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Forget Davos Elites: Trump’s Protectionism is a Threat to His Own Voters

As world leaders gather in Davos, Switzerland for the annual World Economic Forum, a narrative has taken shape that Trumpism is leading to the decline of the United States’ diplomatic importance. Davos, after all, is a gathering of globalists who tend to favor free trade and open borders, the antithesis of what Trump stands for. The truth is certainly more nuanced than some hysterical American columnists are making it out to be, yet the United States is becoming more protectionist, and all things considered, France and Germany are right to criticize Trump’s economic policy.

At the World Economic Forum, French president Emmanuel Macron declared that “France is back. France is back at the core of Europe, because we will never have any French success without a European success.” There is some undeniable truth in that: France heavily relies on European consumers and investors, be it German airlines flying French Airbus planes or the London Tube being run by French-made Alstom wagons. France makes €82.6 billion [1] ($102.5 billion) on tourism and exports €9.2 billion [2] ($11.4 billion) of its agricultural production. Macron’s political adversary Marine Le Pen might be correct that France could technically rely on itself for its own consumption, but should it opt for total isolation it certainly wouldn’t be among the big global players.

The same thing can be said for any other European country: as European nations opened up to trade, they’ve seen more prosperity and have been less inclined to start trade wars, or actual wars for that matter. Brexit was a blow to the European Union as a political project, yet as of now, it seems like both Britain and the EU agree at least that trade relations are essential for everyone.

Donald Trump’s protectionism stands in stark contrast, not only to this European experience, but to years of American leadership. For decades, the United States has been a driving force for free trade because its leaders recognized that all parties involved benefitted from opened and enhanced trade relations. Yet for Trump, free-trade deals seem to be mostly a political tool, used to reward his friends with loyalty, as he did when he called for a “beautiful” trade agreement with the United Kingdom after Brexit.

Trump, who continuously invoked “the forgotten men and women” during his successful presidential campaign, needs to know that it’s especially low-income households that will suffer from his protectionism. Tariffs hurt the poorest of the poor. A recent research paper [3] on American tariffs explains why:

It appears tariffs are imposed in a regressive manner—in part because expenditures on traded goods are a higher share of income and non-housing consumption among lower income households, but also due to explicit regressivity.

In plain English, tariffs fall disproportionately on those least able to afford them. The paper concludes that tariffs cost those who make the least about 1.5 percent of their disposable incomes, which is far more than the highest earners in society, for whom that number is less than 0.3 percent.

Not only is Trump’s mercantilism not good economics, it is also diplomatically unwise, as trade and geopolitical relations are linked. The president of the United States can say and do many things, but if he makes trade more difficult, he also seriously marginalizes American interests abroad.

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This is not to say that confident Europeans aren’t considerably overestimating their momentum. Emmanuel Macron’s EU reform ideas haven’t found many supporters outside of Brussels, Angela Merkel still hasn’t formed a government after an election last September, Italy faces a major election showdown in March, and the United Kingdom and the EU have stalled Brexit trade negotiations by making them overly political.

It is certainly true that Europe is performing well economically, especially Central and Eastern European countries, most of which have seen GDP growth of more than 3 percent [4] (Romania is currently at 6.4 percent). However, the idea that economic growth translates into support for a European superstate, as many EU elites do, is certainly a stretch. In fact, a 2017 poll shows [5] that 66 percent of EU citizens are dissatisfied with the direction of the EU: 62 percent in France, 72 percent in Germany and 83 percent in Italy. In the same poll, 44 percent of Italians said they would vote to leave the EU outright. With one state out of the EU and others considering the same, it’s hard to imagine how European elites think their federalist agenda has been vindicated of late.

Yet despite all this, Trump’s protectionism has still given Europe the moral high ground, even if it’s just at Davos this weekend. The United States is at risk of ejecting itself from the world stage in pursuit of the vague slogan that is “America First,” despite free trade having long been at the core of America’s foreign policy. You don’t have to be a fan of Macron and Merkel (there are plenty of reasons not to be) to recognize this. The United States should step back and learn from the European experience that free trade is not a threat to local economies, that it indeed enriches society. Let’s hope that America will not learn this lesson the hard way through economic stagnation.

