It’s not as if we weren’t warned.
From his own inaguaral address, Donald Trump made it clear what mattered to him – “Protection will lead to great prosperity and strength” (CNBC [1]).
Today, he started acting on that mistaken – and for him, religious – faith. Suffering will soon be upon us.
He started by announcing America’s withdrawal from the Trans-Pacific Partnership. Bizarrely, the man who rants repeatedly about the nefarious cadres in the Chinese Communist Party – and not without merit where that crew is concerned – just handed Zhongnanhai (China’s Kremlin) its greatest geopolitical victory since the Nixon-Mao summit of 1972. Decades of efforts to bring Vietnam into the American sphere of influence have been set aflame. An economic agreement to cement American hegemony in the Pacific has been abandoned by the very power that sought it for years. The states of the Pacific Coast and the Rocky Mountains – which likely would have benefited most from the increased trade – will now never see those benefits. Meanwhile, one could easily see the CCP itself step into the geopolitical void left by the Trump Administration.
Of course, Trump also began the process of “renegotiating” NAFTA today, a process that now throws two of America’s largest trading relationships into serious question. If the president is serious about his willingness to abrogate the agreement – and on trade, Trump has been resolutely consistent since the 1980s – it could raise prices across the board for consumers and firms that rely on imported inputs…
…and by that, I mean, basically, everyone.
Or were you not aware (Source: EIA [2]) that the United States now imports more oil from Canada than it does from OPEC? Or that our fourth largest source of imported oil is Mexico?
Higher tariffs means higher energy costs, which raises prices on just about anything one can imagine – along with fewer jobs and lower pay from firms who will have to redirect revenue to cover said higher energy costs.
In short, Donald Trump has begun recreating the 1970s oil shocks all by himself; he is a one-man energy crisis.
Of course, none of this will phase him, or the Trumpenproletariat who were validated by his victory and will gladly see the rest of the country suffer so they can thwart the global markets in their vain and quixotic wishes to turn back the clock just enough to reopen insert-inefficient-factory-here.
This is why the political opposition (yes, Democrats – I’m looking squarely at you) need to park the Sandernista siren song and reach out the victims of Trump’s protectionism. For while more dynamic regions of the economy (the Atlantic South, the Southwest, and the Pacific Coast) may suffer more, the entire nation will feel the pain of protectionism, and economic conservatives who believe in freer trade will find themselves strangers in a strange political land.
In the meantime, those of us who recognize and understand the benefits of freer trade must raise our voices now, so voters recognize what and who knocked them into recession, and act accordingly.