Trump Pulls Off a Surprising Victory on Trade

Trump Pulls Off a Surprising Victory on Trade

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The Republican Party’s free-trade wing has been showing signs of life. As President Trump makes the case for tariffs on Chinese imports, and as U.S. agricultural producers brace themselves for the fallout from China’s retaliatory measures against soybeans and other products, a parade of congressional Republicans has been castigating him for threatening to unravel a trading relationships that has greatly enriched millions of Americans, GOP voters very much included. After the Trump administration pledged $12 billion in emergency aid to farmers expected to be harmed by the trade war with China, conservative critics panned the measure as either all too narrow, as it excluded other affected industries, or as unacceptably dirigiste, and unbefitting a government ostensibly committed to market freedom. This, despite the fact that while voters skeptical of the wisdom of increased tariffs outnumber those who favor them by 49 percent to 40 percent, self-identified Republican voters are overwhelmingly in the latter camp. In an age when elected Republicans are woefully unwilling to criticize an often reckless president, it is no wonder that these free-trade dissenters have earned a modicum of respect across the political spectrum.

But why have free-trade Republican lawmakers been so vocal in denouncing the president’s protectionism when it seems to reflect the sensibilities of most Republican voters? For one, opinion varies across constituencies, and it is entirely plausible that, say, marginal voters in competitive districts are rather more skeptical of the wisdom of tariffs. Or it could be that free-trade Republicans are acting in accordance with their convictions, even if doing so will prove politically costly. A more cynical explanation is that while there is little free-trade enthusiasm among the Republican rank-and-file, there is a great deal of it among potential donors, especially those deeply invested, figuratively and literally, in the economic integration of the U.S. and Chinese economies. Standing up for soybean farmers is awfully appealing for any heartland politician, regardless of partisan affiliation. If it offers cover for catering to the interests of multinational business enterprises that are rather less sympathetic, so much the better.

And of course, Trump hasn’t done himself any favors by yoking together his calls for a more hawkish trade posture towards China—a defensible proposition—with almost equally venomous hostility towards the European Union, which is widely and correctly seen as a far more benign actor. By waging a trade war on all fronts, Trump has made life much easier for his GOP detractors, who can justly claim that the president’s economic diplomacy has been scattershot, if not self-defeating.

So it is noteworthy that Trump is now striking a more conciliatory tone towards the EU. Having spent much of the past few weeks raging against supposed European trade abuses, and inching towards imposing tariffs on European automobile imports, Trump spoke of a “new phase” in trans-Atlantic trade relations at a joint press conference with Jean-Claude Juncker, president of the European Commission. Among other things, Trump and Juncker expressed a desire to work together to reform the global trade system, and to act in concert to check the threat of Chinese mercantilism, which is very much a common concern.

Given Trump’s mercurial nature, it is not yet clear that this rapprochement will last. But there is reason for cautious optimism. The Trump administration has expressed openness to lifting its recent tariff hikes on imported European steel and aluminum, and this small gesture appears to have yielded dividends. Juncker, for his part, is characterizing Trump’s decision to hold off on imposing auto tariffs during trade negotiations as “a major concession,” as if to pave the way for European concessions. Indeed, they may have already begun. Earlier this month, in a little-noticed move, the European Commission approved imports of a widely used genetically modified soybean variety, a boon for U.S. farmers and grain traders who’ve long denounced Europe’s limits on GM food imports as protectionism in disguise. When Juncker spoke of increasing European purchases of U.S. soybeans, he was doing more than blowing smoke—the Commission had already laid the groundwork for doing so. If Europe does indeed import more U.S. soybeans, China’s retaliatory measures will prove that much less effective. Just when it seemed as though Trump had backed himself into a corner, a Luxembourgish Eurocrat has come to the rescue, strengthening his hand in his dealings with China, a revisionist power he rightly sees as America’s chief rival, and sparing red-state agriculturalists a punishing reversal of fortune. Of all the plot twists in the Trump presidency so far, this is among the more surprising.

Where does this unexpected turn of events leave free-trade Republicans? It leaves them divided. For those who see no principled distinction between trading with China and Europe, nothing has changed. Tariffs against Chinese imports are no less offensive to them than tariffs against European imports.

But then there are the fair-weather free-traders, of whom there are many. These Republicans accept that China, a state explicitly committed to import substitution as a means of achieving technological dominance, that actively interferes in the domestic affairs of allied states, that has been building a vast array of extralegal detention centers to isolate and punish minority activists and other political dissenters, is not quite the same as, say, Belgium. For them, Trump’s welcome retreat from an ill-advised trade war with Europe changes the equation. It makes it much easier for them to embrace a campaign to contain and counter Chinese power—a campaign that is far likelier to succeed if the U.S. and its European allies stand shoulder to shoulder.

Source: technology

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