To Boldly Go Wrong

America must have decided that Barack Obama was infuriatingly reasonable. He refused to offend anyone. It was always “tell me what you think, and I’ll listen, and although we probably can’t agree I will listen, and if you listen to me, even if you probably can’t agree with me, at least we’ll know what we’re talking about, and maybe we can work something out, which may not be perfect for either of us, but that’s a start and maybe we can build on that.”

That explains the Iran nuclear deal, and ending our refusal to even talk with Cuba, and may even explain Obamacare – which wasn’t perfect and satisfied no one but was a start. The perfect shouldn’t be the enemy of the good after all – and Obama was mocked for that. That wasn’t bold leadership. Bold leaders say what’s what – what they want and how things should be. They don’t listen. They make demands. If those demands aren’t met they bring on the pain, and the United States can bring on a whole lot of pain – and that explains Donald Trump. He promised not to be reasonable. He’d make demands. He wouldn’t listen, he’d sneer. He’d be bold. Agree with him – or the United States – or pay the consequence. It would be America First now. Deal with it.

That was simple. Obama’s “leadership” had been complicated. Americans seems to have decided to keep it simple now –  even if Iran had at least stopped working on their nukes, and even if Cuba might come around, eventually, and even if a whole lot of Americans now had health insurance for the first time. Trump said that wasn’t good enough. He had his demands. He wasn’t going to listen to reason. He’d be bold.

As CNN’s Z. Byron Wolf reports, that isn’t working out:

The allies are giving the American President a piece of their mind.

After Trump bucked his party and most economists by announcing a new raft of tariffs on aluminum and steel produced by US allies in Europe, Canada and Mexico with the stated purpose of improving US security, leaders of those countries are letting loose in public, and with the President on the other end of the line.

Canadian Prime Minister Justin Trudeau sounded angry and jilted in interview with NBC’s Meet the Press. It’s a far cry from the previous efforts by the young liberal to charm Trump and his many outings with Ivanka Trump. The gloves are off, diplomatically speaking.

“The idea that we are somehow a national security threat to the United States is quite frankly insulting and unacceptable,” said Trudeau, speaking to the American political audience in a very direct way and pointing out the longtime connection of the US and Canadian militaries.

Asked by Chuck Todd what Trump wants, Trudeau seemed to honestly say, “I don’t know.” But he did promise tit-for-tat tariffs on US goods and to up the ante with new tariffs on finished consumer goods.

Trudeau really doesn’t know what Trump wants. The man won’t listen to reason, and meanwhile, across the pond:

French President Emmanuel Macron had tried to good-cop Trump, developing a bro-ship with the unpredictable American leader and trying to influence him in favor of international agreements. That didn’t work on the Iran deal. And when the two spoke about trade and immigration recently, the bromance seemed to be over.

“Just bad. It was terrible,” one source told CNN in a report by Michelle Kosinski and Maegan Vazquez. “Macron thought he would be able to speak his mind, based on the relationship. But Trump can’t handle being criticized like that.”

Theresa May, the British Prime Minister, planned to express her displeasure at the “unjustified and deeply disappointing” tariffs, according to Downing Street.

Trump won’t listen:

The effort has not swayed Trump, according to the White House.

“The President feels very confident in his decision,” White House press secretary Sarah Sanders said during a short briefing with reporters, “and will continue to make sure that the unfair trade practices that have gone on for decades do not continue and that he’s protecting the interests of American workers and American businesses.”

Wolf throws up his hands:

None of this should be a surprise at this point in the Trump presidency. On foreign affairs, he’s been pulling out of international deals and upsetting the decades of US foreign policy from his first days in office, when he withdrew the US from a massive trade deal with Pacific nations (they’ve moved on without the US), and held combative conversations with leaders from Mexico and Australia.

The combination of Trump’s decision to scuttle the Iran nuclear deal, his dogged pursuit of a face-to-face meeting with North Korea’s leader Kim Jong Un, his separate high-stakes game of tariff escalation (or maybe a trade deal) with China and the confusing US relationship with Russia, makes finding a specific message out of Trump’s foreign policy a fraught exercise.

In short, Trump is bold and no one knows what his game is, and this will come to a head in Canada:

Prime Minister Justin Trudeau this week plays host to a summit of the Group of Seven leading industrialized nations with six of the seven members outraged at the United States over a slew of recent moves by President Donald Trump…

Trudeau, who wants the June 8-9 meeting to focus on economic growth, insists he can handle the challenge, though insiders and analysts say he will have to fight to keep the grouping together at a time when Trump’s trade and diplomatic moves have isolated the United States and risk undermining the G7’s relevance.