Bill Wirtz is a Young Voices advocate. His work has appeared in Newsweek, the Washington Examiner, CityAM, CapX, the Mises Institute, Le Monde, and Le Figaro.

25 Comments (Open | Close)

25 Comments To "Forget Davos Elites: Trump’s Protectionism is a Threat to His Own Voters"

#1 Comment By Joshua Xanadu On January 29, 2018 @ 12:04 am

I appreciate criticism of Trump in his increasingly neoconservative foreign policy decisions and advisors, but his team on trade is far from lightweight. This article of recycled globalist talking points is made for the editorial section of the Washington Post rather than here at TAC. Unfortunately Bill Wertz seem to think TAC readers are as gullible as the beltway group thinkers on the supposed economic magnificence and international “leadership” brought together by the type of free trade nostrums of the past. A fair criticsm of Trump’s trade policies can be debated, but the tired arguments about the cost to consumers and global leadership are transparently obtuse. The so-called mercantilism is essentially the same policies practiced by every country that has own from trade, not just today’s bugaboo China, but going back to every Asian tiger, Japan, and yes, the UK and US in the 19th century.

#2 Comment By Fran Macadam On January 29, 2018 @ 1:25 am

“For decades, the United States has been a driving force for free trade because its leaders recognized that all parties involved benefitted from opened and enhanced trade relations.”

I suppose you mean “all parties”- those who “count” – leaves out the beleaguered deplorable classes in their millions.

We are those who haven’t benefited from the enormous gains of corporate heads, Wall Street financiers and all those living in the Superzips.

This is a replay of the effects of “Free Trade” in England in the 1860s. Initially, cheap imports led to a temporary increase in the standard of living, but inexorably, it led to an industrial collapse of jobs and erosion of incomes on a widespread scale. As in America, consequent substance abuse vitiated the population, with gin mills on every corner, with men, women and even children passed out on streets at all hours. The government did nothing serious for decades, for beholden to the financiers who benefited mightily, they preferred a drunken citizenry to an aroused and rebellious one.

#3 Comment By LouisM On January 29, 2018 @ 2:26 am

Trade with Europe is not as much a threat as trade with Asia. I am a Trump supporter and I want those import taxes, tarrifs and VAT taxes.

Yes, many US companies import their components and therefore an import tax will make US goods more expensive and less competitive for export.

Yes, other countries may retaliate with by increasing their import taxes on US goods.

That’s what we pay these guys big bucks. Figure out a way for the US to come out as a winner but there is no denying there needs to be a rebalancing when it comes to trade with the US…and that rebalancing means more goods made in the US for domestic consumption. We had the buy local movement in food to support local farms. This is a buy domestic for domestic consumption in relation to manufacturing and industry. Maybe the idea is to have different tax laws for companies based on domestic market versus a global market. Being competitive globally is only part of the problem (that’s exports). The other part of the problem is reducing imports by satisfying domestic demand within the US (if we reduce immigration and imports significantly enough maybe we can widen the scope of reducing imports and satisfying domestic demand within the US, Canada, Mexico and Central America).

#4 Comment By Winston On January 29, 2018 @ 3:57 am

Financialization is killing off US companies. Here is one of the latest victims:

[6]

For More Than 100 Years, South Milwaukee Identified As The Manufacturer Of The World’s Most Impressive Mining Equipment. Now What?

#5 Comment By Winston On January 29, 2018 @ 4:03 am

US is sinking like UK;and for same reason financialization and because elites too vested in status quo. US has been sinking since 1960s, so a lot swifter than British that started decline in 1870s! Both will get final blow around same time. UK by Brexit;and US from having majority of young people (those in school right now)produced by substandard education because of segregation.

#6 Comment By tz On January 29, 2018 @ 7:55 am

Free trade: Deplorables make $10/hr, no benefits but T-shirts are $5 and billionaires get richer.

Protectionism: Deplorables make $25/hr, full benefits, but T-shirts are $10 and billionaires get hit.

