Trading on Trade

There are worlds that most of us will never know. There are billionaires, or so we’re told, but they may be another species, or apocryphal – except that one of them is running for president, unless he’s been less than honest about his net wealth and he’s just another rich guy. But assume he’s a billionaire. How does one become one of those? Who are these people and how did they get to the top of the top of the top? They must know things that no one else knows. They probably get together and laugh about the rest of us. Maybe they have a club. They ought to – they’re all Republicans, save for one or two oddballs here and there – and that would be a secret club, a club of extraordinary people who all think alike, and certainly not like the rest of us.

It’s easy enough to imagine that, but it seems that’s a myth:

A billionaire hedge fund manager known for contributing huge sums to Republican candidates cautioned Wednesday that Donald Trump’s economic policies effectively guaranteed a depression.

“The most impactful of the economic policies that I recall him coming out for are these anti-trade policies,” Paul Singer said during a panel discussion at the Aspen Ideas Festival in Colorado, according to CNBC. “And I think if he actually stuck to those policies and gets elected president, it’s close to a guarantee of a global depression, widespread global depression.”

Paul Singer doesn’t want Donald Trump in that club. Trump thinks the wrong things and Singer doesn’t:

Singer is the founder of Elliott Management Corporation, a fund worth $27 billion that specializes in distressed debt acquisitions. A self-described libertarian, he donated $100,000 to the Republican Party in 2015, according to Forbes, and contributed to Sen. Marco Rubio’s (R-FL) failed bid for the presidency.

Singer’s remarks in Aspen came one day after Trump gave two speeches laying out his fervent opposition to international trade agreements and threatening to raise tariffs on the United States’ leading trading partners, including China and Mexico.

It seems that one of the things these guys know, that no one else knows, is that international trade agreements are good and threatening to raise tariffs will ruin everything, so Singer has been fighting Trump:

According to CNBC, Singer donated $1 million in April to the anti-Trump Our Principles PAC. He said at the conference that he may not vote for anyone in November.

Trump will not do, but he’s confused everyone in the club:

Billionaire casino magnate Sheldon Adelson said he would support Trump as the Republican Party’s nominee, and The New York Times reported he may spend up to $100 million aiding Trump’s bid. Industrialists Charles and David Koch will not donate to either Trump or the GOP convention and have instead signaled that they’ll funnel money towards down-ballot candidates.

So billionaires don’t all think alike, but then no one thinks like Trump:

Republicans are trying to embrace Donald Trump – but he isn’t making it easy. Just three weeks before the party plans to coronate Trump as its 2016 standard-bearer at the Republican National Convention in Cleveland, the presumptive nominee is keeping up the infighting that has troubled the GOP’s establishment for months.

“It’s almost – in some ways, like, I’m running against two parties,” Trump told conservative talk radio host Mike Gallagher on Thursday.

That does seem to be the case:

In the past two days, Trump has abandoned decades of conservative orthodoxy on trade, launched into a battle with the GOP’s traditional business-lobby allies and campaign financiers – like the Chamber of Commerce – and slammed his former Republican presidential rivals who haven’t endorsed him, saying their political careers should be over.

“They broke their word and in my opinion, they should never be allowed to run for public office again because what they did was disgraceful,” Trump said in Bangor, Maine, Wednesday, alluding to figures like Florida Gov. Jeb Bush, Texas Sen. Ted Cruz and Ohio Gov. John Kasich, who signed a pledge to support the GOP nominee but have yet to endorse him. Kasich, for his part, on Wednesday released a letter on his campaign fundraising list highlighting a poll showing him faring better in the general election than Trump.

That’s nice for Kasich, but Trump doesn’t care:

Trump will continue to make his case against free trade deals like the Trans-Pacific Partnership, negotiated under President Barack Obama, and the North American Free Trade Agreement, signed into law by Bill Clinton, in a speech Thursday afternoon in Manchester, New Hampshire.

Trump is shaking things up, and the Washington Post’s Sean Sullivan and Jenna Johnson report on how that’s been playing out:

The unusual battle between Donald Trump and much of the Republican establishment on international trade is rapidly escalating, as the presumptive GOP nominee rails against business groups and members of his own party while defenders of sweeping free-trade pacts rebuke him.

