted security partner since World War I. Other Canadians echo his deep concern.
Consider the current U.S. trade approach from the perspective of a personal life experience. What would your reaction be to a neighbor who:
- insists there is a problem that does not appear valid to you;
- demands actions that you think will be very harmful;
- redefines the city or neighborhood rules to justify his action; and
- takes punitive steps to force you to accept his demands.
This is not a person one would choose to live next to, if given the choice. Sadly, this is how many partner nations in Europe, Canada, Mexico and Japan likely perceive U.S. tariffs.
The U.S. and its partners and rivals may end up playing out these trade conflicts aggressively, but Congress should insist that the administration provide detailed, in-depth justifications to explain its actions in the face of alarm and criticism.
What are the administration’s studies that led to the measures being imposed? What do they show as the costs for U.S. workers, farmers, businesses and consumers?
How do U.S. positions and tactics get us to good longer-term economic results and maintain a strong U.S. role in the world? Alternative approaches need to be offered and urged as part of a serious discussion.
Now is the time for a concerted effort in Congress and by other elected representatives to press these issues in public and in private. The costs of misfired trade war tactics for the United States and its citizens need to be made crystal clear and alternative pathways forward must be highlighted.
Earl Anthony Wayne is a public policy fellow at the Wilson Center, a former assistant secretary of state for economic and business affairs, the former U.S. ambassador to Argentina and the former U.S. ambassador to Mexico.