Today, the Republican president of the United States made the kind of economically illiterate argument that Republicans have been mocking for longer than I've been alive:
When you're already $500 Billion DOWN, you can't lose!
— Donald J. Trump (@realDonaldTrump) April 4, 2018
Trump was referring here to his mutually threatened trade war with China, which minutes before this tweet he had insisted "We are not in," because "that war was lost many years ago by the foolish, or incompetent, people who represented the U.S." You can't fight a war you've already lost, and so that's why we must fight, amirite?! (Also, the U.S. trade deficit with China isn't close to $500 billion; the president is once again pulling scary-sounding trade stats out of his arse.)
Conservatives used to know damn well that trade deficits don't matter, budget deficits do; not vice-versa. Here's Uncle Milton Friedman making the succinct case about that, and against steel tariffs, 40 years ago. But now that a populist protectionist has taken over the GOP and the White House, that new song is getting sung right out loud:
Fox & Friends just now on Trump's trade war:
1) "I love that he's doing this"
2) "I support President Trump's hard stand"
3) "He is good at this. He is great at this."
4) "The president is on your side" pic.twitter.com/uo9YUM9Kw6
— Matthew Gertz (@MattGertz) April 4, 2018
We have already seen opportunistic heel-turns on trade from the likes of Mike Pence, Reince Priebus, and Stephen Moore, as well as a big opinion-shift among the Republican electorate (Democrats, bless their hearts, are already there). But could we be witnessing the same pattern from new Economic Council Director and lifelong free trader Larry Kudlow?
Let's hope not. But today, Kudlow was certainly whistling a different tune on China from the White House than he did from his CNBC desk during the Obama administration. Asked by reporters to respond to the market-roiling news that China was announcing retaliatory tariffs on $50 billion worth of American goods, Kudlow implausibly characterized the president as a "free-trader" who "wants to solve this with the least amount of pain." He then added: "This is a growth action. I can't emphasize that enough."
The best you can say about Kudlow's rosy interpretation is that he's doing what it takes to have access to a Mercantilist president's ear. A less charitable explanation is that proximity to power corrupts analytical integrity.
During Obama's first term, when the then-president slapped duties on Chinese tire imports, Larry Kudlow repeatedly warned that a "trade war with China" would be "a disaster." A "Smoot-Hawley protectionist trade war," he cautioned in June 2010, "is the last thing we need right now." Also: "A message to all those people blaming China for our slow, jobless recovery: Shame on you. Stick to your own knitting." Even "the threat of higher tariffs," he wrote that October, "only adds to uncertainty and weakens the foundation of growth."
It's "not about trade wars," Kudlow insisted. "This is about holding to the laws and customs of free trade and holding violators to account. It's not about war."
Kudlow would not appear to be on the same page as his new boss.
When a country (USA) is losing many billions of dollars on trade with virtually every country it does business with, trade wars are good, and easy to win. Example, when we are down $100 billion with a certain country and they get cute, don't trade anymore-we win big. It's easy!
— Donald J. Trump (@realDonaldTrump) March 2, 2018
UPDATE: I forgot to include one of the greatest trade-policy quotes in the history of cable news. In March 2011, Kudlow featured on his CNBC program the one and only Donald J. Trump. Who said this: "I have a son, and he loves little airplanes….Most of them are made in China….He has so many of 'em….If he had half of 'em, and if they were made in this country, I'd be very happy…and he'd be just as happy."