Donald Trump

Trump's Scrapping of TPP Will Make America Poor Again

American consumers, exporters and manufacturing will get screwed

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You know the world, including this great nation, is screwed when a nationalist like Donald Trump and a socialist like Bernie Sanders agree on something. That

Trump Sanders
Gage Skidmore via Foter

happens to be the case with the TPP – or the Trans Pacific Partnership—the 12-nation free trade agreement that Barack Obama, in a rare move of inspired leadership, negotiated. Together these countries account for 40 percent of the world GDP and house 800 million of the world's population, almost double that of the European Union.

However, fulfilling one his core campaign promises on the first full day of his presidency, Trump officially pulled the United States from the deal.

This was largely a symbolic move because the treaty had not been ratified and Congressional leaders had already signaled after the November elections that there was no path forward for it. But Bernie Sanders instantly tweeted that he is "glad the Trans-Pacific Partnership is dead and gone." And as he made the withdrawal announcement, Trump declared that this was a "great thing for the American worker." He didn't mention that American consumers – aka "importers" – on the other hand would be "raped" (to use his own description for the ill-fated treaty).

Particularly hard hit will be low income households – you know those poor white working-class schlubs that this election was all about – who purchase foreign shoes and apparel at WalMart given that the agreement would have phased out U.S. tariffs most steeply on such items. But it will also affect manufacturers looking for cheap raw material, subverting Trump's core goal of rebuilding American manufacturing, while also limiting their ability to sell abroad given that the deal would have immediately eliminated all tariffs on US non-agricultural goods, and almost all agricultural goods.

But that's not the only Trump goal this move will subvert.

In classic mercantilist vein, Trump believes that exports are good because that means you are selling things and imports are bad because that means you are buying things, not understanding that the whole point of exports is to import just as the point of production is consumption. If we keep selling goods but don't buy anything in return, what would be the point of earning all that money?

But even if exporting is Trump's goal, the TPP would have slashed to zero 18,000 tariffs that the partner countries currently impose on US exports, Mercatus Center's Dan Griswold has pointed out. Americans, especially farmers, would have gained tremendous access to overseas markets.

The most bizarre thing about Trump's hostility to the TPP is that if it has a geo-political goal it is to balance China's growing influence in the Pacific, exactly what Trump wants. The deal, which included, besides the United States, Japan, Malaysia, Vietnam, Singapore, Brunei, Australia, New Zealand, Canada, Mexico, Chile and Peru, pointedly left out China. Now China will cut its own deals with many of these countries with whom it already doesn't have one, basically isolating the United States in the region. (Let me hasten to add, I am not by any means in favor of restoring the 1990s neo-conservative demonization of China when The Weekly Standard had made opposition to Most Favored Nation status and isolation of the Middle Kingdom its signature issue. I'm just trying to point out the internal contradictions in the new president's policies.)

To be sure, the TPP, like most multi-lateral trade agreements, was long and cumbersome and far from perfect. Indeed, it favored more politically connected U.S. exporters who helped write the rules – precisely also what happened in the partner countries, as Reason contributor Veronique de Rugy notes. And it also tried to force all countries to hew to America's intellectual property, environmental and other standards, basically raising the global cost of doing business. Hence, if Trump wanted to replace this 5,500-page treaty with simpler and shorter bilateral agreements with these countries, that would be one thing.

But Trump is doing the exact opposite. As part of his America First rhetoric, he is threatening to restore a 10 percent tariff on all foreign imports and impose an even bigger one on American companies that move operations overseas and then try and import goods back.

In short, he wants to build not just a physical wall around America but also a tariff wall, basically ending America's decades-long championship of global free trade—not to mention mark a stunning turn for the Grand Old Party to the Grand Old Protectionist party.

That is a total shame and to hear more about why, view Todd Krainin's interview with Cato Institute's Dan Ikenson here.

NEXT: Nick Gillespie Talks School Choice, Radical Autonomy, and Small "L" Libertarianism

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  1. There is plenty not to like buried inside this agreement. I think Reason itself has written about at least some of the issues.

    1. The only reason to have a trade agreement the absurd length of TPP is to embed kickbacks and protectionism to favored industries.

      Screw TPP, glad its dead. Replace it with bilateral agreements with countries who are actually interested in true free trade.