“What this G7 is going to show is that the United States is alone against everyone and especially alone against their allies,” French Finance Minister Bruno Le Maire told reporters on Friday before a meeting of his counterparts in British Columbia.

So the Group of Seven is now the Group of Six, plus One rogue nation, but Trump is fine with that:

At the G7, Trump will defend his insistence on “fair and reciprocal trade,” said a White House National Security Council official, speaking on condition of anonymity.

Trump economic adviser Larry Kudlow described the tensions over trade as a family quarrel.

“This thing can work out. I’m the optimist,” he told reporters on Friday.

But that pre-summit ministerial meeting in British Columbia didn’t go well:

The United States faced unified opposition from the world’s top economies to President Donald Trump’s escalating, multi-front trade offensive at the end of high-level meetings Saturday soured by the imposition of tariffs.

G-7 ministers urged U.S. Treasury Secretary Steven Mnuchin, who was at the event, to express their “unanimous concern and disappointments” to the White House over new U.S. tariffs, Canadian Finance Minister Bill Morneau told reporters…

No joint final statement emerged from the G-7 ministerial meeting, a sign of the strong discord as the world’s major economies verged on open trade conflict.

There was only a Group of Six statement:

G7 Finance Ministers and Central Bank Governors agreed that, when they work together, the G7 can build on strong interpersonal and economic relationships to advance our common goals.

Concerns were expressed that the tariffs imposed by the United States on its friends and allies, on the grounds of national security, undermine open trade and confidence in the global economy. Finance Ministers and Central Bank Governors requested that the United States Secretary of the Treasury communicate their unanimous concern and disappointment…

While G7 Finance Ministers and Central Bank Governors are pleased with the progress made on important issues that affect the daily lives of people around the world, most regret the uncertainty caused by trade actions which run counter to the goal of economic growth. The international community is faced with significant economic and security issues, which are best addressed through a united front from G7 countries. Members continue to make progress on behalf of our citizens, but recognize that this collaboration and cooperation has been put at risk by trade actions against other members.

Daniel Drezner, a professor of international politics at the Fletcher School of Law and Diplomacy at Tufts University, is a bit amazed:

I have read a lot of G7 statements in my day. Heck, I even helped craft a few. I have never seen an individual G7 country called out in this manner.

But earlier he had said this:

Coercing allies only works if those expectations of future conflict remain low. If a targeted state starts to view the threatening actor as something other than an ally, then conflict expectations rise and the likelihood of concessions falls. This is why sanctioning Cuba in the 1960s did not work. Despite the severe economic costs, Castro decided to ally with the U.S.S.R. instead.

If Trump could convince U.S. allies that the current pressure represents an extraordinary exception to traditionally strong alliances, it is possible that he might get some concessions. Clearly, however, Trump has no love for either the liberal international order or the U.S. alliance system. He cannot even feign commitment to animating ideas of the open global economy or America’s security community. And our allies have noticed. So they are going to be expecting a lot more conflict down the road. This reduces their incentive to acquiesce in the present.

That’s the situation now, and at Vox, Zeeshan Aleem notes just how this mess developed:

On Sunday, the third round of trade talks between the US and China concluded without a breakthrough, which means that the US is currently still on track to impose sweeping tariffs on $50 billion of Chinese goods. China has promised to retaliate against the US’s tariffs, raising the possibility of a trade war between the world’s two largest economies. China also warned on Sunday that US tariffs could torpedo any chance of a future trade deal between the two countries…

On Sunday, the US and China wrapped up their third round of talks. The US is hoping to reach an agreement with China in which it agrees to buy more goods from the US and drop some of its unfair trade practices, like the way it forces US companies trying to do business in China to hand over their technology to Chinese companies.

But it appears that the talks broke no new ground – which means the possibility of a trade war between the world’s two largest economies is closer than ever.

That’s more than a possibility:

US Commerce Secretary Wilbur Ross and Chinese Vice-Premier Liu He didn’t release a joint statement after their meeting, the way that the US and China did after the past talk. But China did release its own statement, warning that the US could obliterate any progress made in the talks by moving ahead with the tariffs it’s threatened to impose on Chinese high-tech goods.

“All economic and trade outcomes of the talks will not take effect if the US side imposes any trade sanctions, including raising tariffs,” the Chinese government said in a statement.

