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Trump’s trade war disqualifies him from the presidency

Posted by John Reed on

Presidential candidates say and promise a ton of things. No president in the 20th century really affected the nation much except Hoover and FDR. No doubt some who were not alive during Hoover/FDR will say Reagan won the Cold War. Not really. It would have ended around the same time even if he had never been president. It actually ended after he left office. Plus winning the Cold War was a lot easier than winning the hot one—World War II—which FDR did.

The two major events of the 20th century

The two major events of the 20th century were the Great Depression and World War II.

What will the two major events of the 21st century be? If he is elected, one will be Trump’s-trade-war-caused Great Depression 2.0.

Presidential candidates claim they can change all sorts of things. They change next to nothing. About the only thing they can change that matters is international trade

In 1928, Herbert Hoover, like Donald Trump, ran on a promise to institute protectionism—“fair trade.” If other countries don’t end all their tariffs on our exports to their countries, we will impose tariffs on their products. It always starts with one country claiming they are being unfairly treated. But all the others claim, no, they are the ones are being unfairly and if America increases tariffs on their products, they will retaliate and impose higher tariffs on America’s products.

Reneged on their debts

During World War I, European nations fighting Germany borrowed billions from America for the war. After we imposed tariffs on their exports to the US, they go so mad that all European countries other than Finland refused to pay back the money they borrowed from us as part of their retaliation for the tariffs.

Begged him not to sign the tariff law

1,028 economists signed a petition begging Hoover not to sign the Smoot-Hawley Tariff bill. 

 Here is a Wikipedia paragraph about it:

“In May 1930, a petition was signed by 1,028 economists in the U.S. asking President Hoover to veto the legislation, organized by Paul Douglas, Irving Fisher, James TFG Wood, Frank Graham,Ernest Patterson, Henry Seager, Frank Taussig, and Clair Wilcox.[12][13] Automobile executive Henry Ford spent an evening at the White House trying to convince Hoover to veto the bill, calling it "an economic stupidity."[14] J. P. Morgan's chief executive Thomas W. Lamont said he "almost went down on [his] knees to beg Herbert Hoover to veto the asinine Hawley-Smoot tariff."

The head of GM Europe sent Hoover a wire that said,


He was right. 

Asset bubble plus tariffs

The Great Depression worldwide was triggered by a combination of an asset bubble caused by too much easy credit and the expected signing by Hoover of the Smoot-Hawley Tariff bill.

Now we have Trump making the same promise as Hoover and an asset bubble in almost all assets other than commodities caused by years of record low interest rates. And it’s worse than 1929 in that the international trade that would be disrupted is now about 25% of world GDP. In 1930, it was only 7%, yet disrupting just that 7% caused the Great Depression.

Caused World War II

Arguably, the Great Depression worldwide, along with the Treaty of Versailles, caused World War II in Europe. It was a factor in the Pacific war as well, along with our refusing to continue to sell raw materials to Japan. Trade matters hugely in world affairs and especially outside of the U.S. Almost all other countries are far more dependent on exports than the US.

Trump says other countries are not treating us fairly in trade—they impose tariffs on our stuff going to their country. Believe it or not, the other countries feel the exact same way about how we are treating them. I’m not interested in who’s “right.” It does not matter who’s right because the way it will play out is if anyone increases tariffs on any country, that country will retaliate by raising their tariffs on the country that started it. It will be a chain reaction of the first shot fired by wave after wave of retaliation.

Ships that don’t sail and pink slips

The end result will be that the ships that now travel the world’s oceans carrying containers will stop sailing The workers who made the goods or grew the crops that used to be shipped will get laid off both in the U.S. and around the world.

Also getting laid off will be the workers who sell imported goods in the U.S. like the workers in Wal-Mart, Apple Stores, foreign car dealers, some grocery store workers (not all the food there is grown in the US).

Jobs not coming back

The myth is that all those jobs will come back to the US when we outlaw Americans buying imports. Not true. For example, the banana workers at the grocery stores will not get jobs growing bananas in the US. We don’t have the climate.

Another myth is the only reason imported goods are cheaper is poor people abroad willing to work for pennies a day. Not anymore. For another, a big reason why we import is all the regulations and restrictions on businesses here—human resources, EPA, OSHA, etc., etc. They make American goods more expensive. Even with tariffs, other countries still spend huge amounts to ship goods 9,000 miles across the ocean and they are still cheap compared to American-made after all that.

If the average American were forced to remove all the foreign made clothes they are wearing, they would end up almost naked.

If everything sold in America had to be American made it would all be a lot more expensive and people would be forced to buy fewer things.

The Herbert Hoover of 2016

Trump is the Herbert Hoover of 2016. All his other qualifications and promises are beside the point. Few if any of them would harm the nation. But the imposition of tariffs on the goods of other countries will trigger national pride and outrage—as it did in 1930—in all countries rapidly escalating as a chain reaction leading—as in 1930—to another worldwide depression.

Is this certain? Nothing is certain. But it is so dangerous that we cannot risk it. Presidents really don’t have anywhere near the power they claim. Obama said he was going to stop the rise of the oceans of the world. Other than signging the now-crumbling Obamacare, he changed nothing.

But Presidents DO have the power to start a worldwide trade war and Trump promises, daily, to do exactly that. If he gets elected after making all those promises, he will have a rock solid mandate to start that trade war. Congress will spend no political capital to stop him.

As I said above, the only presidents who made a big difference in the last 116 years were Hoover and FDR, and that was because they restricted international trade and interfered with the economy. So you can generally ignore their campaign blather—UNLESS you hear them utter the phrase “fair trade.” When you hear that, hang on to your wallet.

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