      1. nah. free trade is really all about letting China slap 35% tariffs on US exports and the US placing a 0% tariff on Chinese exports. That is good for the “working” poor according to this blogger.

  2. To be sure, the TPP, like most multi-lateral trade agreements, was long and cumbersome and far from perfect. Indeed, it favored more politically connected U.S. exporters who helped write the rules ? precisely also what happened in the partner countries, as Reason contributor Veronique de Rugy notes. And it also tried to force all countries to hew to America’s intellectual property, environmental and other standards, basically raising the global cost of doing business. Hence, if Trump wanted to replace this 5,500-page treaty with simpler and shorter bilateral agreements with these countries, that would be one thing.

    Just kill it.

    But Trump is doing the exact opposite. As part of his America First rhetoric, he is threatening to restore a 10 percent tariff on all foreign imports and impose an even bigger one on American companies that move operations overseas and then try and import goods back.

    I can only hope this is a negotiation tactic – or that Congress says…um, no. ’cause that would suck arse.

    1. Whoops, looks like the squirrelz ran off with muh tags!

    2. He should just exempt from tariffs any overseas operation that complies with US regulations and worker requirements. Progs can’t complain too much since it expands government’s influence beyond its borders, Cali-style.

      Of course it will suck for consumers — but consumers have been able to use imports to have their cake and eat it too, to support or at least tolerate idiotic regulations and dump the burden on businesses and workers. Make them fully share the pain, and maybe they will demand a little more moderation out of Leviathan.

      As a bonus, if foreign companies opt to pay the tariff rather than shoulder the burden of regulation, it gives people something solid to point to in terms of quantifying the burden of regulation on the economy.

      1. “He should just exempt from tariffs any overseas operation that complies with US regulations and worker requirements…. consumers have been able to use imports to have their cake and eat it too, to support or at least tolerate idiotic regulations and dump the burden on businesses and workers. Make them fully share the pain, and maybe they will demand a little more moderation out of Leviathan.”

        Bingo. Another way to balance it would be to get rid of protectionist licensure and immigration requirements. If doctors, nurses, dentists, hygienists, lawyers, teachers, accountants, financial advisers and housewives had to compete in the global labor pool, I’d be quite open to the TPP.

  3. How is it free trade if you have to have a contract enacted for TPP to work? Is every country involved in it? Sounds like protectionism to me.

    1. “Free trade” is nowadays just the meme used by the most-well protected protectionists (ie the financial sector in the US). The modern deals are multilateral precisely because they have nothing to do with ‘trade’ in an economic sense. They are designed to protect trade deficits (ie currency export) for the US and because they are about the role of dollar-currency not stuff they have to be multilateral.

      And because the trade deficit no longer resolves itself via an offsetting currency decline, that opens a new domestic product line for the financial mafia. They can sell currency hedges to every small local business that doesn’t do business overseas with the accompanying threat that if they don’t buy, their business will mysteriously burn to the ground.

  4. In the still in the video, I see a sign demanding internet freedom? Is this the freedom that can only come from the Iron Grip of Federal Control via FCC mandates?

  5. So shika says this is symbolic because congressional leaders wouldnt go thru with it anyway. So how is trump scrapping making us poor if it was doa to begin with?

    And dont we already trade with these countries?

    1. I’m a little puzzled, myself, on how the status quo ante from what, last year, is making America poor again.

      Now, if he goes full Smoot-Hawley, yeah, that will suck. OTOH, maybe he’s threatening tariffs to jumpstart those bilateral deals, no?

      Government, academic, “intellectual class” types generally don’t know how negotiation works, it seems. It often involves threatening to do something that the other side won’t like. If they have nothing to lose, why negotiate with you?

      Just a thought. Maybe Prez Dealmaker isn’t really planning on making any deals at all, just handing down non-negotiable edicts. But if he is planning on negotiating, this is what I would expect the battlespace prep to look like.

  6. Bullshit!

    YOu know what would make us prosperous.

    Scrap TPP and drop all tariffs to 0 unilaterally.

    Politically dead because false allure of mercantilism is even harder to kill than the false allure of socialism. But, that’s what will make us more prosperous.

    The secret sauce in the TPP, the weird security around the draft copies, the demands that legislators vote to approve it without knowing its contents, all speak to a document containing lots of handouts to cronies that would be rejected by the electorate.

