CletusWilbury
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Trump’s Trade Policies Keep Backfiring FiveThirtyEight, Nov 9, 2017
Incoherent protectionism.
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Trump appears to have overestimated other countries’ willingness to be cowed. Singapore’s leader, Lee Hsien Loong, said recently that “it is not the right time” to negotiate bilateral trade agreements with the U.S. because the Trump administration insists on getting the better of any deal. One of the reasons Japan wants to salvage the TPP is so that it has a baseline for future talks with the United States. Canada and Mexico so far have refused to concede to any of Trump’s demands at talks to update the North American Free Trade Agreement, which delayed until next year a renegotiation that the White House had originally hoped to complete in 2017. Trump’s threats to quit the U.S.’s free-trade agreement with South Korea were met with an unexpected response: You can’t leave it if we leave first.
Trump has limited room to maneuver on trade in Asia because he needs allies in the region to help counter North Korea’s antagonism, a reminder that U.S. foreign policy is about more than imports and exports. Similarly, Trump curbed his threats to impede Chinese imports because he wants Beijing’s help in containing North Korea.
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Trump’s threats to curb U.S. purchases of cheap Chinese steel totally backfired. ... The decision to exploit a provision designed for the Cold War was either creative or blatantly protectionist, depending on your point of view. But what is beyond dispute is that the threat to curb steel imports caused a surge in shipments from abroad as companies raced to get their product through the door before Trump closed it. Steel imports were up 20 percent through the first nine months of 2017 compared with the same period last year, according to the American Iron and Steel Institute.
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The (Canadian lumber) tariff was meant to assuage U.S. lumber mills, which say provinces charge too little for permission to cut trees on government land. But Trump has no control over nature. The hurricanes that devastated Houston, other parts of the South, and American islands in the Caribbean this summer created unexpected demand for building materials, pushing lumber prices up and offsetting whatever pain Canada’s forestry industry would have felt from Trump’s border tax. Shares of Canfor, a major Canadian lumber company, increased by more than 40 percent in the six months between the time the original duties were applied and early November. Compare that with the performance of the America’s biggest owner of sawmills: Shares of Weyerhaeuser, one of the companies that complained to Commerce about Canadian forestry policy, were only 4 percent higher over the same period.
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Another case involving Canada went awry when Boeing asked Commerce in April to punish Montreal-based Bombardier for agreeing to sell planes to Delta Air Lines for what the American planemaker called an “absurdly low” price. There was a problem with the request for retaliation though: Boeing doesn’t make the plane that Delta bought from Bombardier; it had offered to sell Delta secondhand Brazilian aircraft in its own bid for the airline’s business. The Trump administration sided with Boeing anyway.
At the end of September, Commerce initiated temporary duties of 220 percent on any Canadian plane of a certain size that crossed the border — the duties were meant to offset allegedly illegal subsidies. Ten days later, Commerce added a second tariff of 80 percent to offset what it felt was an unreasonably low price. The combined duty of 300 percent far exceeded Boeing’s request for a punitive tariff of a combined 159 percent.1
If the tariffs were meant to crush the hopes of an upstart in Boeing’s backyard, they may have instead had the unintended consequence of strengthening the U.S. company’s true rival: Airbus. Bombardier had gone heavily into debt, and the Commerce duties were a deathblow. In need of a lifeline, Bombardier struck a partnership with Airbus — which allowed Airbus to expand without paying a cent.
If Canada won’t be pushed around — despite the country relying on the U.S. to buy more than 70 percent of its exports — that doesn’t bode well for Trump’s trade policy with the wider world. If the president insists on continuing down this path, both enacting punitive measures and reconsidering America’s role in multi-country trade deals, he will likely face more unintended consequences.
Incoherent protectionism.