Trump Is Doing for World Trade What It Could Not Do for Itself

Even the New York Times has a positive column today about President Trump’s trade policy. The story was filed by Ana Swanson, who I happen to know, and regard as a fair-minded reporter.The story wasn’t totally positive, but she made the point that the big economies like the European Union and Japan are making peace with Mr. Trump’s trade reordering. And they are avoiding a global trade war.She makes a second and good point: Mr. Trump is using America’s economy as leverage, so that other countries will pay what I would call a modest toll of 15 percent to 20 percent in order to do business with America.What Mr. Trump is doing is simply rebalancing the world toward reciprocal, fairer, and freer trade.And even though there was tariff hysteria this past April, it was based on several very poor premises.Yet the biggest mistake that the liberal lefty press and their allies in the equally liberal lefty economic profession make is that the Trump tariffs are somehow a repeat of Smoot-Hawley.Who are Smoot and Hawley? Senator Smoot from Utah and Congressman Willis Hawley from Oregon.These two presided over the worst tariff mistake in American history.As the stock market was crashing, and the Great Depression just beginning, they drove America’s average tariff rate to nearly 60 percent. And that triggered a retaliatory wave around the world — from countries that were all in economic trouble themselves.There was no tariff diplomacy or dealmaking, such as Mr. Trump and his team are engaged in.This time around, because of the dealmaker-in-chief, there is virtually no retaliation and hence no global trade war.What’s more, Mr. Trump is moving to an average tariff rate of something between 15 percent to 20 percent, not 60 percent.Plus, President Hoover — who foolishly signed the Smoot-Hawley tariff in 1930 — also agreed to a huge tax hike, moving in 1932 the top tax rate to nearly 65 percent from 25 percent.Hoover was a fine man, but he was an economic dummy. Mr. Trump is not repeating Hoover’s mistakes.Mr. Trump is cutting taxes and deregulating the economy in order to promote economic growth.Mr. Trump is also doing something that is very clever: He is persuading the big economies around the world and their top businesses to make huge direct investments into America.These investments could, over time, come to something like $5 trillion or $6 trillion, which will overwhelm the tax hike effect of the tariffs — and will merge beautifully with the low-tax business and investment incentives embodied in the one big beautiful bill that Mr. Trump just signed into law.This is all completely different than what happened 95 years ago.Not to mention, the Trump tariffs have brought in a surge of revenue, possibly as much as $400 billion a year, toward cutting the deficit and debt.So far, Mr. Trump has enlisted more than half of our big trading partners, and admittedly he has more to do.Communist China is still out there. And Canada and Mexico and the United States–Mexico–Canada trade deal are still out there.Yet the EU and Japanese successes give him a lot of momentum.And, really, if tariffs are so bad, then why are all these other countries employing them?If trade surpluses are so bad, then why are all these other countries using them?I doubt that American trade deficits are going to disappear, or that that’s even a desirable outcome.Opening market access for our businesses and reducing foreign tariffs and non-tariff barriers are all very desirable goals, though.And that’s what Mr. Trump is doing.To oversimplify, we’re going to be able to sell rice and autos to Japan. And we’ll sell far more cars to Europe now, too.And we will sell a ton of clean burning liquid natural gas to Europe — good for our producers, and good to wean Europe off of its Russian energy dependence.How can these not be good things?There was no such diplomacy 100 years ago surrounding Smoot-Hawley. In fact, as the world entered the 1930s, there wasn’t much diplomacy of any kind.Today is a completely different story.Mr. Trump is single-handedly doing for the world trading system what it could not do for itself.From Mr. Kudlow’s broadcast on Fox Business Network.

Trump Is Doing for World Trade What It Could Not Do for Itself

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