Is President Trump winning on trade?
Two underappreciated trade wins last week suggest the answer is: Yes.
First, South Korea agreed to reduce longstanding nontariff trade barriers that have reduced US exports there. Though the details are still sketchy, it appears that the Koreans will buy more Ford and GM cars and trucks and other US-made products. This can only be good news for American workers. Seoul has also agreed to increment reimbursement rates to American drug and vaccine producers.
On the negative side, the administration extended tariffs on Korean trucks and imposed a quota on steel imports from Korea. These will raise prices on American consumers and businesses.
On balance, though, as The New York Times grudgingly conceded, the deal “represents the kind of one-on-one agreement that Mr. Trump says makes the great sense for American companies and workers.”
Second, China capitulated in response to Trump’s jarring announcement of a record $50 billion of tariffs on Chinese products. China at first threatened to retaliate with barriers on American soybeans, wheat, blue jeans and bourbon. The US financial markets tumbled.
Now Premier Li Keqiang has pledged to improve access to Chinese markets for American businesses. He also said in a news conference that “China would treat foreign and domestic firms equally.” That’s not all: Beijing has promised to stop forcing foreign firms to transfer technology to China and strengthen intellectual-property rights enforcement.
Those are gigantic and long-overdue concessions. Whether Beijing actually honors these promises remains to be seen. With China, as with the old Soviet Union, Trump would be wise to live by the Reagan doctrine of “trust but verify.”
But Trump won the staredown. He used the threat of punitive tariffs as a bargaining chip to force better trade deals with our trading partners.
You can’t have free trade with a country like China that steals $300 billion a year of your intellectual property. Period. Why couldn’t the last two presidents figure this out?
Trump once told me in a meeting at Trump Tower: “I am not a protectionist, and I am not an isolationist. Of course, I understand the advantages of international trade. I’m a businessman. I just want better and fairer trade deals that advantage America.” That was reassuring, but I was still nervous.
True, this a dangerous game. Trump has rattled financial markets by brandishing the sword of steel tariffs and punitive trade restraints on China. Stocks fell more than 1,000 points on the Trump tariffs as trade-war jitters infected global markets.
But Trump’s message was clear: There’s new trade sheriff in town, and unfair trade practices, non-tariff barriers against American products, stealing intellectual property and cheating on existing trade treaties will no longer be acceptable. Trump even terrified our trading partners and the US media by saying that “trade wars are winnable.”
Trump was merely announcing to the world that if you want to continue to have open access to America’s multitrillion-dollar customer market, you’re going to play by rules that benefit Americans and promote our security interests.
The risk here is that Trump may upend three decades of progress in opening markets for international trade. This has benefited the citizens of the world in lower prices for nearly everything. He may be risking another 1930s-style trade tariff war that shutdown global trade and cratered the world into depression.
If that happens, Trump’s trade strategy will have clearly backfired.
But Trump recognizes what many of his critics don’t: the enormous leverage America has on the world economic stage. He’s now demanding that as component of a new NAFTA, Mexico and Canada respect American intellectual-property rights and stop imposing price controls on our drugs and vaccines.
Ditto for Europe. These nations also impose price controls on our pharmaceutical and technology products. Meanwhile, the Council of Economic Advisers reports that most nations impose de facto tariffs on our goods and services. How is that free trade? That has to stop, and don’t be surprised if the Germans, French, Italians and other EU members moan but ultimately agree to Trump’s terms.
If this plays out the way we all hope, Trump may score the biggest victory for freer and fairer trade practices in American history.