Trump Trade - Pro, Con, and Center

Airplane - the movie, Yankees v. Red Sox, The Clash, and Fleetwood Mac

First off - two book recommendations.

Alex Eisenstadt: Revenge: The Inside Story of Trump's Return to Power

Sax - Brisk, well-written recap of Donald Trump’s historic comeback. Found myself saying over and over again, “oh yeah! Forgot about that one!”

Marc Dunkelman: Why Nothing Works: Who Killed Progress—and How to Bring It Back

Sax - Regardless of your politics, this books captures well the internal divisions of progressive politics. You’ll laugh…you’ll cry…you’ll call out Bravo Sierra…This is one of the few books where I underline and put notes in the margins. Still reading, but why wait when I know it’s worth recommending.

Trump Trade Policy

The Basics:

President Donald Trump announced a sweeping set of tariffs aimed at reshaping U.S. trade policy, which he dubbed "Liberation Day" for the American economy. The key points of his announcement are as follows:

• Baseline Tariff: A 10% tariff will apply to all goods imported into the United States from all trading partners, effective April 5, 2025.

• Reciprocal Tariffs: Higher "reciprocal" tariffs will target specific countries based on trade deficits and perceived trade imbalances, effective April 9, 2025. Examples include:

  • China: 34% (on top of existing levies, bringing the effective rate to 54% in some cases).

  • European Union: 20%.

  • Japan: 24%.

  • Vietnam: 46%.

  • Taiwan: 32%.

  • India: 26%.

  • South Korea: 25%.

  • Cambodia: 49% (the highest announced rate).

• Additional Measures:

  • Closure of the de minimis loophole, ending duty-free treatment for packages under $800, particularly targeting Chinese imports.

  • Expansion of existing steel and aluminum tariffs to 25% on all imports, with no exemptions, effective earlier in March but reinforced in this announcement.

  • A 25% tariff on auto imports, set to begin April 3, 2025, with auto parts tariffs to follow by May 3, 2025.

• Rationale: Trump framed these tariffs as a response to a "national emergency" caused by chronic trade deficits, aiming to protect American workers, boost domestic manufacturing, and force other nations to negotiate fairer trade terms.

These tariffs build on earlier actions in his second term, such as 25% tariffs on Canada and Mexico (later adjusted for USMCA-compliant goods) and industry-specific levies on semiconductors and pharmaceuticals.

Sax - First off, I’m highly skeptical of the “national emergency” declaration as the pretext for the change in policy. This has been Trump’s basic position for decades. I think most of these tariffs will change as other countries adjust their tariffs on us. Rather than wait out long drawn out trade negotiations, Trump is bypassing that process in favor of a direct path. Uncertainty and disruptions are never embraced by “the market” but Trump was elected to shake things up. And boy is he.

Let the debate begin!

Proponents’ Views

Proponents of Trump’s trade policy, including his administration officials, certain business leaders, and supporters within his political base, see it as a bold and necessary step to protect American interests. Their key arguments include:

• Correcting Trade Imbalances: Supporters argue that the tariffs address decades of unfair trade practices by countries like China, the European Union, and others that have imposed high tariffs and non-tariff barriers on U.S. goods. They point to the $1.2 trillion U.S. goods trade deficit in 2024 as evidence of a broken system, with Trump himself calling it a "national emergency" that his policy will fix by leveling the playing field.

• Boosting Domestic Manufacturing: Advocates, including figures like White House trade adviser Peter Navarro, assert that tariffs will incentivize "reshoring" of production, echoing studies from Trump’s first term (e.g., a 2024 study cited by the White House claiming tariffs "strengthened the U.S. economy" by boosting manufacturing). They highlight industries like steel and auto production as beneficiaries, with companies such as Nucor and Cleveland-Cliffs previously investing billions domestically under similar policies.

• Economic and National Security: The administration frames the policy as a safeguard for both economic sovereignty and national security, arguing that reliance on foreign goods—especially from rivals like China—undermines U.S. self-sufficiency. Trump’s April 2 speech emphasized protecting American workers, farmers, and craftsmen, with the White House claiming tariffs will bring "better-paying American jobs" and counter threats like counterfeit goods and intellectual property theft.

• Negotiation Leverage: Proponents believe the tariffs give the U.S. leverage to force trading partners into fairer deals. Trump has suggested that countries could lower their own barriers to avoid U.S. tariffs, a tactic he claims worked during his first term with the USMCA and China Phase One deal.