    Let’s not kid ourselves that it was a free trade agreement just because lying liars pretend it is.

    1. Yep shikha should really be complaining about the tariffs trump proposed…not because this is dead. The tariffs would be a change from the baseline. Getting rid of tpp is pure status quo

    2. +1 Amen!

    3. I’d also settle for matching every increase in tariffs with a decrease in income tax.

      If you want to create an incentive, fine. That doesn’t mean you should line your pockets with the proceeds.

  7. To be sure, the TPP, like most multi-lateral trade agreements, was long and cumbersome and far from perfect. Indeed, it favored more politically connected U.S. exporters who helped write the rules ? precisely also what happened in the partner countries, as Reason contributor Veronique de Rugy notes. And it also tried to force all countries to hew to America’s intellectual property, environmental and other standards, basically raising the global cost of doing business.

    But, I thought it was a “free trade” agreement! I read it on H & R!

    As part of his America First rhetoric, he is threatening to restore a 10 percent tariff on all foreign imports

    Isn’t this pretty much the way the US government raised its revenue for decades, if not longer? Not saying its a good idea, mind, but its basically a targeted sales tax, in effect.

    1. At least tariffs are in the enumerated powers thingy.

    2. Interesting factoid: Before the income tax, most federal income came from ariffs and alcohol excise taxes. It’s one aspect of the pre-Civil War tariff battles that is ignored. The standard story is that the North wanted high tariffs to protect its industry and force the South to buy US goods, while the South wanted low tariffs so they could buy luxury goods and farm goods cheaply. What few people want to discuss is that tariffs were a huge part of the federal budget.

      And the income tax was what enabled both entry into WW I and Prohibition. WW I would have been unaffordable without all that extra income, and Prohibition would have cut the budget in half without the income tax to replace it.

      1. A return to a tariff-funded Federal government would certainly be interesting. A lot of the programs that we have depend on the (relative) stability of income tax revenue.

        1. Personal preference would be to eliminate popular election of Senators, and apportion the budget directly to the States and let them figure out how to raise it.

  8. So he withdrew support for a treaty that was probably never going to get ratified and now the world is ending? Getting rid of something we never had in the first place will make us poor again?

    1. Yea it doesnt make sense as it isnt like we dont get shoes made from china or other cheap places now.

    2. You beat me to it by a couple of minutes.

  9. How is an agreement favoring politically connected exporters a win for consumers?

  10. TPP is far more than a trade agreement. It has so many side deals and intellectual property and environmental and union nonsense baked in that it is a terrible deal for everybody but the unions, social justice warriors, and politicians.

    Any politician who actually wanted lower tariffs would just unilaterally lower them. That’s been shown effective in both theory and practice. Enshrining such stuff in thousands of pages of treaties is the wrong way to do it.

  11. Now just wait a minute here. Trump’s scrapping of something that never existed in the first place, is going to make us poor again? Did I miss something here?

    1. He’s also cancelling our flying cars.

      1. God damnit really? No flying cars…screw Trump this is bullshit!

  12. “Particularly hard hit will be low income households ? you know those poor white working class schlubs that this election was all about”

    That’s a little bit mean spirited. A little bit.

    1. They’re white, it’s okay.

    2. And how does not putting something that wasnt there in first place make them poorer?

      If anything the deal was bad as cause the article mentioned it was full of politically connected cronyism

    3. low income households ? you know those poor white working class schlubs

      And here I thought that low income households weren’t monochromatic.

  13. you know those poor white working class schlubs that this election was all about

    Oh, them.

    I am not by any means in favor of restoring the 1990s neo-conservative demonization of China


    Quelle surprise
    . You know who else demonizes China? People who respect freedom, that’s who.

    What a condescending article.

      1. That was cray, brother.

        But Jack is a good dude. I’m reading “Alibaba’s World” by Porter Erisman, which runs through the history of the company. My first exposure to Alibaba was in pricing out agricultural processing equipment for licensing agreements; it was the only place I could find the market value of small-scale machinery. Now they’re one of the Super 7 buying up all the server equipment Intel puts out. He’s certainly the most libertarian of the CEO’s.

    1. Given that the liberalization trend in China seems to have come to a halt and that the PRC has been interfering with Hong Kong, it seems fair to say they have done plenty to deserve criticism of late.

