Trump’s Gamble on Tariffs: He Holds an Ace Card If Trade War Ensues as America Escapes Globalization’s Trap

President Trump knows better than to treat the “honeymoon” a president gets in his first months of office as a time to relax. He’s fighting as hard now as he did at the height of last year’s campaign. He’s even started what critics call a trade war.Every week, the White House astonishes liberals — and often conservatives, too — with dramatic actions on every front from immigration to Ukraine.Much of the press is in a daze. Democrats are dizzied and disoriented.The president knows how to keep his enemies, and more than a few friends, off-balance.Yet there’s a logic to this whirlwind of policy change: Mr. Trump knows his clock is running.The tariffs are the biggest risk Mr. Trump is taking in domestic policy.If this is a trade war, its stakes are existential for the administration, with the potential to cost Republicans dearly in next year’s midterms and leave the GOP looking like the party of Herbert Hoover come the next presidential election.Mr. Trump loves the very word “tariff,” calling it “the most beautiful word in the dictionary.”Yet good economic policy calls for a cool head, and Wall Street fears the president is letting his passions set the nation on a dangerous course. Provided there’s enough competition at home, domestic production can take the place of foreign goods that are priced out of consumers’ comfort zone by tariffs.Substitution takes time, however.And while Mr. Trump has been quick to grant delays and reprieves, the market is taking his tariffs seriously — and hard.The Commerce secretary, Howard Lutnick, went on “Meet the Press” Sunday to assure the country, “There’s going to be no recession in America.” Yet the president himself said on Fox News, “I hate to predict things like that. There is a period of transition because what we’re doing is very big. We’re bringing wealth back to America.”“It takes a little time,” he continued. “You can’t really watch the stock market.”Americans do watch the stock market, though — just as they watch prices in the supermarket that keep rising while their investment portfolios are falling.Inflation and a poor economy can do to Trump exactly what they did to Joe Biden.Yet the president knows that — and, as his words show, he knows that getting out of the trap decades of globalization led America into will take a while, which is why he’s starting now.The president’s gamble is that even if this slew of tariffs triggers a recession, it’ll be over by the time voters cast their ballots next year.President Reagan made a similar bet in 1981, when he and the Federal Reserve chairman, Paul Volcker, accepted a recession risk to get inflation down and cure the economy of low-growth “stagflation.”The plan worked — but not before a recession kicked in, letting Democrats pick up 26 seats in the House of Representatives and costing Republicans one seat in the Senate.Is that a preview of what Mr. Trump’s party can expect next year?Or will enough manufacturing and other jobs come back to America that voters will want to continue Mr. Trump’s reorientation of the economy away from global trade toward more American production?Mr. Trump is hedging his bet even as he makes a big one — his winning hand is his freedom to declare victory whenever he chooses.America’s trading partners need our business at least as much as we need theirs — and in most cases, they need ours a lot more.Mr. Trump can ask for any number of concessions — from settling fisheries disputes with Canada in America’s favor to getting more foreign companies to agree to build factories here — that other governments will gladly grant to escape from the burden of tariffs.Competition among producers within our borders can replace foreign goods more easily than foreign producers can find alternative buyers for their goods; no other nation has consumers with as much disposable income as the United States.The countries with the next highest levels of disposable income per household are the tiny states of Luxembourg and Switzerland, with a little less than $45,000 and $40,000 per household, respectively. American households have more than $51,000 of disposable income on average — and there are a lot more households than in other wealthy developed nations.Communist China can’t make up the difference by selling goods to its own, far poorer citizens, or the numerous but even poorer peoples of most other developing countries. Because Mr. Trump controls access to what every other trading nation needs, he can strike a deal any time, assuming wounded pride doesn’t cause other countries — like Canada — to forget their interests.The president’s strategy, long-term and short-term, is sound — as long as he gets the timing right. Creators.com

Trump’s Gamble on Tariffs: He Holds an Ace Card If Trade War Ensues as America Escapes Globalization’s Trap

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