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Commentary By Jason L. Riley

Trump's Big Gamble

Economics, Economics Tax & Budget, Immigration

His trade and immigration policies put at risk his advances on the tax and regulatory fronts.

Has Donald Trump forgotten why he won the election? Does he remember how he was able to flip millions of previous Obama supporters in states like Michigan, Pennsylvania and Ohio?

One way Mr. Trump did it was by more effectively communicating with people Hillary Clinton had either taken for granted or written off as beneath her dignity even to court. Mrs. Clinton dismissed these voters as racist, sexist and xenophobic. Mr. Trump viewed them as everyday Americans—medical technicians, factory workers, bus drivers and nurses—who felt that the federal government was no longer making their concerns a priority.

If the president has forgotten this recent history, someone on his staff might jog his memory. Candidate Trump championed the working class, but President Trump is pushing trade policies that put the interests of favored U.S. industries ahead of consumers, including the working class. His message of late to those Midwestern growers who tipped Wisconsin and Iowa for Republicans is to be patient while he cuts China down to size on trade.Mr. Trump seems to acknowledge that his protectionist trade policies will harm agriculture and manufacturing but wants industry simply to suck it up. After all, these farmers are “great patriots” who “understand that they’re doing this for the country,” he said Monday. He also promised to “make it up” to them in some undefined way at a later date.

The problem is not that the president wants to do something about China’s trade policies. Beijing effectively forces U.S. companies that want access to Chinese markets to share their intellectual property with Chinese competitors—a practice the World Trade Organization expressly forbids. Rather, the problem is that Mr. Trump wants to force China’s hand in ways that are more likely to escalate tensions. Historically, when the U.S. raises duties on imported goods, other countries retaliate against U.S. exports. The U.S. tariffs on steel that were announced last month begot the Chinese tariffs on U.S. agriculture products announced last week.

Both sides lose in a trade war, and the first domestic casualties of this one will be U.S. consumers and workers. Daniel Griswold of the Mercatus Center explained the “collateral damage” to come if this tit-for-tat between the world’s two largest economies continues. Of the $505 billion the U.S. imported from China last year, nearly half consisted of “household goods that are staples of a working family’s budget, such as cell phones, toys, furniture, apparel and footwear,” wrote Mr. Griswold on the Mercatus website. “Tariffs on those items will hit tens of millions of Americans right in their pocketbooks. Tariffs on other major categories of imports from China, such as computers, machinery, and industrial supplies, will hit the bottom line of American companies, raising their costs and reducing their competitiveness in the global marketplace. Hundreds of thousands of American workers could be displaced from their jobs.”

Mr. Trump’s supporters, along with the rest of the country, are currently reaping the benefits of his wise decisions to lower taxes and reduce regulations. The 4.1% unemployment rate is at an 18-year low, and earlier this year the jobless rate for black men marked its lowest point since 1973. Manufacturing jobs have increased by nearly 300,000 since Mr. Trump was elected. Last week this newspaper reported that the nation’s top five manufacturing regions—all of which are in red states—are experiencing worker shortages even as wages and signing bonuses have increased. If Trump voters take issue with the president’s support for trade policies that have a long track record of increasing prices and decreasing employment, who can blame them?

Mr. Trump’s trade policies, alas, are of a piece with his views on immigration. For the president, both are zero-sum propositions, whereby one side must “lose” in order for the other side to “win.” He campaigned against the trade and immigration status quo, so none of his subsequent rhetoric or behavior as president should come as a surprise. But it’s too bad Mr. Trump won’t let himself be persuaded by what he’s experienced since taking office. However badly the Chinese are cheating on trade, and however many foreign nationals are residing in the U.S. illegally or legally, neither situation has prevented this president from overseeing strong economic growth, steady job gains and increased consumer confidence. Perhaps tax and regulatory relief matter more to America’s well-being than border walls and tariffs.

A savvier White House would focus more on touting these economic accomplishments as the midterm elections approach, and less on implementing trade and immigration policies that would undermine them. Mr. Trump isn’t on the ballot this year, but his relationship with the leaders of China and Mexico isn’t making things easier for those Republicans who do have to face voters in November.

This piece originally appeared in The Wall Street Journal


Jason L. Riley is a senior fellow at the Manhattan Institute, a columnist at The Wall Street Journal, and a Fox News commentator.

This piece originally appeared in The Wall Street Journal