Sax - Very little downside politically in fighting for American workers; however, it has to work for consumers, too. No one will oppose the thematics of correcting trade imbalances, boosting domestic manufacturing, economic & national security, or advancing American leverage.

The efficacy of these policies is on the political clock. Given the results from Tuesday, Republican incumbents will need to see some positive results in the next two quarters before they hit the panic button.

Virginia and New Jersey statewide elections are this fall and just 169 days until voting starts here in the Commonwealth.

Opponents’ Views

Opponents, including many economists, global leaders, business groups, and political critics, warn that Trump’s tariffs risk severe economic and diplomatic fallout. Their main concerns are:

• Inflation and Higher Costs: Critics, such as Goldman Sachs and Yale Budget Lab, predict that the tariffs will drive up prices for American consumers and businesses. Estimates suggest an average household cost increase of $2,700–$3,400 annually, with imported goods like electronics, clothing, and autos becoming more expensive. Fitch Ratings’ Olu Sonola noted the U.S. tariff rate jumping to 22% from 2.5% could push inflation higher, a level unseen since 1910.

• Retaliation and Trade Wars: Leaders from the EU, China, Canada, and others have promised countermeasures, threatening a tit-for-tat escalation. The EU plans retaliatory tariffs by mid-April, while Canada’s Mark Carney vowed to "fight with force." Opponents fear this could shrink U.S. export markets, hitting industries like agriculture and tech, with companies like Nike and Apple already seeing stock drops of about 7% post-announcement.

• Global Economic Disruption: Economists like Lawrence Summers and groups like the World Economic Forum argue that the policy upends decades of trade liberalization, risking a global recession. They cite market reactions—Dow futures fell 1,007 points, S&P 500 futures dropped 3.4%—as evidence of investor panic, with multinationals like Dollar Tree (down 11%) and Gap (down 8.5%) hit hard by import reliance.

• Harm to U.S. Companies Abroad: Posts on X and analyses from Reuters highlight concerns that retaliatory tariffs will damage U.S. firms operating internationally, creating "lose-lose situations." Critics note Trump’s own past outsourcing (e.g., Trump-branded goods made abroad) as a contradiction, arguing that American companies could lose competitiveness globally.

Sax - Newton's third law simply states that for every action there is an equal and opposite reaction. While trade is not physics, this is a law nonetheless. There is going to be a lot of pushback.

Reminds me of when a pitcher in baseball unintentionally hits a batter. That batter’s team pitcher then intentionally hits a batter of the other team and that is followed by yet another intentional beanball. It’s intense and sometimes funny…I was a catcher and know well the conversations/thinking (or lack thereof) that goes on until the benches clear in a full out brawl.

Broader Sentiment

The divide is stark: proponents view the tariffs as a patriotic "Liberation Day" for American workers, with Trump calling it one of the "most important days in American history" for reversing decades of being "looted" by trading partners.

Opponents, however, see it as reckless "bullying" (China’s term) that could destabilize both the U.S. and global economies, with German Economy Minister Robert Habeck urging new alliances to counter the fallout. While supporters cheer the policy’s boldness, critics fear its unpredictability—marked by Trump’s history of delays and reversals—only heightens the risks.

Centrist & Pragmatic Trade

A pragmatic approach to American trade policy seeks to balance the benefits of global trade—such as economic growth, innovation, and consumer access to goods—with the need to protect domestic industries, workers, and national interests. It avoids the extremes of unfettered free trade (often associated with neoliberalism) and aggressive protectionism (like Trump’s recent tariff-heavy strategy), aiming instead for a flexible, evidence-based framework. Here’s what such an approach might look like:

Core Principles

1. Targeted Protection with Openness: Maintain open markets where the U.S. has a competitive edge (e.g., tech, services, agriculture) while using selective tariffs or subsidies to shield vulnerable sectors (e.g., manufacturing, green energy) from unfair foreign competition, such as subsidized imports or currency manipulation.

2. Strengthen Rules-Based Trade: Reinforce multilateral institutions like the World Trade Organization (WTO) to enforce fair trade rules, while negotiating bilateral deals to address specific imbalances, avoiding blanket tariffs that risk broad retaliation.

3. Worker-Centric Adjustments: Pair trade liberalization with robust domestic support—retraining programs, wage insurance, and tax incentives—to mitigate job losses and help workers transition to growing industries, rather than relying solely on trade barriers.

