Trump’s Trade War
by D.J. McGuire
Over the eight months and change of the Trump Administration, two of his closest allies – both geopolitically and personally – have been Justin Trudeau and Theresa May, Prime Ministers of Canada and the United Kingdom, respectively.
This week, the Trump Administration declared a trade war on both of them – and the Democrats are practically silent. Between Trump’s economic ignorance and the opposition’s political malpractice, we’re in for a very bumpy ride.
This all began when the governments of Canada and Quebec (the former’s troublesome, francophone-majority province) injected government funds into Bombardier to help the firm sell planes to Delta. Bombardier has been so reliant on government subsidies for its survival that some have cynically wondered if rent-seeking is its sole business model (Andrew Coyne, National Post). In this particular case, the subsidies are to encourage exports.
From an economic perspective, an export subsidy is just about the most counterproductive policy imaginable: it diverts government funds and raises the price of the export at home (because supply is diverted to exports), resulting in all sorts of knock-on effects. However, it can keep exporters in business, and said exporters and their employees are usually loud in their thanks. It’s a classic case of concentrated benefits against larger (but diffused) cost. Of course, Delta ends up a big winner (they get planes for less cost) as would its customers in particular (as trip rates would be lower than if Delta didn’t get a discount courtesy of the Canadian taxpayers) and all American flyers in general (as keeping up with Delta means their rates must be lower than if Delta had to pass the full cost of the planes to their customers).
But Donald Trump doesn’t look at the big picture; he falls for the “jobs” argument protectionists have been using for over two hundred years (and which Mark Twain debunked brilliantly in A Connecticut Yankee in King Arthur’s Court – of all places). So when Boeing decided to complain about Bombardier’s subsidies (despite the American aerospace firm getting subsidies of its own – over $20 billion worth based on Coyne’s data), Trump went into full protectionist mode.
Boeing asked for a tariff of 79%. The Trump Administration nearly tripled that – to 220%. The Commerce Secretary, Wilbur Ross, threw a quote into the press release himself (Leeham News) , making it clear the decision was driven by Trump’s protectionist political agenda (one Ross shares).
The response didn’t take long. Canada is now threatening to cancel deals with Boeing (Reuters). The UK (where Bombardier is a major employer) quickly followed suit (Vox). Suddenly, leaks to the media included threats that Boeing could “turn off” the planes it sold to the British:
‘Boeing owns the data. You buy the data.
‘You rely on the original equipment manufacturer for the key to the data, servicing and upgrades. They can turn the fleet off.’
So not only has the Trump Administration started a trade war, it may set off a chain of events that cripples the air force of our closest ally.
Yet, from what I’ve seen (with just a few minutes left before Thursday night turns into the small hours of Friday morning on the east coast), neither the Republicans nor the Democrats have uttered a word of criticism (although many analysts were willing to lambaste the move – Washington Post). For the GOP, it is yet another sign that they have abandoned limited government in favor of populist economic nationalism – more evidence that leaving it was the right decision for me.
For Democrats, this is Exhibit A in Why Trump Won. During the campaign, Trump spewed protectionist nonsense repeatedly – and Clinton refused to criticize it. Millions of freer-trade supporters were left either holding their nose with their traditional party (the GOP) or checking out of the election by backing the long freer-trade candidate (Gary Johnson) – and if not for my white-hot hatred of the Bashar Assad regime, I might have voted for Johnson myself (Clinton’s criticism of Assad won me over at the end).
Those freer-trade voters are still out there, especially in Sun Belt swing states like Florida, Arizona, and North Carolina. Johnson voters held the balance of victory in the first two of those states, along with Wisconsin, Michigan, and Pennsylvania. They are aghast at Trump’s trade war, and wondering if anyone in Washington will stand with them as Conscientious Objectors.
For what it’s worth, at least this Democrat does – but I shouldn’t be the only one.
D.J. McGuire is the conservative Democrat on More Perfect Union podcast – and sometimes feels like he is the lone conservative Democrat in the country.