It’s Time To Make Rolling Back 71 Years Of Progress On Global Trade Great Again!

Early on Sunday, I started to write a piece about global trade and it ended up morphing into a long-winded rant on the extent to which conservatism is an antiquated ideology that is increasingly incompatible with modernity.

When I started that post, my initial goal was to communicate how insane it looks to large swaths of the public when the people who are elected to look out of for the public good end up making policy that, by virtue of a misguided belief in ideals that are out of touch with the modern world, end up setting everyone back and generally pushing the world in a direction that isn’t conducive to the greater good of humanity.

I’ve said this repeatedly and I’ll keep saying it: you cannot turn back the clock on globalization and more to the point, you shouldn’t want to. I’m not at all convinced that there’s much long-term utility in adopting policies aimed preserving national “identities” and/or strengthening artificial boundaries that inhibit multiculturalism and progressivism. “Identities” are important to the extent they represent rich cultural heritages and customs. “Identities” based on arbitrary lines drawn on a map are not the same thing.

Pushing a nationalist platform in today’s interconnected world is an exercise in futility, but more importantly, it perpetuates the idea that we should subjugate what’s good for humanity to what’s good for “us”. At the micro level, that’s a necessary part of surviving. Self-interest is what keeps us alive. But the further out we pan, the less sense that makes.

Trump’s posture on global trade is an example of policy that sets the world back. He’s trying to turn back the clock and he’s managed to create a sense of nostalgia among some of his supporters for a “great” yesteryear. Even if we assume that’s desirable or that there is something “great” that’s been lost (see here for more on that), it’s a pipe dream. Trump cannot singlehandedly restore American manufacturing, he cannot make coal “beautiful” and “clean”, and he cannot bully the world into acquiescing to something nobody is on board with. Indeed there’s a certain irony in the whole premise. If America really isn’t “great” anymore and we’re really as weak as Trump claims, well then why should we all expect that a burgeoning hegemon like China is simply going to bow down to a not-so-“great” has-been hegemon? Oh, that’s right: it’s because Xi Jinping – the most powerful Chinese leader since Mao – is going to be in awe of Donald Trump the reality TV show host. That is laughably absurd. As Bjarne Knausgaard put it last year, “everything is explicit, but the plot cannot be taken seriously.”

Well just to give you a little visual perspective on what it is Trump’s trying to undo, have a look at this chart from Barclays:

Trade

It took 71 years to get to where we are in terms of trade openness and now we’re going to risk throwing it all away, for what? For Donald Trump and his promise to the American middle class who, by the way, Trump wouldn’t piss on if they were on fire.

But beyond that, this is a threat to the ebullient economic backdrop that’s helping to fuel the global rally by serving as one of the two pillars of the Goldilocks narrative. Here’s Barclays:

Protectionism and its adverse effect on the global trade system have been one of the key concerns in a ‘Goldilocks’ environment of favourable economic developments and rallying financial markets. The aggressive rhetoric on trade of the US started to turn into action this week, as President Trump’s approved ‘safeguard’ tariffs on imported solar panels and washing machines. Later, Treasury Secretary Mnuchin and Commerce Secretary Ross indicated at the World Economic Forum in Davos that further such trade measures could be forthcoming, while also criticising the WTO in principle. President Trump’s speech at Davos struck a generally conciliatory tone on trade, but also lacked any specificity to meaningfully alleviate concerns. In parallel, the NAFTA re-negotiations entered their sixth round this week, with growing risk of collapse, as the US will present its response to Mexico and Canada’s suggestions this Monday.

Will this deteriorate into an actual trade war? Or, more poignantly, is Donald Trump about to try and send the world stumbling backwards in time in the interest of being able to say “hell, I tried” when flyover America asks why nothing has changed for them three years from now? For Barclays, the answer is probably not, but the bank does say this:

We continue to believe the US administration will want to avoid deterioration into a trade war. However, the coming months will show whether this view could be too sanguine; markets will watch for the next steps in: NAFTA negotiations, additional trade actions by the US (eg, on steel and aluminium) and potential retaliation measures by China, as well as a possible turn of the US towards challenging its KORUS deal with Korea and a looming fight over the refusal of the US to grant China ‘market economy’ status in the WTO.