Instead of not having to worry about maimed and dead Chinese and Mexicans from polltion and workplace accidents, you have to deal with us fellow citizens who will return to the blue collar jobs that can support a family.

#7 Comment By Malto On January 29, 2018 @ 8:36 am

Well, so the parasites on our society are going to lose their jobs. Who cares?

#8 Comment By Gaius Gracchus On January 29, 2018 @ 8:48 am

The American School of Economics rejected the British free trade model. And transformed America into the greatest nation on earth.

The 45 years of free trade has been the greatest wealth transfer in history, redistributing wealth from the lower and middle classes to the 1%. Free trade is destructive, causes inequality, fuels crony capitalism, and leads to war. It results in a race to the bottom for manufacturing, searching for the cheapest workers and most corrupt governments.

Free trade advocates, such as the writer, are mere shills for dogma of the 0.01%. There is nothing conservative about free trade.

#9 Comment By Dan Green On January 29, 2018 @ 8:58 am

The drum beat for the longest time, even by the elite ruling class was the issue of equalization among the populations. So if one might lets imagine this sitting President was not elected and HRC carried on the prior administrations policies. I ask would the elite ruling class who have accumulated most of the wealth have altered their model?

#10 Comment By Don Walker On January 29, 2018 @ 10:23 am

TAC is now not only pro-open borders, its pro so-called “free trade.” Thank God that I can read Bacevich, Buchanan, and Larrison on the Antiwar and Chronicles websites.

#11 Comment By Allen On January 29, 2018 @ 10:53 am

Just let me summarize this article for you:
PART ONE
America should be more like Europe
PART TWO
Europe is falling apart
PART THREE
Ignore part two

#12 Comment By ALM On January 29, 2018 @ 11:38 am

Free trade: Deplorables make $10/hr, no benefits but T-shirts are $5 and billionaires get richer.

Protectionism: Deplorables make $25/hr, full benefits, but T-shirts are $10 and billionaires get hit.

Instead of not having to worry about maimed and dead Chinese and Mexicans from polltion and workplace accidents, you have to deal with us fellow citizens who will return to the blue collar jobs that can support a family.

Please inform me as to why you think you (or anyone else) are entitled to $25/hr, benefits, or anything else for that matter, TZ.

#13 Comment By ALM On January 29, 2018 @ 11:46 am

Fran Macadam writes:

“For decades, the United States has been a driving force for free trade because its leaders recognized that all parties involved benefitted from opened and enhanced trade relations.”

I suppose you mean “all parties”- those who “count” – leaves out the beleaguered deplorable classes in their millions.

The so-called “deplorable” classes have benefited enormously from free trade – far more than the billionaires, in fact. The obesity rate OBJECTIVELY attributes to this fact. These people have mistaken their class envy for suffering.

#14 Comment By Fran Macadam On January 29, 2018 @ 3:15 pm

ALM, tell me why the elites are so super entitled to ever increasing portions of the nation’s wealth, while production outside financialization, militarism and government with its burgeoning security state has been eviscerated.

#15 Comment By peter On January 29, 2018 @ 4:01 pm

Globalization has destroyed our blue collar middle class.
It modified the social pyramid into something like a pole standing on top of a wide and thin parallelepiped.
Basically, it changed the social structure from something stable (a pyramid) to an unstable structure.
The promoters of globalization used it to buy goodwill for America: for your friendly UN vote, we will give you the most favored nation’s treatment, and you can export here your stuff.
It started with apparel, continued with appliances and ended with high tech memory chips, laptops, solar cells, etc. We also gave away the know-how.
Only manufacturing of weapons remained here.
The high priests of globalization praised it as increasing efficiency, spreading wealth, etc. They also told us not to worry for the loss of jobs because we will have new ones in the financial sector!
And then we had the great recession created by the geniuses from the financial sector.
And we noticed that the wealth spread from the blue collar middle class to the top 0.1% from the world and to the workers from far away.
The fact that the economic power of the American blue collar workers was destroyed did not matter.
This is why the blue collar workers voted for Trump.
I prefer more expensive T-shirts, more expensive washing machines or other items – provided that this gives jobs to my compatriots.
This protectionism is not nationalism or white-supremacism.
It is just common sense.
History tells us that an unstable social structure can bring disastrous social upheavals…Think French Revolution, Russian Revolution…

#16 Comment By Clyde Schechter On January 29, 2018 @ 4:21 pm

I’m inclined to believe the neoliberal argument that free trade provides a net benefit to the nations engaged in it.