The rift deepened on Thursday when Trump called out the U.S. Chamber of Commerce by name for the second straight day and pilloried the North American Free Trade Agreement and the Trans-Pacific Partnership, two landmark trade agreements broadly supported by Republicans. …

The mogul’s comments followed a flurry of insults throughout the week aimed at advocates of broad trade accords, which have been championed by Republican leaders for decades as crucial engines of capitalism. Trump accused TPP backers, for example, of wanting to “rape” the United States.

He is picking a fight with these guys – they’re rapists now, Republican rapists – and that’s a gamble:

For Trump, feuding with powerful business interests makes him an attractive candidate for many disaffected working-class voters, including some who have supported Democrats in the past. But the loud dispute also risks alienating many of the Republican Party’s wealthy benefactors at a time when he is struggling to kick his long-dormant fundraising operation into gear. A stridently protectionist message could also push some moderate Main Street Republicans to support Democratic rival Hillary Clinton, in much the same way that many Republicans in the foreign policy world have done.

This, however, is even more serious:

For many Republicans in particular, the rhetoric amounts to an assault on core ideological beliefs that have undergirded conservative economic policy for generations.

The candidate’s arguments have also left an opening for sharp attacks by Clinton and other Democrats accusing him of hypocrisy. Trump in the past has talked favorably about outsourcing jobs overseas, and much of his Trump-branded apparel line and other products are manufactured in low-cost Asian countries.

“Donald Trump is running as an anti-Republican Republican in many ways,” said David French, senior vice president of government relations at the National Retail Federation, which like the Chamber of Commerce is not taking sides in the presidential contest. French said Trump’s commentary on trade has been disappointing.

Some business leaders are privately pessimistic that publicly fighting Trump hard on trade will be a winning proposition. His access to free media coverage through television and radio interviews presents a big obstacle to anyone standing in his way.

Some business leaders know they can’t win this battle, but Trump has a different sort of victory in mind:

Trump’s repeated talk about trade is aimed in large part at undermining Clinton, whose husband signed NAFTA as president. Trump also accuses Clinton of waffling on TPP, which she praised as secretary of state but then opposed during her hard-fought primary contest with Sen. Bernie Sanders of Vermont.

“The trade policies of Hillary Clinton, global financiers – and they’re all controlling her, they have 100 percent, they might as well stamp Hillary Clinton on their forehead,” he said Thursday.

Take THAT, Paul Singer! But this won’t go well:

Clinton and other Democrats have pushed back by pointing to the ways that Trump has benefited from the policies he now condemns. On Thursday, Clinton issued a tweet listing the countries, from Mexico to Bangladesh, where Trump-branded ties and shirts were made.

That’s not nice, but here’s the deal:

While Trump insists he is not trying to challenge free-trade principles, he has repeatedly argued that it is more important for the United States to have “fair trade” agreements. He has said that he would prefer to negotiate deals one-on-one with countries rather than enter into multi-national settlements.

Divide and conquer, and make everything more expensive:

Trump has repeatedly vowed to impose high tariffs – or the threat of high tariffs – to bully American companies into keeping jobs in the United States. His favorite example is Ford Motor Co., which plans to build a massive plant in Mexico. Trump has said that before he takes office he will persuade Ford to change course by threatening to charge the company a 35 percent tax on cars imported back into the United States.

That’s a little crude. That’s screwing Ford and making either their assembled-elsewhere cars more than a third more expensive, or forcing them to assemble those cars here, where they’ll be just as expensive – and then everyone buys a Toyota or Kia. What is Trump thinking?

At the Washington Post’s Wonk Blog, Jim Tankersley helps specify the problem here:

Trade has been one of Donald Trump’s great selling points on the campaign trail. China and Mexico are killing us, he has told crowds on his way to the lead position for the Republican presidential nomination, and if Trump wins the White House, he will fight back. The implication is that getting tough with our trading partners – by taxing their exports as they cross America’s borders – will bring jobs and prosperity to the United States.

An economic model of Trump’s proposals, prepared by Moody’s Analytics at the request of The Washington Post, suggests Trump is half-right about his plans. They would, in fact, sock it to China and Mexico. Both would fall into recession, the model suggests, if Trump levied his proposed tariffs and those countries retaliated with tariffs of their own.

