Trump and global trade war

Please don't start a global trade war, President Trump

By David A. Andelman

Updated 1729 GMT (0129 HKT) March 7, 2018

David A. Andelman, visiting scholar at the Center on National Security at Fordham Law School and director of its Red Lines Project, is a contributor to CNN and columnist for USA Today. Author of "A Shattered Peace: Versailles 1919 and the Price We Pay Today," he formerly served as a foreign correspondent for The New York Times and CBS News in Asia and Europe. Follow him on Twitter @DavidAndelman. The views expressed in this commentary are his.

(CNN)What Donald Trump clearly cannot see through the prism of his own warped ideology is that the US is so far behind in its trade imbalance with the world that no matter how many tariffs he imposes, the retaliation will only leave it deeper in the hole with a damaged economy.

In short, he is risking kicking off a global trade war.

For trade, unlike Trump's simplistic view, is not a zero-sum game. It's not all about the dollars, it's about jobs. All this flailing effort at rebalancing, imposed in an instant, could take decades to correct. Meanwhile, millions of jobs risk being lost. We may save a few hundred jobs in steel, and lose hundreds of thousands in automobiles, planes and industries critical to our survival.

Gary Cohn, head of the White House Economic Council, clearly recognized this and clearly could not visualize a viable path ahead for the American economy if the President failed to recognize the existential dangers toward which the Trump administration appeared hell-bent on plunging the world. 

House Speaker Paul Ryan urges Trump 'to be more surgical' on tariffs

Now he's gone and it's difficult to see any rational voice counseling restraint that remains between Trump and some economic Armageddon.

Let's look at the logic. America's trade imbalance in goods with the European Union was $151 billion last year ($435 billion in imports, $284 billion in exports.

Now, say Trump imposes a major tariff on steel and aluminum, cutting back on their exports to us, then Europe in turn imposes countervailing tariffs on our exports to them, and Trump retaliates on European automobiles, and they retaliate on American planes (critically damaging Boeing and helping their own Airbus competitor).

Canada, another victim of the Trump tariffs and the largest exporter of steel to the US, would in turn likely go straight for the jugular -- American agriculture, a total of $23 billion. Indeed, some 1.2 million jobs are devoted to exports to Canada.

Brazil, the second largest victim of Trump's steel tariffs, imported $900 million in agricultural products, as well as $4.8 billion in planes. All those exports represented 128,000 American jobs.

What is especially interesting is that all these figures come directly from the Office of the United States Trade Representative. Yet somehow, none of them seem to have made their way to President Trump, or at least made much difference once they arrived.

Larry Summers: Trump's tariffs 'crazy, dumb' 

But there's much more trouble ahead. The rationale underpinning Trump's steel and aluminum tariffs will have set a critical precedent -- the President labeling them as being in defense of "national security."

That's an escape clause in the World Trade Organization charter that is designed to be invoked narrowly and only in the most dire circumstances. Imagine that escape clause being invoked globally and routinely. The broad use of this narrow path through and around the World Trade Organization could (Trump's other big daydream) eviscerate that organization which America has supported from the get-go. 

Trump: We're not backing down on tariffs 

A full-fledged global trade war would quickly and inevitably ensue. And America, its economy, its currency, its stock market would truly be brought to its knees. Of course, so would everyone else's.

This risk did not suddenly appear on the horizon. Last year, the World Trade Organization took up "two trade concerns raised at the 30 June meeting of the Goods Council. The United States said it was investigating the impact of steel and aluminum imports on national security while certain Gulf states cited national security interests in a discussion on their trade restrictions on Qatar."

The European Union warned, then, that this clause could never be invoked "for the purpose of protecting a domestic industry against foreign competition" and warned, back then, of dire consequences including "systemic risks."

An updated map of the feuds and frustrations splitting the Trump White House

At that meeting, in addition to the EU, Brazil, Australia, Taiwan, Japan -- all loyal American allies -- as well as China and Russia, all weighed in against invoking national security.

The world has been there before -- long before the creation of the WTO in 1995 or even its predecessor, the General Agreement on Tariffs and Trade after World War II. All of these were a reaction to the catastrophic American Smoot-Hawley Tariff that in 1930 helped plunge the world into the maelstrom of the Great Depression, compounding the 1929 stock market crash.

Back then, President Herbert Hoover, the Donald Trump of his day, had a trusted economic adviser -- Thomas Lamont, a partner in J.P. Morgan bank (the Goldman Sachs of its day). "I almost went down on my knees to beg Herbert Hoover to veto the asinine Hawley-Smoot Tariff," Lamont later recalled. "That Act intensified nationalism all over the world." Sound familiar?

Many of those defending the President's steel and aluminum tariffs, which are expected to lead to -- among many other effects, including increased inflation -- reply that "a little inflation isn't a bad thing." That we need to defend our ability to produce steel and aluminum at home.

Perhaps. But then there are the lost jobs, dying exports and shuttered factories, fallow farms. For all too often, ill-considered events can quickly spiral into uncontrollable effects that can be reversed only at enormous cost. Hopefully, another adviser to President Trump will emerge, before it is too late, and go down on his knees, and this president will listen.

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