If Trump simply let the economy do its thing, he’d have a solid pitch to voters come the midterm elections in November: You’re better off with me and my fellow Republicans in charge. Let’s keep it that way.

But Trump’s style of protectionism will produce more displaced workers, in the industries that are harmed as the collateral damage in his trade wars. This will happen in at least two ways. First, tariffs are a tax that boosts the price of the protected product, in this case steel and aluminum. So domestic producers earn more money and might hire more workers. But other companies that purchase those products, such as producers of cars, appliances and beverages, now have to pay more, and their products become more expensive, which means sales could suffer. That kills profits and jobs.

More damage comes from retaliatory tariffs imposed by other countries, which raises the prices of American exports and reduces sales. 

Read this news on Yahoo News at: https://www.yahoo.com/news/trumps-fatal-flaw-becoming-dangerous-even-173821635.html

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President’s Trump’s best asset as a politician right now is the strong US economy. Unemployment is low, profits are up and Americans feel more secure than they have in over a decade.

If Trump simply let the economy do its thing, he’d have a solid pitch to voters come the midterm elections in November: You’re better off with me and my fellow Republicans in charge. Let’s keep it that way.

Trump seems motivated by something else, however. It’s clear by now he’s obsessed with trade, and with rewiring the global flow of goods that has evolved during the last 30 years. His latest moves include the imposition of steel and aluminum tariffs on allies that seemed likely to gain exemptions, including Canada, Mexico and the 28 countries of the European Union. Trump has now made clear: No exemptions. And as expected, those trade partners have responded in kind, announcing tariffs on a like amount of American importsincluding motorcycles, bourbon, pork, apples and cheese.

Trump may be just getting started. On May 29 he announced there will be new tariffs on $50 billion of imports from China, beginning in mid-June. He’s also considering tariffs of up to 25% on 8 million imported autos Americans purchase each year. And who knows what else.

These are the trade wars Trump thinks he can win, and Trump is no longer threatening such wars—he’s launching them. Since the United States imports more than it exports, Trump seems to think we can slap tariffs on a lot more products than any trading partner can. But this is financial markets’ worst fear regarding Trump, because escalating tariffs can easily become a war of attrition in which governments destroy value and the “winner” is whoever loses the least.

I’ve referred to Trump before as 70s Man: He views smokestack industries such as steel and coal as the backbone of American economic might, even though we’ve evolved into a service and technology economy with manufacturing as an important, but declining, sector. Trump’s fatal flaw is this outdated view of the economy. He feels manufacturing is so important that he’s willing to sacrifice jobs and profits elsewhere—in retail and agriculture, for example—to boost a sector that has been in natural decline as a portion of the nation’s overall economic output.

Economies change continually, with new industries always displacing old ones. Workers in declining industries undoubtedly get hurt, as jobs disappear and the new ones created are in different fields hundreds of miles away. The United States has done an inadequate job of helping displaced workers adapt and find new ways to prosper, and Trump has adroitly appealed to the “forgotten men and women” other politicians have jabbered about but done little or nothing to help.

But Trump’s style of protectionism will produce more displaced workers, in the industries that are harmed as the collateral damage in his trade wars. This will happen in at least two ways. First, tariffs are a tax that boosts the price of the protected product, in this case steel and aluminum. So domestic producers earn more money and might hire more workers. But other companies that purchase those products, such as producers of cars, appliances and beverages, now have to pay more, and their products become more expensive, which means sales could suffer. That kills profits and jobs.

More damage comes from retaliatory tariffs imposed by other countries, which raises the prices of American exports and reduces sales. Some US farmers and business owners have already been complaining about reduced access to Chinese markets, after tit-for-tat protectionist measures by both countries. Trump’s Commerce Secretary, Wilbur Ross, said in April that Americans need to “absorb a little bit of pain” to get better trade deals that will help the US economy. Well, the pain is arriving. What Americans really need to do is tolerate the pain longer than our trade-war foes, hoping they blink first.

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