Blog - Views on the Economy and the World

Views on the Economy and the World

A blog by Jeffrey Frankel

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280 posts

After NAFTA

| Oct. 12, 2018

Donald Trump thinks he once again pulled off a smashing victory on October 1, delivering on his oft-repeated campaign promise to terminate NAFTA, “the worst trade deal ever,“ and replace it with something much newer and better.  One is tempted to say to oneself, “Let him think that.”  The US-Mexico-Canada Agreement may not be an improvement over the status quo, but at least it is an improvement over the end to free trade in North America which he had threatened.

The US Treasury is due in October to submit its biannual report to Congress on what countries, if any, are manipulating their currencies to gain unfair trade advantage.   President Trump has recently resumed the accusation against China  that he made during the election campaign.   “I think China’s manipulating their currency, absolutely. And I think the euro is being manipulated also,” he told Reuters.  He is apparently pressuring the Treasury directly in its deliberations.

Apology Tour d'horizon

| July 26, 2018

American presidents are supposed to take America’s side when dealing with other countries. (“My country, right or wrong.”) When Barack Obama was (falsely) accused of starting his presidency with an “apology tour” of the Middle East, it was understood that apologizing to foreigners would have been a bad thing, if true. Last week Donald Trump received a lot of criticism from both Democrats and Republicans for failing to take the side of his own intelligence services and law enforcement agencies when their findings ran counter to what his friend Vladimir Putin solemnly assured him to be the truth.

Even though US presidents are not supposed to apologize for their country, there is nothing that says that professors can’t. This column is an apology tour. The tour visits countries in alphabetical order.

Critics of President Trump’s aggressive trade policy have mostly gotten it right. His tariffs cause economic damage at home – raising the cost of living for American consumers, hurting industry, and taking foreign sales away from farmers and other exporters. Moreover the threats have been deployed erratically across trading partners and across time in ways that seem calculated to discourage cooperation with the US and rather to isolate the hitherto leader of the free world from even its closest allies.

Democrats are gearing up for the November mid-term elections, in which they hope to take back the US House of Representatives. Candidates are finding that the voters are not necessarily paying close attention to foreign affairs or even Trump scandals, and are more concerned about “pocketbook issues.” The conventional wisdom still stands: underlying the shock election of Mr Trump was the worry by the median household that it has been left behindby globalization and technological change and that the gains have been going to the rich instead.

President Trump enacted steel and aluminum tariffs in March, citing national security.  China is the intended target, as most other major suppliers were eventually exempted. On April 2, China retaliated by imposing tariffs on 128 American products (representing about $3 billion of trade), ranging from 15% on fruits to 25% on pork.  Trump April 3 announced 25% tariffs on another 1300 Chinese products [representing some $50 billion of trade], citing forced transfer of US technology and IPR. China on April 4 responded with plans for retaliatory 25% tariffs on 106 US exports -- including soybeans, autos, and airplanes -- to go into effect when the US tariffs do.  On April 5, the White House announced it was considering $100 billion of additional tariffs on China.

If these tariffs go ahead, yes, it is a trade war. How will it end?