Let’s hope the worst case scenario doesn’t play out here. Put away your jingoism for a minute and ask yourself if you honestly believe that rolling back what you see in the chart below is really going to help middle America…

Trade2

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8 thoughts on “It’s Time To Make Rolling Back 71 Years Of Progress On Global Trade Great Again!

  1. In trade negotiations that have evolved over 71 years – is there any position left beyond – “trade war”? Especially if you are on the stronger end of the negotiations – which the US isn’t. We progressively, step by step – sold our manufacturing economy to Asia decades ago. If China turns into to a manufacturing version of Seinfeld’s “Soup Nazi – a no more soup for you exporter, it is a very ignorant and or stupid assumption that the US is in any position manufacturing wise, to offset Asian imports suddenly or even for decades. Even if we could somehow divorce our economy from Asian manufacturers – especially most of our electronics and tools – the shift in cost (of up to 10x) of US or European goods sold to US consumers, services industries and light manufacturing – would produce another economic depression. Not a recession, but a depression.

  2. “We progressively, step by step – sold our manufacturing economy to Asia decades ago.” What do we as a country have to show for it? Debt has increased from under $1 trillion in the early 1980’s to over $20 Trillion some 37 years later… Things as a whole as much worse off fiscally as compared to the early 1980’s.

  3. Extreme wealth distribution in this country was caused by the financial profit from the globalization of trade and enshrined by the Fed’s crushing of interest rates to affirm the wealth created. Bringing back some activity to this country will lead to a shortage of labor (good for labor) and an increase 8n inflation which will collapse the asset values that underly the abnormal wealth distribution. Point is by paying $15 more for a washing machine or keeping your old one a little longer you will start the unraveling of a system that gutted the very heartland of this country. Go Trump!

  4. We should all embrace collectivism and for go individualism because global corporations, central banks,governments, kings and queens clearly know what is best for us. NOT!

  5. I have to side with Dugger in this standoff.

    How about a simple look at changing times, growth of this country, massive improvements, space and sea exploration, development, population, food production and safety, medical expansions and research and life extensions — that ain’t free. Increases have been due to wars, weather, population explosion — decreases in cost for TV’s, calculators, computers.

    1980 How much was the first personal computer?
    IBM priced its initial IBM PC at $1,565, and that was a relatively steep price in those days, worth about $5,000 today, give or take a few hundred dollars. In the US in 1981 that was about the cost of a decent used car.

    So, the value of money over 38 years — $180 in 1980 had the same buying power of $578 does now.
    A new home 1980 average $68,700, car $7200, gas 1.19, bread .50, hamburger .99; wages $19,500.

    Just a few fun facts and here’s a fun little tool: https://www.dollartimes.com/inflation/inflation.php?

    Keep in mind since trump clearly does not – America does not own this planet. We must fit into the puzzle. A little give and take and a fair game. His arrogant stomping around in Switzerland, braggart bullshit, does not help America. The sooner he leaves the WH, the better it will be!

    • Ok but at what cost are you willing to accept and say that you are sorry for saddling all of this debt on to your children and your children’s children only so you can have a $ 300.00 flat screen?
      At some point a future generation will have to pay for our excesses.
      But hey no worries

      • I can only be responsible for my debt and any that is passed on to my children. I actually have no debt. I worked hard and paid cash for all vehicles I purchased, paid off my home 10 years early at a low interest rate too, use 2 credit cards during each month and pay the total charged before the bill even comes to me — when I get the bill in the mail, my balance is zero and a full page of charges is attached and was paid to them before the bill was generated. I pay monthly rent on this damned apartment which it is not worth – in advance of the due date. I learned from my father how not to waste my money on interest for using credit. I hope I have successfully passed that on to my children – I don’t ask them, it is not my business, but if they need anything, they know the bank is open

        btw, my flat screen was about $500 and I paid cash on sale at Target.

        I accepted any financial burdens put upon me by prior generations and did not complain. You learn about how they lived and what it cost them and I was thankful my new generation had it better than they did…as do our future generations. I have no guilt and wish them well. I certainly did not vote for trump so they cannot hold that against me either! 🙂

        Also, another btw, it was interesting that you used terms “kings and queens” in your other post below Konghaakon’s post. The King of Norway was Haakon – konghaakon translates to King Haakon.

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