The White House has said a final list of $50 billion worth of Chinese goods that will be subject to tariffs will be announced on June 15, and that the measures will go into effect “shortly thereafter.”

China, for its part, has promised to respond with tariffs on $50 billion worth of US goods, which could deal serious damage to the US agricultural industry.

And that mirrored this:

On Thursday night, Trump imposed 25 percent tariffs on steel and 10 percent tariffs on aluminum from the European Union, Mexico, and Canada. And he had imposed those same tariffs on Japan in March. Now every country that’s been subjected to Trump’s steel and aluminum tariffs is making plans to potentially retaliate with tariffs of their own. Europe is considering targeting American bourbon, jeans, and motorcycle exports.

It’s not just the tariffs that are making close US allies upset – it’s also the way the US is trying to justify them. The Trump administration has invoked an obscure bit of US trade law known as Section 232 to argue that the US needs to block foreign steel and aluminum exports and boost domestic production in order to protect its national security needs.

But all the countries that Trump is targeting with tariffs are close allies of the US, and object to the idea that they would jeopardize the US’s security.

Trump spent a few days being bold and offended everybody, but at CNBC, Jaden Urbi noted two other Republican presidents have tried this and got spanked:

Reagan imposed some pretty significant tariffs on Japan in the 1980s. And in the ’90s, countries were agreeing to stricter rules under the World Trade Organization.

More recently, former President George W. Bush imposed steel tariffs in 2002. He was met with threats of retaliation from European trading partners. And soon after, he ended the tariffs.

She also notes something that became law on March 13, 1930:

America was turning inward with protectionist policies. The government was restricting trade with other countries. And in an effort to save U.S. factories, a couple of congressmen came up with a plan. It was formally called the Tariff Act of 1930, but it’s more commonly known as the Smoot-Hawley Tariff Act.

The plan faced a lot of opposition, but it ultimately became law. The act raised tariffs on American imports to nearly record levels. But instead of reviving the economy, it actually exacerbated the Great Depression.

Nations across the world were striking each other with tit-for-tit tariffs. European countries put a tax on American goods, which slowed trade between the U.S. and Europe. That made it harder for the U.S. to crawl out of its economic slump.

Nationalist rhetoric was heating up, with countries blaming others for their struggles. All of that eventually escalated, turning a trade war into a real war when World War II began.

That’s why after the war ended, nations formed the World Trade Organization to regulate international trade, in the hopes that nothing like the global trade war of the 1930s would ever happen again.

That global trade war had become a global real war. The new World Trade Organization might prevent another. Everyone agreed on that, but Catherine Rampell thinks that Trump took a different lesson from history:

President Trump often seems as though he’s stuck in the ’80s. But maybe the better comparison is to the 1680s, not the Reagan era. These trade policies, and the supposed rationale behind them, bear an uncanny resemblance to classical mercantilism…

As you may remember from some long-ago high school class, that’s an economic philosophy that was prevalent in the 17th and 18th centuries. In a nutshell, mercantilists believed a country should try to maximize exports and minimize imports.

The logic was this: Military power comes from wealth, wealth comes from accumulating gold and silver, and the way you accumulate gold and silver is through trade surpluses. Your merchant ships should go out loaded with attractive goods and came back overflowing with shiny specie.

That’s how it was:

There basically was no such thing as modern-day trade diplomacy; tariffs were high, and no one would have trusted anyone to stick to trade agreements anyway, since everyone was trying to maintain trade surpluses at once – which is fundamentally impossible.

It was a zero-sum view of the world. Nothing was win-win, everything was win-lose, and everyone was suspicious of everyone else.

And then that’s how it wasn’t:

As you also may remember from high school history, then a dude named Adam Smith waltzed onto the scene. He (and subsequently other classical economists, such as David Ricardo) turned much of this thinking on its head. Smith showed that real national wealth doesn’t come from amassing piles of gold, which are transitory. Wealth comes from increasing productivity – that is, by figuring out how to make stuff more efficiently, which permanently increases living standards.

How do you increase productivity? By specializing in what you do well and honing your skills in that area. Then you trade with other people who do other stuff well. Through these transactions, over time, everyone gets richer.

In other words: Trade is not zero-sum; it’s positive-sum.

And that’s not Donald Trump:

Like an 18th-century mercantilist, Trump perceives no mutual gains from trade. In any transaction, he sees only a winner and a loser. And the winner is determined by who has the trade surplus.

