The Administration is considering expanding tariffs to apply to another $500 billion worth of Chinese imports. This move would double the number of tariffs that the Administration has imposed on Chinese goods and would include nearly all Chinese exports to the United States. Looking at the Administration’s tariffs George Will recently called protectionism “socialism for the well-connected” as the government picks winners and losers. Expanding tariffs is a gross example of a negotiation scenario called a circular firing squad.
The Administration’s approach to international negotiation is to aggressively demand much so that the other party will surrender without negotiating. When you don’t know anything about international relations and the other countries’ history, bullying may appeal to the naïve, but the experts know otherwise. China withstood an American economic boycott for 30 years and is now the second largest economy in the world. Preserving Face is an important cultural attribute in Asia. China proved the point by robustly responding to U.S. moves by cutting purchases of American goods, a major component of which is agricultural products. China is not about to be bullied and it knows Europe is not a substitute market for the volumes China buys.
The Administration did not expect a robust response from China and will have to lay out $12 billion to mitigate some of the damage done to the farm sector as China called its bluff. That $12 billion in debt is on top of the $1.5 trillion debt from the Republican Tax Bill. The Administration’s half-baked $12 billion sop just puts the American farm sector on welfare, probably jeopardizing the American family farm. The Administration does not have a good track record at winning bets like this.
Trump braggadocio while refusing to release his taxes strongly suggests he is not a successful businessman. For example, he filed for bankruptcy on his three Atlantic City casino properties. First was the Trump Taj Mahal in 1991—which was $3 billion in debt after just one year in operation. Four years later, Trump missed an interest payment on a $53.1 million bond; the company declared bankruptcy and walked away. How do you lose money running a casino?
Then again, Trump took out a $245 million loan to purchase the planes and routes of Eastern Air Shuttle. Two years after he launched Trump Shuttle, the airline wasn’t making enough money to even cover the $1 million monthly interest payment on his loan. Trump ultimately defaulted, surrendering ownership of the airline to his creditors.
If he couldn’t make it in casinos, or airlines, or steaks, maybe Trump could sell vodka? The trademark was abandoned in 2008, and the liquor was out of circulation by 2011. We know what happened to Trump University. The underlying story is business man Trump borrows money he can’t repay. It is not clear that $12 billion from the U.S. Treasury can fully cover all the farmers’ losses or that the Republican Party will allow this executive policy.
What the farmer knows is that once a market is lost, it is difficult to recreate without subsidies, which is why George Will warned about the government picking winners and losers.
An important part of Culpeper’s economy is agriculture. Let’s hope the soybean producers around here are not among the losers. Culpeper Republicans proudly boast about “free enterprise.” George Will makes clear that tariffs are taxes and do great damage to free enterprise. Nevertheless, it remains to be seen whether Republican candidates in the midterm election adhere to Trumps coattails or abandon him and embrace the economics of free enterprise.
Editors Note: This letter originally appeared in the Culpeper Star Exponent, and is re-posted here with the author’s permission
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