  14. I remember how poor we were back in 2013. I mean, it was basically Mad Max until Obama announced the TPP was close to being signed.

  15. Next time argue tariffs that dont exist now would be bad. Not something that doesnt exist continuing not to exist would make poorer…or you could rephrase it as maybe it is existed it would better than before

    This was a pure fail of an article

  16. My favorite part of the media trumpeting free trade is their pearl clutching over China taking over America’s leadership role. I mean, their guy is giving speeches praising free trade while ours is condemning it! Ignore that China is a communist country in which actual free trade doesn’t exist…

    1. Damn that is such a good point.

  17. Dalmia overstates the impact of scrapping TPP with the title that doing so will make America poor again. But she’s right about protectionism being a bad deal for the US. Scrapping TPP leaves things the same, so doesn’t represent a change. CATO’s analysis is that TPP is overall, trade liberalizing, so it’s a lost opportunity for Trump, but he promised to scrap it so will to follow thru on his promise.

    The GOP’s border adjustability tax is terrible, and frankly, I believe the GOP establishment RINOs are setting Trump and the US economy to fail, so he doesn’t win re-election. If the Smoot-Hawley Tariff Act of 1930 is a guide, where the US GDP fell by almost half within 3 years before it was repealed, and Smoot and Hawley (both Republicans) lost their seats, then increasing tariffs will make us poorer. People aren’t aware that most imports are used by US manufacturers in products they produce; thus, tariffs will make their products less competitive globally (and many US jobs will move overseas as a result).

    Hopefully either a) Trump was lying to get elected and played the protectionist card rather than blame the government we’ve elected, or b) he’ll be a quick learner before he harms the economy with protectionist moves.

    1. “People aren’t aware that most imports are used by US manufacturers in products they produce; thus, tariffs will make their products less competitive globally (and many US jobs will move overseas as a result).”

      You simply do not understand what you are talking about.
      Most imports already have tariffs associated with them. Most exports already have tariffs associated with them.
      Local production is always cheaper, both from a supply chain standpoint as well as tariff avoidance.

      The US is the largest consumer in the world. If you don’t think domestic production to fulfill that market share is a huge incentive to produce more domestically, than frankly you are clueless.
      Regulation and cost-of-business has driven jobs offshore. Raw material costing due to tariffs is a non-issue.

    2. If Trump’s tariffs trigger a recession, he’ll simply claim that the media is lying and economy is doing better than ever. Millions of people will believe him because what is actually true doesn’t matter anymore.

      1. In all fairness to Trump, the economy is already in a recession. The effects have been masked by central bank manipulation and a smokescreen propagated by the media to maintain an illusion of progress. This was done to help Obama’s legacy and protect Hillary/Dems from blame-through-association during the election.
        Now that Trump is in office, we all should expect a severe recession. It will have nothing to do with Trump’s policies, but rather a coordinated economic ‘war’ from the media and Soros, almost exactly what was done in the lead-up to the 08 election. Give it a month or two. They will work to de-legitimize everything Trump does, so that when the economy crashes in may-July, they can say “told you so”.

        Possibly, they will wait until the lead-up to midterms, but I expect Trump will implement an avalanche of policy directions as soon as possible to pre-empt the crash. Don’t think the Dems will be able to hold off bringing it down.

    3. Does she choose the title?

  18. If my U.S. company sells some widgets to India, what am I supposed to do with the rupees I get? If you’d like to buy the rupees from me so you can get some Indian goods, aren’t you going to devalue the rupees by the 10% tariff you’ll be paying to import goods from India? And if I get only 90% of the value from my rupees, won’t I have to demand more rupees when I sell to India? If they say, “screw it, I’ll buy widgets from China” then won’t I have to lay off some of my workers? I guess Mr. Trump and his protectionist geniuses can explain it to me.

    1. If my U.S. company sells some widgets to India, what am I supposed to do with the rupees I get?

      Tell them the contract specifies payments in dollars, so quit trying to pay in pretend money?

      1. Where did they get all the dollars if their goods now cost 10% more to sell in America? Aren’t their U.S. customers going to buy from other U.S. companies instead of Indian companies?