4. Strategic Self-Sufficiency: Promote resilience in critical supply chains (e.g., semiconductors, pharmaceuticals) through incentives for domestic production, without fully decoupling from global markets.

5. Climate and Labor Standards: Embed enforceable environmental and labor protections in trade agreements to level the playing field, appealing to both progressive and moderate priorities.

Key Policy Features

• Moderate, Flexible Tariffs: Instead of Trump’s 10% universal tariff or Sanders’ outright rejection of trade deals, apply tariffs (e.g., 5–15%) only where data shows clear harm from dumping or subsidies—say, Chinese steel or Vietnamese textiles—while exempting allies who meet fair trade standards. Adjust rates based on economic outcomes, not ideology.

• Revise Existing Agreements: Build on the USMCA’s framework by strengthening labor enforcement (e.g., Mexico’s compliance) and adding climate provisions, rather than scrapping or overhauling it entirely. Negotiate updates to deals like the U.S.-Korea Free Trade Agreement to reflect current realities, such as digital trade.

• Invest in Competitiveness: Fund innovation and infrastructure—think $100 billion for advanced manufacturing or green tech R&D—over five years to boost U.S. exports, rather than just shielding declining industries. This echoes Biden-era policies like the CHIPS Act but with broader scope.

• Trade Adjustment Assistance (TAA): Expand TAA funding (historically under $1 billion annually) to $5–10 billion, offering displaced workers up to two years of income support and retraining, addressing Sanders’ focus on workers without his anti-trade stance.

• Global Cooperation: Lead a coalition to reform the WTO, tackling China’s non-market practices (e.g., state subsidies) collectively, rather than unilateral U.S. action that risks isolating allies.

Why It’s Centrist and Pragmatic

• Avoids Extremes: It rejects Sanders’ near-total opposition to trade deals, which could shrink U.S. export markets (19 million jobs tied to exports in 2024), and Trump’s blunt tariffs, which economists warn could spike inflation by 2–3% and cost households $3,000+ yearly. Instead, it uses data-driven, selective measures.

• Bipartisan Appeal: Protecting jobs and critical industries nods to populist concerns, while keeping markets open and investing in innovation aligns with pro-business moderates. It sidesteps ideological purity for practical outcomes.

• Real-World Precedents: This mirrors successful strategies elsewhere—Germany’s export strength with worker protections, or Canada’s balanced trade under CUSMA. It also builds on U.S. history, like Clinton’s NAFTA with side agreements, adjusted for today’s challenges.

• Adaptable: Policies can shift based on economic indicators (e.g., trade deficits, job growth) or geopolitical needs (e.g., countering China), avoiding rigid dogma.

Potential Outcomes

• Economic Impact: Studies like those from the Peterson Institute suggest moderate tariffs with retraining could limit job losses to 100,000–200,000 (vs. millions under free trade or Trump’s plan) while preserving $1.5 trillion in annual trade benefits. Inflation might rise 0.5–1%, a manageable trade-off.

• Political Viability: It could unite moderates in Congress—say, Senators like Mitt Romney and Mark Warner—while blunting criticism from both Sanders’ base (by aiding workers) and Trump’s (by showing toughness on trade).

• Global Position: The U.S. retains leverage without sparking the trade wars feared from Trump’s April 2 announcement, maintaining alliances strained by unilateral moves.

In essence, a centrist pragmatic trade policy in 2025 would blend openness with protection, prioritizing adaptability, worker support, and strategic goals over ideological crusades. It’s less about grand gestures—like Trump’s "Liberation Day" or Sanders’ trade deal bonfire—and more about steady, workable progress for American interests in a messy global economy.

Sax - My guess is that we end up with a centrist pragmatic trade policy outcome. Like when you sell your house, the market ends up deciding what the price actually is.

Evidence to support that? We bombed the Houthis because they have been hitting Israel AND disrupting global trade routes.

Eventually, negotiators will be told where the economic, political, and cultural markets actually are.

Until then, buckle up…

Commentary now ID’d with the name most folks call me for about 50 years now…Sax.

Again. H/T to GROK AI.

Update on family - First grandchild, HRH Sloane Margaret Taylor is a very good baby who is pretty much sleeping through the night in just her first week. Michele just got back after 2.5 weeks of prep and support.

My first visit is scheduled for Monday. Loving and spoiling is not only ON the agenda it IS the agenda.