But clearly looking at its effects on the US in the past three decades, those benefits have not accrued to those who do, or used to do the actual work here. They go primarily to parasitic executives and financiers instead.

So, yes, we should have free trade, but only when we impose redistribution so that all Americans benefit from it.

#17 Comment By ALM On January 29, 2018 @ 6:49 pm

Fran Macadam writes:

ALM, tell me why the elites are so super entitled to ever increasing portions of the nation’s wealth, while production outside financialization, militarism and government with its burgeoning security state has been eviscerated.

Please explain to me why the “elites” that you and most of the other commenters disdain shouldn’t, considering that the top 5% of income earners contribute 80% of U.S tax revenue. 47% of the population (of which deplorables form a sizeable percentage) pays no income taxes.

And I am seeing a distrubing amount of class envy in these comments.

#18 Comment By Dan Phillips On January 29, 2018 @ 8:48 pm

Huh? Why is this article in TAC?

#19 Comment By Anne Mendoza On January 29, 2018 @ 9:29 pm

It is galling to read more burnished dreck about the miracle of free trade and open borders. Why? Because it’s not all good for huge swaths of the population which articles such as this one refuse to acknowledge, presumably because only winners matter even if they are grossly outnumbered by the losers.

Unless the author of this piece is brain dead due to the lack of oxygen in the rarified atmosphere of Davos, he must be aware that global trade deals have deliberately pitted workers in advanced countries in direct competition against workers in third world countries with predictable results. He must be aware that open borders also include unfettered capital flows from rich corporations to poor countries to exploit cheap labor and an absence of labor protections at the expense of workers who once lived middle class lives.

Corporations and the think tanks they buy along with their executives, shareholders, and political and professional class enablers are doing well. But that is not the litmus test that should be applied when measuring economic success. When nearly half of your children live near the poverty line (I’m talking to you America), your economy is not doing well, and articles such as this one should have the decency to acknowledge that.

#20 Comment By Liberty&Virtue On January 29, 2018 @ 9:47 pm

Good essay, Mr. Wirtz! Protectionism is a indeed a pernicious policy precisely because it hurts the ones it claims to protect.

@Fran Macadam: You bring up 19th century British economic policy. Ok, if you want to do that…how about the Corn Laws? These protectionist tariffs on various grains made basic foodstuffs more expensive, leading to riots and worsening the massive starvation in Ireland during the Great Famine. It also entrenched the power of the landed aristocracy, partly to the detriment of the middle and lower classes.

The folly of tariffs can be seen in our time too, with Trump’s tariffs on solar panels and washing machines very likely to kill more jobs than they create. Meanwhile, a small handful of companies might see more manufacturing jobs–nevermind the fact that the main solar industry in the US is installation.

Which gets to a great hypocrisy of tariffs and other protectionist measures: they claim to be populist, yet they are cronyist, benefiting a few well-connected, favored businesses and segments of the population to the detriment of a much larger group: American consumers and all the businesses who trade with foreign businesses.

Also, the financialization of our economy, militarism, and growing security state–this has more to do with cronyism and neoconservatism than it does free trade or free markets. Indeed, all of these things would be greatly reduced in a more free-market system.

A final point: We need to remember the lesson of comparative advantage. When countries specialized in production based on their comparative advantage, goods are produced at a lower cost and are produced in greater numbers and/or higher quality. And it’s not simply goods–the savings created for all countries involved are now available to expand business.

