Turmoil On the Road to
Autarky
By
Phil Mattera for the Dirt Diggers Digest
Donald
Trump got elected in 2016 essentially by promising everything to everyone
except immigrants and environmentalists.
In
the economic realm he vowed to resurrect dying industries such as coal, to
achieve trade supremacy over the rest of the world, to dismantle the regulatory
state, and to bring about growth rates not seen for decades.
Now
those corporate executives who sold their soul to Trump are realizing he cannot
deliver on all those promises.
This
is most apparent with regard to trade.
Companies
such as Harley-Davidson and General Motors are complaining about the
consequences of Trump’s ham-handed use of tariffs, which instead of bringing
about concessions from U.S. trading partners are prompting retaliatory moves.
A
front-page story in the New York Times headlined “Industries
in U.S. Feel Undermined by Trade Policies” states: “Even as the president’s
pro-business stance is broadly embraced by the corporate community, in some
significant cases the very industries that Mr. Trump has vowed to help say that
his proposals will actually hurt them.”
This
epiphany took a while to happen because most of Trump’s previous dubious
initiatives were domestic in nature.
Large corporations stood by as the administration and Congressional Republicans went after the Affordable Care Act because the main victims were individuals who did not get employer-sponsored coverage but were not poor enough to qualify for Medicaid.
They
went along with the tax bill because it enriched them handsomely even as it set
the stage for future fiscal distress.
They
were largely silent as Trump’s plans to rebuild infrastructure and to address
the opioid crisis fizzled out.
Yet
trade involves other countries, whose leaders and citizens are a lot less in
thrall to Trump and don’t seem to take his bullying routine very seriously.
Even
mild-mannered countries such as Canada are showing plenty of backbone.
Meanwhile,
countries such as China, which have engaged in unfair practices that should be
addressed in a more coherent way, are able to take the moral high ground.
While
Trump is not budging, this foreign resistance is starting to close markets and
raise costs for a long list of domestic industries.
Globalized
companies cannot afford to follow Trump on the road to autarky. For some big
firms the European market, for instance, is as important or even more important
than the domestic one.
Yet
it is not clear that Corporate America is willing to stand up to Trump in a
major way. Rather than challenge the president directly, they may simply shift
investment and sourcing to lessen the impact of the trade barriers. We need not
worry too much about GM and Harley.
The
problem is that the trade standoff will eventually take its toll on the U.S.
economy as a whole, threatening the delicate balance of low unemployment and
mild inflation while hastening the arrival of the next recession.
And
that will hurt Trump’s individual supporters a lot harder than his corporate
backers.