Unfortunately, the United States would fall into recession, too. Up to 4 million American workers would lose their jobs. Another 3 million jobs would not be created that otherwise would have been, had the country not fallen into a trade-induced downturn.

The job losses would be halved if China and Mexico chose not to retaliate to the tariffs of 45 percent and 35 percent, respectively. In which case U.S. growth would flat line, but the country would not fall into recession.

Paul Singer was right:

The amount of predicted economic damage surprised Mark Zandi, chief economist for Moody’s Analytics, who prepared the model. He said it is magnified by the precarious – and historically unusual – state of the U.S. and global economies right now: Under the Moody’s model, the Federal Reserve has little power to slow the recession, because interest rates remain near zero. Congress refuses to enact any stimulus measures such as spending increases or tax cuts that might increase the federal budget deficit further.

What results, in the model, is a downward spiral of reduced economic activity. Prices rise on imported goods from China and Mexico, which has the effect of reducing spending power for American consumers. If China and Mexico retaliate, U.S. exports fall, forcing layoffs at American companies that sell to those foreign customers. The ensuing growth slowdowns spread to other trading partners, particularly in Europe, and cause stock markets to plunge, which in turn slows growth even more.

Within a year, the model predicts, the U.S. economy is in recession. “This is a pretty ugly scenario,” Zandi said, “one that I think any rational person would want to avoid.”

A rational person would want to avoid an economic death-spiral:

The Moody’s analysis projects the U.S. economy would be 4.6 percent smaller by the end of 2019 if America levies tariffs on China and Mexico and those countries respond, compared to where it would be with no tariffs. It forecasts U.S. employment would be 7 million jobs lower than it would have been, and that the unemployment rate would hit 9.5 percent in the middle of 2019. The federal budget deficit would grow to be 60 percent larger than it would have been.

If China and Mexico do not retaliate, the model predicts, U.S. growth would slow to near zero in 2018. The economy would end up with 3.3 million fewer jobs than it would otherwise have in a no-tariff scenario.

China and Mexico will retaliate. Why wouldn’t they? But it may be that Trump isn’t rational:

Zandi said that the forecasts undercut Trump’s contention that trade is an area where some countries “win” at the expense of others. From a broad economic perspective, he said, shutting down trade is “a lose-lose” for the United States and its trading partners – and one that could have consequences in other areas of concern for Trump and his supporters: If tariffs cause Mexico to fall into recession, Zandi said, “you’ll have a lot more people knocking on the door” to immigrate to America.

Expect the worst of all possible outcomes, the exact opposite of what Trump wants to happen, and at the reliably (Republican) conservative Commentary site, Noah Rothman is a bit incensed:

One point in favor of the notion that America is entering a protectionist phase and the GOP is only following its voters’ lead is that Donald Trump likely doesn’t believe a word of his protectionist rhetoric. In August of 2005, Trump penned a passionate defense of “outsourcing jobs.” “We will have to leave borders behind,” wrote the man who would fashion himself as the nation’s preeminent border hawk today, “and go for global unity when it comes to financial stability.”

That was on the eve of Hurricane Katrina. Soon after that, the GOP’s brand became unpopular and so Trump became a Democrat. By 2012, the candidate was again a Republican and fishing for ways to ingratiate himself to the most disaffected faction of GOP voters. “Rick Santorum’s 2014 book Blue Collar Conservatives pointed Trump to a segment of the electorate that was ripe for seduction,” wrote Virginia Hume in a piece for The Weekly Standard. “Trump studied the book and even had the author to Trump Tower to discuss it.” Thus, Trump the populist rose from the ashes of Trump the internationalist.

The uncharitable interpretation for the GOP’s professional political class here is that Trump sensed that the party’s mood was turning away from free trade before its representatives in public office. There is, however, a difference between being out of touch and simply declining to follow the ill-conceived passions of the mob.

