While I agree with President Trump that our trading partners are treating us unfairly, I respectfully disagree with his trade war strategy. The President has said that trade wars are good and easy to win. This is ridiculously false and simplistic. Trade wars made the Great Depression worse, and once started, trade wars are difficult to end. Trade wars are generally bad: A trade war with the entire world could be catastrophic.
We are now in trade wars with Canada, Mexico, China and Europe, all at the same time. We need to focus on one problem at a time and get it fixed before moving on to the next crisis. We must first start mending fences with our friends in North America and Europe before engaging a trade war with China.
Fix NAFTA First
We must finish renegotiations with Canada and Mexico to improve NAFTA, the North American Free Trade Agreement, before we take on Europe and China. Once we settle our differences with our neighbors we can then present a united front with other nations.
We have allowed Mexico to take away significant chunk of our auto industry. Consequently, supply chains from Mexico now make it exceptionally difficult to sever trade ties completely. We must reach a compromise. I suggest that we propose a modest 10% duty on Mexican autos and auto parts. This will gently help to shift manufacturing back to the United States without harming either country significantly.
Contrary to President Trump's statement on Canada trade, we do not have a trade imbalance with our northern neighbor. However, no matter how nice Prime Minister Justin Trudeau appears to be, Canada is cheating on trade. Canada's 300% tariff on dairy products must be eliminated--possibly over a ten-year period. In addition, Canada's ban on the importation of American beer must be negotiated away.
Canada and Mexico also forced the United States to stop country of origin labeling of beef. This has cost the U.S. beef industry $20 billion annually. The U.S. as a sovereign nation has the right to require that food products be labeled with its country of origin for the safety and preference of consumers. To do business with the biggest economy on the planet, Canada and Mexico should be willing to allow us to require beef labeling.
After NAFTA is fixed, we should shore up our trading relationship with Europe.
The European Union
After World War II, we adopted policies to help Europe rebuild and recover from the extensive devastation caused by the war. We permitted high European tariffs to be placed on U.S. exports, even though we have very low tariffs on imports from Europe. World War II ended more than 70 years ago. Many European nations are now wealthier than the United States, such as Norway and Switzerland. It is time for Europe to treat the United States as an equal trading partner.
Europe now charges a 10% tariffs on cars made in the USA. We charge only a 2.5% duty on imported European cars. The most popular American cars that are selling in Europe are Teslas and Jeeps. And Fiat is now making Jeeps in Italy that it sells back to the United States. Leveling the playing field with Europe should be relatively easy.
China cheats the entire world on trade by manipulating its currency, subsidizing steel and aluminum production and by imposing stiff tariffs on imports. Once we mend fences with Canada, Mexico and Europe, together we can force China to open its doors to more imports. After all, China has a massive trade imbalance with the entire world.
China may be able to survive a trade war with the United States, but not with the world.
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