Of course, our economy system certainly isn’t perfect. I’m a liberal and free market supporter, but I absolutely think the damages of creative destruction and job loss (primarily due to automation) are serious and have been wrongly downplayed. If automation and AI trends continue and some form of retraining or other ameliorative program isn’t put into place, we are headed toward a serious socioeconomic crisis. But the benefits of a more protectionist policy are small, and the harms great.

#21 Comment By Freed Belak On January 29, 2018 @ 10:56 pm

Whether you support Trump or not,one of the main core reasons he won the election,was that he was right on free trade.
Nations do and must work together to have a peaceful and stable world.
That includes trade.
But it must be fair trade not free trade.
Free trade as what this writer seems to advocate,and what was implemented,in the world by the global elites resulted in one thing.
The wealth and good jobs of the great American middle class that played such a part in the stability of America was destroyed.
That wealth was transfered to other nations to advance their people.
And the wealth of those elites in our country and in those other countries also benefited.
Combined at the same time in our nation was an all out assault on unions,that made the situation even worse,in all regards.
Every nations leaders,must work for their own people.
Every people must demand their leaders work number one for them.
Not use other nations and the destruction of other people’s workers,to do it for them.And also thereby benefit.The leaders must make some sacrifices,lose sometimes for their peoples benefit.
What this writer dosent get,is free trade is over as he knew it.
At least in the USA.
Progressives and conservatives are united on that period.
In fact,Trump in everything but speech may be pressured to relent,but it won’t save Free Trade as we’ve known it.
Free Trade is poison to our nations workers,social fabric and stability.
Our top elites may benefit,but when one percent gain and 99 percent lose of a countries populace,history shows even in the most stable nations,the unthinkable eventually happens.
And it usually isn’t pretty or good for them or anyone else.
Let’s hope our elites have learned those lessons from history,for their and our benefit.
Or the year 2016 will only be remembered in history as the beginning of something much bigger that followed,because the lessons weren’t learned.

#22 Comment By Demetri Politis On January 30, 2018 @ 3:13 am

Close to my house was the GM transmission factory. One tear after NAFTA, the last pay day of the workers there was to pack the equipment and send it to Mexico. Trump told the workers he will renegotiate NAFTA. Whom did you think the laid off workers would vote for? As for Europe doing well, before Greece joined the EU euro zone, there was local industry, they were making refrigerators and other products. Now all finished. Coming in from Germany, and no work for Greek workers. Yes, Germany is doing well, but Germany is not Europe.

#23 Comment By Fran Macadam On January 30, 2018 @ 10:35 pm

“If automation and AI trends continue and some form of retraining or other ameliorative program isn’t put into place, we are headed toward a serious socioeconomic crisis.”

Retraining has been an abject failure, a temporary welfare program to hide the permanent shortage of actual good jobs which were eliminated.

Recall Hillary promising to retrain coal miners for computer programming jobs (which were taken by foreign H1B visa holders)?

#24 Comment By Wizard On January 31, 2018 @ 10:13 am

Liberty&Virtue, ALM – It’s nice to see that someone in the comments section actually understands basic economics. Calls for protectionism and autarky have a great intuitive appeal, but this is one of those cases where intuition is disastrously wrong. Such policies leave everyone poorer than they need to be, with the poorest suffering the worst.

Free trade vs. “fair” trade is a false dichotomy. In a true free market, the only way anyone can get your money is by offering you something you need (or at least want) at a price you’re willing to pay. If other countries subsidize certain products, so what? They’re effectively punishing their own citizens in order to give us cheaper products. Why do you insist on punishing Americans to stop this? Some sort of bizarre altruism?

For all the other commenters, I recommend Thomas Sowell’s book “Basic Economics”. Sowell does an excellent job of explaining economic principles in language that’s easily comprehensible, but never dumbed-down. He also demolishes a whole host of popular misconceptions with clear and logical explanations of why they’re wrong.

#25 Comment By Adam On January 31, 2018 @ 2:34 pm

Tariffs, etc are types of incentives. Don’t want to pay the 30%? Move your factory here. Free trade isn’t free and chasing the lowest cost labor pool through globalization necessarily levies a cost to those left behind. We’ve been paying a globalization tax for years. Time to repatriate it with interest.