"Hopefully the President is just blowing off steam again but, if he's even half-serious, this is nuts. China is guilty of many things, but the President has no actual plan to win right now. He's threatening to light American agriculture on fire. Let's absolutely take on Chinese bad behavior, but with a plan that punishes them instead of us. This is the dumbest possible way to do this."
--a tweet by U. S. Sen. Ben Sasse
For the record, Ben Sasse is a Republican. From Nebraska. With a doctorate in American history from Yale. Who, along with a senator named Tom Cotton, sits on a U.S. Senate banking committee called the National Security and International Trade and Finance subcommittee.
Sen. Sasse knows about agriculture and trade.
So do investors. Which might explain why the Dow took another nosedive Friday morning. Folks, we can't keep up with how fast this stuff moves. We wrote a perfectly good editorial for Friday morning, explaining how President Trump's $50 billion tariff threat against China could blow up into a full-scale trade war. But by the time the editorial appeared on your doorstep or tablet, the president had moved on. He's added $100 billion more now. Well, maybe not now. But as of this writing.
Apparently not satisfied with the stock market dives of the last week, and apparently not hearing that the Chinese had matched his $50 billion tariff threat with their own $50 billion tariff threat--on, among many other things, Arkansas soybeans and beef--the president decided to double down. Or maybe triple down. On Friday, he ordered his administration to consider an additional $100 billion tariff against imports from Red China. And, right on cue, the stock market took another dive.
But what, the president worry? Here is what President Trump said about the market dive, and, by extension, all of our 401(k) plans: "I'm not saying there won't be a little pain," he said on New York radio Friday morning. "We may take a hit, and you know what, ultimately we're going to be much stronger for it. It's something we had to do."
So we should take his word for it? The word of a man who doesn't read or listen to economic advisers? And what will Beijing do next?
Speaking of economic advisers, the president's are running, hair-on-fire, to the TV cameras to walk back, or pull back, the president's threats. "We're not running a trade war," said Larry Kudlow, the president's new economic adviser, who either hasn't heard what the president said or has ignored it. Instead, Mr. Kudlow says that the Office of the U.S. Trade Representative, a White House operation, was merely proposing ideas.
"This is just a proposed idea," Larry Kudlow assured, "which will be vetted by USTR and then opened for public comment. So nothing's happened. Nothing's been executed."
Except, possibly, the American recovery.
As of this writing, economic advisers on the other side of the world haven't responded to the president's retaliation of their retaliation. Will they see the president's bet of $100 billion in tariffs, or even raise him? Keep your eyes on the papers. But the Chinese don't seem about to back down. Maybe because they know that their government doesn't have checks and balances, their government doesn't have to worry about voters and 401(k)s, and their government can report to the people what it damn well pleases.
"We said before that, even though we will not be the ones to stir up trouble, we will never allow trouble to be brought to our doorstep," said one Chinese Foreign Ministry apparatchik. "We will resolutely fight back. And we Chinese people always deliver what we promise."
If that sounds like a threat, the Red Chinese are probably happy that we don't misunderstand.
Global free trade isn't only good for American farmers, auto workers, steel factories and the world economy in general, it's also a matter of national security. As 19th-century economist Frederic Bastiat once put it, "when goods don't cross borders, soldiers will."
We don't anticipate the president backing down publicly. That's not something that he does. But he could be persuaded by those close to him, and maybe who understand history, economics and trade, to tiptoe quietly by and let this storm eventually die out. And let the start dates for these proposed tariffs slip by unnoticed.
Or as another president, A. Lincoln, once explained about another tricky political situation: An Irishman had once forsworn liquor on account of his wife. But one day he went by the tavern and mentioned to the barkeep that he wasn't averse to having some liquor spilled into his lemonade on accident. "So long as it's unbeknownst to me."
Editorial on 04/07/2018