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America First

Washington, DC – As the United States moves toward round 2 of the trade war, round 1 having been completed last Friday with tariffs on $34 billion of goods on both sides, an increasingly popular question is, “Why isn’t anybody doing anything about this?” There are multiple answers to that, which this commentary discusses.

The first is never to confuse lack of success with lack of effort. Just because nothing has happened does not mean that nobody is trying. As we have all come to understand over the past year and a half, the president has very strong, very fixed views on trade. It does not appear that anybody has thus far succeeded in changing them, but it is not for lack of effort. Numerous parties from the private sector and from Congress, as well as lots of foreign leaders, have trooped in to make the case for a different trade policy. None of that has worked. Certainly there has been trimming around the edges, and arguments in favor of postponement have occasionally succeeded, if only temporarily, but there is no sign of any fundamental change in his thinking of the past 35 years.

Second, there may be more going on than we think. This is an argument that comes from Congress in the face of accusations that they have done nothing. They can’t very well deny that they have done nothing—there actually are times when reality shines through—so instead they say they are working quietly and doing unspecified things to turn the president around. Maybe they are. This is one of those arguments that can only be proved—or disproved—by people who are not going to talk, so let’s move on.

Third, there is a lot of whining, both public and private, that has not had much impact but may ultimately make a difference, particularly as the media continues its quest for “pain stories” of companies closed, workers laid off, or farmers bankrupted because of our trade policy. These are always anecdotal—the first round of $34 billion is not likely to have a major macroeconomic impact—but a good story can often transform public opinion, so stay tuned.

Fourth, we should not overestimate what can be done. Although the now-well-known Article 1, Section 8 of the Constitution gives power over tariffs to the Congress, exercising it effectively in the face of a determined president can be difficult, as several senators have recently learned. It is not enough simply to remind people of the Constitution; Congress must actually pass something and do it with a veto-proof majority if it wants to stop the president. Thus far there is no critical mass that comes close to that.

And, fifth, why hasn’t that happened, if everybody is as upset as they claim to be? That one has been answered before. Republicans, who control the agenda and the actual flow of legislation and amendments, are afraid of both the voters and the president. Their base is also the president’s base, and his popularity with his base is at record levels. It is no accident that those who have taken him on are either retiring or not up for reelection for some time. He is also personally vindictive and has not hesitated to lash out at those he regards as blocking his path. Few are prepared to pay that price, demonstrating, sadly, that government by intimidation is alive and well and the statesmen of Tom Brokaw’s “Greatest Generation” are long gone.

Democrats, in turn, have had difficulty stepping up because they are divided. Those who are pro-trade and who represent districts of like-minded people have been loud because it is easy for them, but that is not a large number. Others who represent areas where there are substantial Trump supporters have been cautious or silent, either because they agree with the president or simply because they are afraid to attack him on this issue when there are so many others that are easier for them.

Sixth, what about the private sector? Those that have the most to lose in the short run, the farmers, have been loud and consistent, and they may well have staved off—so far—NAFTA withdrawal, but they have had less success on China. That may be because there is widespread agreement that the problems of Chinese behavior the administration has identified are well founded and serious. There is major disagreement over the tariff remedy, but there are very few people standing up saying we should not do something. The business community generally has the same problem—agreement with the diagnosis but not the prescription. In addition, presidential intimidation is an issue in the private sector as well, Harley-Davidson being a prime example.

Finally, while we trade wonks like to think we are writing about the most important issue on the planet, the reality is that most people are focused on other things. Trade is consistently a “low intensity” issue in polls. That may play out as well when it comes to taking on the president—there are other issues where his opponents would rather draw a line in the sand. Of course, a consumer shock like car tariffs or tariffs on another $200 billion of Chinese products could change that. Again, stay tuned.

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