Republicans know better:

Beyond Trump, who has taken to inadvisably equating the TPP with “rape,” attacks on what the fringe right dubbed “Obama-trade” are anathema to the GOP in Congress. 49 of 54 GOP senators and 190 of 246 House Republicans voted in favor of “trade promotional authority” for Barack Obama last year. “A Republican President will complete negotiations for a Trans-Pacific Partnership to open rapidly developing Asian markets to U.S. products,” read the party’s 2012 platform. RNC officials might be twisting themselves into knots to avoid contradicting their mercurial standard-bearer, but this remains a pro-trade party. And what happens in the likely event that Donald Trump loses in November? Will the GOP keep the torch lit for Trump or do whatever they can to wipe the slate clean?

Donald Trump has done his best to remake the GOP into a progressive, pro-choice, protectionist party, but that transformation has encountered a natural resistance among its elected members. It’s reasonable to expect that resistance to continue right up into the autumn. Whatever happens after that is up to the voters.

Rothman should worry about those voters. Trump has a simple message, and the first of his anti-free-trade-agreement speeches show was powerful. Trump spoke at a campaign stop June 28 at Alumisource, a metals recycling facility, in Monessen, just south of Pittsburgh, and he opened with this:

Today, I am going to talk about how to Make America Wealthy Again.

We are thirty miles from Steel City. Pittsburgh played a central role in building our nation.

The legacy of Pennsylvania steelworkers lives in the bridges, railways and skyscrapers that make up our great American landscape.

But our workers’ loyalty was repaid with betrayal.

Our politicians have aggressively pursued a policy of globalization – moving our jobs, our wealth and our factories to Mexico and overseas.

Globalization has made the financial elite who donate to politicians very wealthy. But it has left millions of our workers with nothing but poverty and heartache.

But he can fix that poverty and heartache:

A Trump Administration will also ensure that we start using American steel for American infrastructure.

Just like the American steel from Pennsylvania that built the Empire State building.

It will be American steel that will fortify America’s crumbling bridges.

It will be American steel that sends our skyscrapers soaring into the sky.

It will be American steel that rebuilds our inner cities.

Trump, reading from a carefully prepared text scrolling on a teleprompter, was channeling Carl Sandburg there. Chicago may have been “hog butcher to the world” but Pittsburgh was once “a city of broad shoulders” too. Those of us born and raised in Pittsburgh know that the giant steel y-shaped members at the base of each of the two World Trade Center Towers, at the core of each, were fabricated in Pittsburgh. We remember watching them slide down the Ohio River on their special barges – it was a special day – on the way to Cairo (the one in Illinois) where the Ohio joins the Mississippi, then down to New Orleans, out into the Gulf, around the tip of Florida and on up the East Coast – but that was long ago. American steel did send our skyscrapers soaring into the sky – but skyscrapers can be knocked down, so it’s best not to be too romantic about these things.

The steel industry left Pittsburgh. The city is less than half its former size now, but thriving, a center for amazing high tech research and a center for advanced healthcare. The jobs are better. Nostalgia only gets you so far, and Kevin Drum notes there was nothing that could be done to stop what happened:

Other countries simply produced steel more cheaply than we did. It started with Japan and South Korea in the ’80s and later migrated to other countries not because of trade agreements, but because Japan and South Korea got too expensive. And it’s not as if no one noticed this was happening. Ronald Reagan tried tariffs on steel and they didn’t work. George H. W. Bush tried tariffs again. They didn’t work. George W. Bush tried tariffs a third time. No dice.

And now it’s Trump:

For all his bluster, when it came time for Trump to lay out his plan to “bring back our jobs,” it was surprisingly lame. It was seven-points long but basically amounted to withdrawing from the TPP and getting tough on trade cheaters. This would accomplish next to nothing. TPP’s effect is small to begin with, and we’re already pretty aggressive about going after trade violations.

The bottom line is simple: If we want access to markets overseas, we have to give them access to our markets. Donald Trump can claim he wants to bring back the jobs we’ve lost to overseas competition, but he’d have to back that up by essentially promising to withdraw completely from NAFTA and the WTO – and then promising to build a huge tariff wall around the entire country. He’s not willing to do that because even he knows it would trash the US economy. So instead he blusters and proposes a toothless plan.

