Two Loud Boos

            I cheer when President Trump does things right. I boo when he doesn’t. His tax reform, deregulation, energy policy, and judicial picks get cheers. His healthcare debacle and his ill-advised tweets get boos. And now he gets another boo for his trade and monetary policies.

            It all started with Trump’s choice of investor Wilbur Ross to be his Secretary of Commerce. Ross made his billions on bankruptcies, not exactly the right background for being the administration’s leader on trade. Noted for falling asleep at Cabinet meetings, the 80-year old did poorly on trade deals with the Chinese and was replaced for all practical purposes by Robert Lighthizer as U.S. Trade Representative.  

            I don’t know to what degree he was influenced by Ross, but President Trump’s first bad move was to pull out of the Trans-Pacific Partnership (TPP), a profitable arrangement with trading partners in Eastern Asia, exclusive of China. Trump, the master negotiator, thought he could do better by dealing directly with each former partner. It hasn’t quite worked out that way. The jilted countries formed their own partnership, excluding the U.S. while turning to China.

            Trump’s next bad move was calling NAFTA a terrible deal, because he judges everything on the basis of trade imbalances. The fact is that NAFTA is beneficial for all three NAFTA partners. If Trump kills NAFTA, many industries that trade with Canada and Mexico will lose. The biggest losers of all may be American farmers, whose support the President can hardly afford to lose.

            Then came Trump imposing high tariffs on Chinese solar panels and South Korean washing machines. The net effect is that American companies that rely on low-cost solar panels will have to hike prices to make ends meet; Whirlpool, meanwhile, has raised its prices on washing machines. The losers are not China and South Korea: it’s the American people who now have to pay higher prices for both products.

            Finally, the Trump administration is pushing for a weaker dollar to increase sales of American products overseas. The dollar has already fallen 8% in Trump’s first year. As a result, American consumers will pay increasingly high prices for imported products. So will American manufacturers who rely on foreign components and imported commodities.

            Protectionism and monetary devaluation are two bad plays. They both deserve a loud boo.