It’s a lose-lose proposition for all involved.
The simple but erroneous idea is that import tariff will protect jobs in the domestic market. It simply doesn’t work that way. It’s unbecoming for a Harvard PhD economist, like Navarro, to say so.
Ronald Reagan tried to protect America’s auto industry
A fairly recent example that comes to mind was when Reagan wanted to protect the American auto industry by imposing an import duty on cars made in Japan. The idea was to give the US carmakers breathing space to become more competitive.
Instead of taking advantage of the import barrier to work on their competitiveness, the US car companies simply took advantage of the new prices for imported Japanese cars by raising their own sticker price.
Imposing import duty across the board on goods made in China would be wrong-headed and even more disastrous than asking the American consumer to pay more for their cars.
Most of the consumer goods made in China such as apparel, shoes, toys, and hardware haven’t been made in America in decades. There are no domestic industries to protect and the import tax would just add the daily cost of living for every American.
Trump has to understand that America is losing jobs to automation and technological advances and not to China. Someday, for example, Uber is going to rely of self-drive cars and all the drivers will have to find another job. Amazon will use drones to deliver their packages and UPS will have to either operate the drones or else find some other line of work.
America’s future lies in generating highly qualified and skilled workers and not in bringing back low paying jobs from overseas.
Thus, we hope that Trump will have the wisdom to look for the win-win approach with China. To promote Navarro’s line of military confrontation and restart the nuclear race can only lead to a lose-lose outcome and such outcomes would be devastating beyond imagination.
Negotiation Ploy or the Real Deal?
I still wonder if Trump is engaging in over-the-top rhetoric as some sort of negotiation ploy or if he really believes what he says.
Either way, Navarro is a clear loser who cannot possibly benefit the Trump team.
Mike “Mish” Shedlock