  19. I’m a Trump voter and I completely oppose his trade policy, but. . . I really think this matters less than Reason suggests. The U.S. has trade agreements with virtually every relevant country around the world. The TPP would help at the margins, but – honestly – the impact would be marginal. If I have to sacrifice minor improvements to our existing trade agreements to roll back the crippling burden of taxes and regulation then that’s a trade I’m willing to make.

    1. ^^^ “crippling burden of taxes and regulation”

      Any discussion of trade that doesn’t factor in the far more dominant factor of regulation and corporate tax is simply a childish rant about an ideal that the ranter knows little about.

      1. The published corporate tax rate is very high, but there are so many ways for corporations to avoid paying taxes that the effective corporate tax rate isn’t that high.

        Meanwhile, nearly 50% of my income is taken from me in the form of taxes (>40% for federal/state/SS/Medicare, nearly 10% for sales and property taxes). That’s a higher rate than any corporation pays.

    2. I think many trade agreements are more geopolitical in nature. The economics is secondary.

  20. The non-repeal of an unratified treaty will make the non-repealing party who never ratified it poor.

    It’s nice when you don’t even have to point out the atrocious regulatory fuckery and cronyism being supported by a publication ostensibly dedicated to free markets because the headline is so goddamn stupid.

    1. Was there already legislation or executive policy put in place in preparation for ratification of TPP? I could see that if a tariff was reduced but will now be raised, that it could have some effect. But Dalmia did not make that case.

  21. The TPP is bad law and will only hurt American business. I’m glad its gone

  22. Did we mention that Trump thought the TPP was a bad deal, that we gave away the store to China, because we don’t know how to make great deals like he does? (China was not a party to the TPP, the TPP was in fact a trading bloc meant to oppose China. So maybe a grain of salt in taking anything Trump says as an indication of what he believes. He believes a lot of crap he doesn’t think about at all.)

  23. SD;DR.

  24. The US should have no treaties with the bolsheviks of vietnam.

  25. Someone above mentioned that most imports are inputs for further manufacturing

    Do tariffs not only apply to end user goods? Because im all for free trade, but limited to the extent necessary to protect jobs, which means limiting import of the few things we still have comparati e advantage in, which is not shitty consumer end goods but higher end advanvcwd manufacturing things. Like, let China make all the troll dolls and cheap sandals, but leave the turbjne blades and precision bushings to us.

    Is it not legally possible for congress to

    1. tariff goods based on their usage in further manufacturing or as an end good or whatever? I ask earnestly because I dont knownwhere the legal limitations arsT

  26. Particularly hard hit will be low income households ? you know those poor white working-class schlubs that this election was all about ? who purchase foreign shoes and apparel at WalMart given that the agreement would have phased out U.S. tariffs most steeply on such items.”

    I spent a few years as one of those ‘schlubs,’ and I have to point out to Mz. Dalmia that transpacific imports were a trivial part of my budget at the time. The most expensive Asia-sourced items that I owned were:

    – a $500 laptop, which I still have and use ($50/year).

    – a commuter bicycle that I bought used, with perhaps $150 of what I paid for it attributable to parts made in Taiwan (still in service, so $15/year).

    – I owned well under $400 worth of imported furniture, all of which I still have.

    Food and rent ($7,000/year) were my biggest expenses by a wide margin.

    NAFTA may have lowered my grocery bill by $10-25/month, but only because I like fresh produce. If my job had been vulnerable to imports, lost wages would have more than offset that.

    If her argument is that stingy white bachelors would see a net benefit from the TPP, she’s probably wrong.

  27. We’ve always been at war with those at war with TPP.

  28. Is there anything that better encapsulates fake news than calling the TPP a ‘free trade’ agreement?

  29. This headline of this article is just hyperbolic nonsense. The gains from NAFTA were small, and they would likely be small again. Not passing the TPP just means keeping the status quo. There’s no change in policy, so there is no reason we would be poorer. It’s disappointing for sure, but I’m willing to trade it for a reduction in taxes and regulations.

  30. “Trump’s scrapping of TPP will make America poor again.”

    Since the TPP was concocted in secret by Obama not only can you not know this but given the architect that is most likely false.

  31. The problem with the TPP is the secrecy which enables an insidious type of protectionism at the behest of corporations. There is nothing wrong with free trade as its fair for all parties, which it never is.

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  32. If donald trump and Bernie sanders agree on something, you can be so sure its a bad idea that it is actually kind of funny.

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