Since there’s no way everyone could come out ahead, there’s no point in trying to create a system of rules oriented toward that outcome. Plus, he seems to believe everyone’s going to cheat anyway – including, and perhaps especially, our supposed friends.

“Frankly, our friends did more damage to us than our enemies,” Trump said in March. “Because we didn’t deal with our enemies, we dealt with our friends, and we dealt incompetently.”

Also, like those mercantilists of yore, he conflates our balance of trade with national security, though the exact connection between the two remains a bit muddled.

But Rampell says there’s an even more fundamental error here:

Even 18th-century mercantilists knew that if you were trying to use tariffs to boost your trade surplus, you wanted to tax imports of finished goods, not the inputs that your domestic industry needs to make those high-value, finished-good exports.

Trump still hasn’t figured this out. In protecting U.S. steel and aluminum, he is threatening the much larger manufacturing industries that purchase these materials to make, and then sell, high-value exports such as cars and appliances.

But of course Trump is bold where Obama was infuriatingly reasonable.

Lawrence Summers, the past president of Harvard University and treasury secretary from 1999 to 2001 and an economic adviser to President Barack Obama from 2009 through 2010, puts that this way:

Take as a given the president’s mercantilist premise that the central priority of U.S. economic policy should be achieving more fairness in opening up markets around the world. Even given this dubious judgment about ends, the United States is proceeding in a remarkably un-strategic and ineffective way.

Trump doesn’t get it:

A first rule of strategy is to have well-defined objectives, so success can be judged and your negotiating partners are not confused about what you want. Is the United States’ primary objective to reduce its trade deficit overall, or just with particular countries? Is it to protect employment in politically sensitive sectors, such as steel and automobiles? Is it to stop commercial practices, such as joint-venture requirements, that unfairly penalize American companies doing business in foreign countries? Is it to gain more market access for U.S. companies regardless of how successful they are likely to be, as in the case of increased access for the U.S. auto industry to the Korean market?

From tweet to tweet, and senior official to senior official, it is impossible to know what this administration’s priorities are. When everything is presented as a top priority, as often seems the case, nothing can really be a top priority. No one can be confident that making concessions will resolve disputes.

Justine Trudeau really doesn’t know what Trump wants, but no one does, and there’s this:

A second rule of strategy is to unite your friends and divide your potential adversaries. The United States seems to be doing the opposite. Surely, China stands out as a competitor in terms of economic scale, rate of growth, extent of government economic intervention and prowess in cutting-edge areas such as artificial intelligence. Yet, after alienating its Asian allies by pulling the plug on the Trans-Pacific Partnership, the United States enraged its Group of Seven allies by imposing tariffs on steel and aluminum, as well as by making further threats that have caused them to doubt U.S. commitment to the rule of law in global trade…

Decades of sustained efforts to foster a benign relationship with Mexico are also being squandered. The current U.S. approach to Mexico could hardly be better designed for the objective of electing a leftist radical as president in Mexico City.

Being bold can have unintended consequences, and there’s this:

A third rule of strategy is to use as leverage threats that are credible in the sense that carrying them out would hurt those you are negotiating with more than they will hurt you. “Stop or I will shoot myself in the foot” is a singularly ineffective threat.

Steel tariffs fall into this category. The United States has fewer steelworkers than it has manicurists. The market value of the U.S. steel industry is less than 0.1 percent of the stock market. Yet steel is a key input into industries throughout the economy that employ about 50 times as many people as the steel industry does and compete internationally. By raising the price of steel, the United States hurts much more of its economy than it helps. Why does the White House think that this counts as leverage against its competitors – especially when, in all likelihood, these nations will retaliate in highly strategic ways, with international legal support, by limiting imports from key U.S. industries.

Being bold can have unintended consequences:

Trump’s trade policies will raise the prices that Americans pay for what they buy. They will reduce the competitiveness of the U.S. economy. They will succeed where our traditional adversaries have failed in uniting much of the rest of the world in opposition to us. They will reduce our legitimacy and power by demonstrating our lack of competence.

Other than that Trump’s trade policies are wonderful, or at least they’re bold, or something – and now the United States is alone against everyone and especially alone against its own allies. That wasn’t supposed to happen. America may have decided that Barack Obama had been infuriatingly reasonable, and that wasn’t real leadership. Americans seems to have decided to keep it simple this time. Trump would be bold, without being reasonable at all. America may have made the wrong decision.

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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