George Will: Trade war shows reality of ‘America First’ in action | TribLIVE.com
George F. Will, Columnist

George Will: Trade war shows reality of ‘America First’ in action

George Will
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AP
Customers shop near a section selling Marvel Avengers toys by American toymaker Hasbro in May at a toy store in Beijing.

WASHINGTON

In a trade war, as in a real one, people are wounded by friendly fire from their side. Consider some casualties in Donald Trump’s “easy to win” — his promise — trade war. Begin with the company whose green machines bear the name of the blacksmith who, in the 1830s in Grand Detour, Ill., invented a self-scouring plow that could turn the Midwest’s heavy black top soil.

Is the John Deere corporation “tired of winning,” as Trump promised that all Americans soon would be? Not exactly. The Wall Street Journal reports that U.S. farmers are purchasing fewer farm machines — Deere’s profits from this business are down 24% from a year ago — partly because farmers’ incomes have suffered as a result of the tit-for-tat trade spat that Trump started with China, which has included China canceling the purchase of almost 500,000 metric tons of soybeans. Some good news for John Deere might be ominous news for U.S. farmers: Equipment sales to Brazil and Argentina are up, perhaps partly because China has increased purchases from those nations’ farmers, who are American farmers’ competitors.

Home Depot, the world’s largest home improvement retailer (more than 2,000 stores in North America), partly blames the trade war for its lowered growth expectations. The tariffs, which The Financial Times accurately refers to as “import taxes,” will, according to a JPMorgan estimate, cost the average U.S. household “around $1,000 a year.” If so, this Trump tax increase — it is his alone — is more important to the average American than his (actually Congress’) tax cut.

The Financial Times recalls that “hundreds of U.S. companies and trade associations said in a joint communique in June that the proposed duties would cause the loss of two million jobs and reduce U.S. economic output by 1%.” The losses and reduction are related to the fact that, as Allan Golombeck of the White House Writers Group notes, “Over 60% of U.S. imports are used by businesses in their products and production processes.” Hence Trump’s tariffs make U.S. goods more expensive, thereby dampening U.S. consumer activity. And exacerbating trade deficits, which do not matter other than as irritants to Trump, who thinks they indicate foreigners taking advantage of Americans by selling them things they want.

Uncertainties infused into the global economy by the trade war between the world’s two largest national economies probably have helped to produce a global slowdown and fears, perhaps somewhat self-fulfilling, of an approaching recession. The fourth-largest economy, that of heavily export-dependent Germany, is already shrinking. There, as The Economist reports, “interest rates are negative all the way from overnight deposits to 30-year bonds. Investors who buy and hold bonds to maturity will make a guaranteed cash loss.”

From May 1937 to June 1938, there occurred the “recession within (the) Depression,” America’s third-worst 20th-century contraction. About the causes of this, as about so many economic events, intelligent and informed people disagree. However, one theory is that capital went “on strike.” Rattled and exasperated by the New Dealers’ regulatory fidgets, investors flinched from economic activity. If so, this episode contains a warning for protectionists who seem oblivious.

They fiddle with global supply chains, as though the world economy is a Tinkertoy that they can pull apart and reassemble with impunity. Actually, it is analogous to an Alexander Calder mobile: jiggle something here, things wiggle way over there, and there, and there. So: Tariffs on Apple (headquarters: Cupertino, Calif.) iPhones that are made (actually, just assembled) in China might help Samsung (headquarters: near Seoul, South Korea) Galaxy phones sell in America. This is “America First” in practice.

George Will is a columnist for The Washington Post and can be reached via email.

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