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International trade will be a key issue in the 2024 U.S. presidential campaign. Sadly, both the Republican and Democratic parties are taking positions on trade that will leave Americans in a perilous sitution.
I doubt anyone would view GOP promises to cut or reform taxes as credible avenues to lowering deficits. If Republicans have a plan to curtail federal spending that it can sell to voters, it remains a mystery to me. Inflation at 3% may be unsettling, but the GOP instead will likely hammer at China and international trade.
Donald Trump is not the fool his critics would have us believe. His political ascent owed much to attacking political correctness and immigrants and promoting protectionism. Trump’s advisers now are cooking up schemes to raise tariffs, not just on China, but across the board by 10%.
Other GOP hopefuls are falling into line. Even Republican presidential candidate Nikki Haley, who has demonstrated courage debating foreign policy, abortion and Social Security, advocates dramatically boosting tariffs on China.
During the Great Depression, Congress increased tariffs against imports from all nations by 20 points, taking the average rate to a historic 40%. That just made a bad situation worse. Global trade contracted by about two-thirds and export industries based on fair exchange among nations lost jobs.
Now consider whether the U.S. blocking imports of apparel from Bangladesh to bring clothing factory jobs back home would be worth losing foreign sales of Microsoft Windows and Ford trucks abroad.
The central point is that not all trade is bad, but both Trump and President Joe Biden behave as if it is.
Trump, as president, imposed tariffs on steel and aluminum indiscriminately, instead of focusing on China and other countries that provive the most subsidies.
Biden eschews all new trade agreements, even with staunch allies such as the U.K., whose environmental, labor and industrial policies pose few real threats to American workers.
Slower global growth inevitably will hurt U.S. exports of high-end semiconductor designs, artificial intelligence software and American-produced entertainment — just to name a few. The U.S. can maintain full employment by revving up its factories, but it’s hardly worth trading export jobs in high-tech industries for more domestic manufacturing assembly jobs.
“All ages have luddites — these days they script industrial policy at the White House and tariff schemes for the Trump campaign. ”
Imposing yet more barriers on imports— across the board — would spur retaliation from America’s friends and foes alike. Trade would contract as it did in the Great Depression and Americans would be poorer. U.S. productivity would fall — writing software pays better than stitching garments because it creates more value.
Moreover, Americans would lose economies of scale in high-tech industries. Less trade spells fewer profits and less R&D for artificial intelligence, new drugs and battery technology.
It would be better for the U.S. to impose across the board tariffs on China alone, and forge new trade agreements with allies.
But all ages have luddites — these days they script industrial policy at the White House and tariff schemes for the Trump campaign.
Meanwhile, voters give Biden poor marks on the economy but their opinion is improving. The anticipated recession may never materialize or prove mild. The consensus of forecasters is for modestly slower U.S. growth for the fourth quarter of this year and early into 2024. The U.S. economy then should become stronger during Biden’s presidential election campaign.
U.S. inflation won’t quickly fall to 2% but in an encouraging sign this summer, wages outpaced price increases. Rising gas prices nixed that in September, but should not going forward.
U.S. interest rates will likely remain high and a point of contention. But Republicans won’t be able to offer a good an answer because the most important factor is the federal debt. The budget deficit is soaring to alarming levels, because Washington has displayed little fiscal discipline since the 2008 Global Financial Crisis.
U.S. national debt will have increased from 37% of GDP in 2007 to nearly 100% by next year, because Presidents Obama, Trump and Biden borrowed to bail out the banks and recover from the Great Recession, cut taxes, cope with COVID and most recently, to boost manufacturing and R&D.
The Chips and Science Act enjoyed significant bipartisan support. Those elements of the Inflation Reduction Act that promote green industries and electric vehicles will be tough to campaign against — at least successfully.
What part of Bidenomics will Trump or another GOP nominee rail against? Biden conditioning federal aid to industry? Supporting unions? Providing employee childcare? With the upper-Midwest states and suburban women nationwide as important points where the battle for the White House will be fought, such a posture would just about guarantee Biden a second term.
Peter Morici is an economist and emeritus business professor at the University of Maryland, and a national columnist.
Also read: Trump doubles down on call for ‘simple but powerful tariff’ that has been slammed by economists
More: The next president will have to navigate a tax and debt minefield