Sure, but that’s working, as Greg Sargent explains Donald Trump’s continuing appeal:

One core assumption driving Donald Trump’s presidential candidacy is this: Voters will see even the seamier details of Trump’s business past as a positive, because even if he got rich by milking the corrupt system, Trump is now here to put his inside knowledge of the corrupt system to work on behalf of America – on your behalf. Trump has repeatedly said this himself in various forms.

Today the New York Times published some new quotes and details from Trump’s business past that will severely test this premise – particularly given Trump’s new emphasis on trade and globalization, in which he’s accusing Hillary Clinton of selling out American workers.

The Times reports that Trump’s trade speech, in which he declared that he’ll “protect” and “fight” for “the American worker,” is at odds with his history:

“Such declarations are at odds with Mr. Trump’s long history as a businessman, in which he has been heavily – and proudly – reliant on foreign labor in the name of putting profits, rather than America, first. From cheap neckties to television sets, Mr. Trump has benefited from some of the trade practices he now scorns.”

This is all bluster and nonsense, and what Trump knows and believes is ambiguous:

Mr. Trump usually makes the case that foreign labor is necessary to keep production costs down, but in an interview with David Letterman in 2012 he also offered a humanitarian argument for outsourcing. Teased for selling dress shirts that were made in Bangladesh, Mr. Trump expressed pride that he was creating jobs around the world.

“That’s good, we employ people in Bangladesh,” Mr. Trump said. “They have to work, too.”

Trump was joking – sort of, at least – but if you watch the video unearthed by the Times, you’ll see that this is a very potent clip. Note the part where Letterman points out that Trump’s ties are made in China, and Trump responds with an extended smirk. It’s not hard to envision this stuff in a forthcoming Democratic ad.

And that could be deadly for Trump, or maybe not:

This suggests once again that there is no reason to assume that the big debate over globalization and trade will necessarily play to Trump’s advantage. Democrats will be able to point out that Trump repeatedly profited off of foreign labor in ways that he himself now claims sell out American workers. Remember, Trump’s big speech excoriates not just politicians who crafted free trade deals, but also business elites who profited off of them…

Now there’s video of Trump joking about this. Obviously, this sort of bravado about his own business past seemingly helped Trump in the GOP primary, including among the blue collar whites who supported him. And as noted above, Trump is wearing this as a badge of honor, as if his inside knowledge of the rigged global economic system equips him to reform it. The persuasive power of this argument should not be cavalierly dismissed.

Hillary Clinton is likely vulnerable on globalization and on perceptions that she belongs to an elite that has let down American workers. What’s more, it may prove harder to persuade general election swing voters, particularly blue collar whites, that Trump isn’t genuinely on workers’ side than, say, it was to persuade them to believe the same about Mitt Romney, who had a patrician, aloof manner and did not speak to workers’ economic anxieties the way Trump is attempting to do.

The only hope is this:

If Romney was vulnerable to getting painted as a heartless plutocrat and walking symbol of the cruelties of globalization and outsourcing, Trump is vulnerable to getting painted as a flim-flam man who is selling American workers a scam.

That is a problem for Trump. He has sold a lot of people a lot of scams, but American workers may not want to believe this is one of them. Maybe he can fix all that poverty and heartache. It’s only those experts with all their facts and figures that can prove that what he proposes will multiply their poverty and heartache a hundred times over – and they hate experts. Donald Trump has told them to hate experts, which is, of course, part of the scam. Anyway, he’s a billionaire, so he must know things – unless he isn’t. They won’t let him in the club after all.

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About Alan

The editor is a former systems manager for a large California-based HMO, and a former senior systems manager for Northrop, Hughes-Raytheon, Computer Sciences Corporation, Perot Systems and other such organizations. One position was managing the financial and payroll systems for a large hospital chain. And somewhere in there was a two-year stint in Canada running the systems shop at a General Motors locomotive factory - in London, Ontario. That explains Canadian matters scattered through these pages. Otherwise, think large-scale HR, payroll, financial and manufacturing systems. A résumé is available if you wish. The editor has a graduate degree in Eighteenth-Century British Literature from Duke University where he was a National Woodrow Wilson Fellow, and taught English and music in upstate New York in the seventies, and then in the early eighties moved to California and left teaching. The editor currently resides in Hollywood California, a block north of the Sunset Strip.
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