Trump Must Up His Trade Game Against Biden
Coupled with his tariffs, a border-adjustable tax would make U.S. manufacturing great again.
The post Trump Must Up His Trade Game Against Biden appeared first on The American Conservative.
Trump Must Up His Trade Game Against Biden
Coupled with his tariffs, a border-adjustable tax would make U.S. manufacturing great again.
Borrowing from the former President Trump’s playbook, President Biden last week raised tariffs on Chinese steel, aluminum, semiconductors, and all things green, including electric vehicles. This isn’t the only time the Democratic president has taken cues from his Republican predecessor. Not only was a “Buy American” executive order among the first he issued, but Biden has continued most of Trump’s trade policies since he arrived at the White House.
Biden’s pattern confirms the wisdom as well as the election-year appeal of Trump’s trade agenda, to which Biden originally took exception. With his latest move, the president handed his GOP challenger an opportunity to up the economic ante by championing a broader and more vigorous industrial policy—projecting a vision that is not distracted by windmills or other green-energy boondoggles, but one that elevates manufacturing as king of the American economy.
Trump’s call last year for across-the-board, 10-percent tariffs on all imports, regardless of country of origin, signifies the former president is serious about making manufacturing great again. And if he complements his import duties with the border-adjustable tax proposed in 2016, the combined punch would be far stronger than Biden’s ideological and piecemeal approach, currently limited to his “green” agenda and semiconductor production. Trump could seize the day with a comprehensive campaign to restore balanced trade while generating a healthy tariff-revenue stream to fund cutting-edge U.S. innovation and help retire federal debt.
Having railed against U.S. inaction in the face of unfair foreign trade practices since the late 1980s, Trump should be bullish on the border-adjustable tax—a tax-code revision that ensures all products sold domestically, whether made at home or abroad, are taxed equally, and that U.S. exports are not price-burdened by taxes imposed here but taxed in the country where consumed. The United States remains the only industrial nation in the world without a value-added tax (VAT), leaving us with a strategic economic and trade disadvantage. Without a border-adjustable equivalent, U.S. exporters are being out-competed in global commerce. In effect, we have for years been giving every VAT country a free ride on trade—just as we did with NATO, giving most member states a free ride on defense until the 45th president shamed them into paying their fair share.
In committing tariff revenue to rebuild the American economy, Trump needs to address forcefully the shambolic underpinnings of our economic and military might—for example, steel production and commercial shipbuilding—after generations of outsourcing that have turbocharged both allies and enemies to out-produce and undersell us at home and abroad.
As the Iraq War revealed, domestic steel makers have for years lacked the surge capacity needed in a crisis. More ominous, the U.S. commercial shipbuilding and maritime trade—a pillar of our industrial base and key to achieving a sorely needed 355-ship Navy—barely exists anymore, warns national-security expert Loren Thompson. China’s shipbuilding capacity, per a stunning Wall Street Journal video report, is 200 times greater than ours. Shoring up these core foundations of American strength should dovetail with reviving other legacy industries—everything from advanced technology products and aerospace to power tools and motor-vehicle parts—equally in dire straits.
In revitalizing manufacturing, Trump confronts the same obstacle he faced in his first term: a legion of influential GOP policy players, encompassing supply siders, libertarians, and neo-liberals, whose economic objectives few Republican, or, for that matter, Democratic voters share. These ideologues soured on the president when he imposed tariffs on steel and aluminum in 2018. The top White House economic adviser, Gary Cohen from Goldman Sachs, resigned in a huff.
Trump gets the same shabby treatment from rabid free traders at the Wall Street Journal, who trashed his beefed-up tariff proposal last August. The newspaper’s editors, steeped in discredited neoclassical trade theory, remain happy campers when Trump talks about extending his 2017 tax cuts, but sneer at his goal of restoring the very “America first” trade and industrial policies upon which the GOP was founded, and which reaped a massive growth surge, lasting more than 100 years, leading to dominant superpower status.
Favoring the financial sector over manufacturing, these entrenched influencers think trillion-dollar merchandise trade deficits don’t qualify as a “useful measure economic performance.” They base such claims on a mistaken extrapolation from the maxim that a one-country or one-year trade deficit doesn’t matter because markets correct such imbalances. Yet the market has yet to reverse our cumulative net losing streak of the last 30 years—now approaching a whopping $20 trillion and counting, representing the loss of prime wealth-creating industries and millions of family-wage jobs with good benefits. If we don’t change the trajectory, as Trump would say, we won’t have a country.
Lost in the details of GDP numbers and tax rates, the free traders can’t see the faulty economic models in their own eyes; nor can they spot currency manipulation, inflexible labor markets, the overvalued dollar, and the trade-distorting practices of foes and friends alike. Their cherished abstractions don’t work in the real world. Meanwhile, the constant fixation of their supply-side fellow travelers—corporate and business tax rates—are less determinant of national success and well-being than keeping the United States on top of the innovation and manufacturing game by moving promising ideas quickly from R&D into useful commercial production.
These hidebound voices scuttled the border-adjustable tax during the congressional sausage making of the 2017 tax legislation. Yet, the brainchild of former House Ways and Means Committee Chairman Kevin Brady as part of the 2016 “House Blueprint” tax proposal, the daring border-tax plan would have compensated for the revenue losses from the business tax breaks. And it would have boosted long-term investment at home by rewarding U.S. companies for exports while, at the same time, revenues from tariffs could be channeled to subsidize the rebooting of key industries. Border-tax revenue could further be directed to defense R&D, historically a vital engine of American innovation and federal debt reduction.
Assuming he returns to the White House, Trump could easily deliver on tariffs and the border tax by tying both policies to the extension of his tax cuts, for which he will find ample support, even among Democrats. Such a winning policy would dramatically help the country, but especially workaday Americans, move on from supply-side napkin narrative that has overpromised and underdelivered for 40 years.
But right now, the presumptive Republican nominee needs to enhance his trade game against the Democratic incumbent, who seems intent on stealing his thunder. By setting forth a more robust and comprehensive trade, border-tax, and industrial policy—one that returns manufacturing to the center of American economics—Trump can deliver policies ordinary Americans want, and leave Biden in the dustbin of history.
The post Trump Must Up His Trade Game Against Biden appeared first on The American Conservative.