BULL IN THE CHINA SHOP

After Donald Trump was elected to the presidency, the stock market started climbing. Presumably this was based on the premise that taxes would be lowered on business and the wealthy. Given the Republican majority in both houses of Congress, this seems likely to happen. However, not everyone is optimistic about the economic outlook over the next four years.

This is partly because we can’t take Mr. Trump at his word. He often does not seem to comprehend the complexities of the issues he deals with. He frequently walks back statements he has made or says they were merely jokes. Sometimes he outright lies and continues to insist of the veracity of those lies long after they have been exposed as falsehoods.

Also Republicans are generally regarded as friendly to business while Democrats are thought of as hostile to business, but recently the economy has flourished under Democratic administrations and floundered while the Republicans had the White House. President Clinton handed President Bush a tidy surplus in the federal treasury. Bush promptly squandered it by lowering taxes on the well-to-do and starting a misguided war in Iraq. Under the Bush administration we saw the greatest economic struggle since the Great Depression. President Obama took the mess that Bush had handed him and turned it around, pulling us out of the Great Recession and handing the economy to President Trump in a much better shape than it was when he received it. Do you have any confidence in Donald Trump’s ability to handle it with care?

Conservatives believe that the marketplace will be able to resolve any issues it faces. If you just let things go, the law of supply and demand will make everything turn out right in the end. They resent liberal meddling, making up rules and regulations that hinder business’s ability to function without interference.

And yet that is just what Donald Trump did when he stepped into a business decision made by Carrier in Indiana. The company was going to shutter two plants and send them to Mexico. Trump talked them into keeping one of those plants open, partly by having his running mate, who happened to be governor of Indiana, grant the company some $7 million in tax credits. Trump also threatened to impose a heavy tariff on any material coming from that Mexican plant into the United States. It is almost like having the central government decided how many pairs of shoes were to be made, as was done during the Soviet government in Russia. 

Can the President step in, in the decision any business makes if he does not agree with it? Is the governor of every state involved going to grant tax credits to companies that say they’re going to move out of the country? What will stop manufacturers from threatening to move out of the country unless they get significant tax breaks? What will prevent the companies that keep manufacturing here from replacing huge portions of their work force with automation?

Mr. Trump blames China and Mexico for the loss of manufacturing jobs in the United States. He threatens to tear up international trade agreements and raise trade barriers in the form of high tariffs against countries he deems our adversaries in trade. However, those jobs are gone forever. More jobs have been lost to automation than to companies sending them overseas. What is needed is not a trade war but education to prepare American workers for the new world that is emerging through automation, computers, and the internet.

If America raises import duties on goods from other countries, they will retaliate by doing the same to us. Such warfare will destroy the delicate symbiosis that keeps the world economy in balance. The real estate bubble that burst in 2008 threw the economy off balance not only in this country but world-wide. The Great Depression of the 1930s was felt in every country. In warfare no one wins. Everyone loses. This is true in economic war as well.

A recent issue of The Week featured Trump on the cover as a bull in the china shop. It was an apt comparison.