Job Losses from Trump's Trade War Likely Just Beginning

Much like Mussolini (for whom things did not end well), Donald Trump likes to strut around and act the tough guy. Part of this tough guy/bully routine is Trump's self-created trade war which is already beginning to kill American jobs.  But worse days are likely to come for both American workers more of whom will lose jobs and American consumers who will find themselves paying higher prices for numerous goods.  All so a foul narcissist can feed his insatiable ego and play to the knuckle dragging base of the Republican Party. A column by a former U.S. Trade Representative looks at America's increasingly alienated allies working to form new trading alliances that exclude America.  Here are highlights:

Diversification is the polite way of saying that America’s friends and allies believe we have become an unreliable partner, and they are now looking elsewhere. From Ottawa to Brussels to Seoul, our trading partners are fed up with the Trump administration’s tariffs, and they have given up on trying to charm President Trump or persuade him that free trade is good. To reduce their economic dependence on the United States and their exposure to a potential global trade war, they are forging trade deals that leave us out of the picture altogether. On June 14, Canada’s government asked Parliament to ratify a new version of the Trans-Pacific Partnership, which the United States backed out of last year. On June 18, the European Union trade commissioner visited Australia and three days later, New Zealand to begin negotiations for free-trade agreements; and on June 22, South Korea announced plans to pursue negotiations for its first free-trade agreement with Russia.

These moves are a direct response to the Trump administration’s unreliability and unpredictability, and they are a clear sign that the administration’s trade policy priorities — renegotiating deals and punishing violations — are not working out as expected.

[Trump] The president may want better deals to replace the old, “terrible” deals he doesn’t like, but so far, the rest of the world has been reluctant to negotiate new agreements with the United States. The long and growing list of tariffs, particularly those based on dubious national security grounds, has weakened the administration’s ability to form coalitions with other countries to tackle legitimate concerns, especially China’s unfair trade practices.

Instead, our closest trading partners are scrambling to find new markets for exports subject to tariff increases by the United States, and to secure new suppliers for the American products that their own countries are planning to hit with retaliatory tariffs.

Japan is thus accelerating negotiations with other countries. Japan and the European Union plan to sign their free-trade agreement in July. Moreover, it was Japan who stepped up to fill the leadership void left by the American exit from the Trans-Pacific Partnership. The Japanese Diet approved a bill to ratify the revised pact this month.

The tone and policies of the Trump administration have even managed to bring two longtime rivals, China and Mexico, closer together. The two countries once competed head-to-head as low-cost manufacturers, with the United States as the most important market. After Mr. Trump began beating the drum for tariffs and a possible withdrawal from Nafta, Mexico’s economy minister, Ildefonso Guajardo, called a visit last year to China “strategic leverage,” saying it “sends the signal that we have alternatives” to the United States.

Regrettably, this leaves the United States on the margins as the rest of the world builds a new trading structure without us. Our workers, farmers and companies will be locked out of important markets. We will lose our chance to help write the rules and set standards for trade in advanced technology, such as alternative-fuel vehicles, 3-D printing and artificial intelligence. Global and regional supply chains will increasingly bypass the United States. And years of efforts by the United States to curb China’s unfair trade practices will lose critical international support. To be sure, as the world’s largest economy, the United States will remain a major player in international commerce. . . . There is a danger, however, in overestimating our negotiating leverage. Trade patterns will shift as our partners look elsewhere. We have spent decades building trust with our allies. We are now squandering it.

The Panama Canal - The First and Next 100 Years

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Much of my mother's family history links to Panama and Central America.  My grandfather - pictured above - worked on the building of the Panama Canal and with the money he earned - the pay was good for that era, especially given the high death rate from malaria and yellow fever - that he was able to go to Vanderbilt University where he earned his medical degree.  Graduating just in time to spend America's period of involvement in World War I as an army doctor, he returned to Panama at the war's end where he met my grandmother - they are pictured below.  My mother was born in Honduras and under the Honduran Constitution I am entitled to dual citizenship in Honduras.  All of the family saga began, however, with the building of the canal.  

The 15th of August was the centennial of its opening.   A piece in The Economist looks at the history of the Canal and its possible place in geopolitics in the coming years.  Here are article excerpts:

IN 1914, troubled by the onset of the Great War, The Economist published a 176-page special edition on what it called a great “achievement of Peace”: the opening of the Panama Canal. “It may be long before the tolls become remunerative, but its immediate effect on commerce will be stimulative,” it said. “Eventually the Isthmus is likely to become one of the busiest resorts of shipping upon the face of the globe.”

Half right. In fact, the first world war meant there was almost no commercial traffic on the canal for its first six years. But from 1921 onwards, the canal quickly started paying rich dividends—particularly to its owner, the United States.

On the eve of the anniversary of the Panama Canal’s opening on August 15th, the Egyptian government has announced a plan to upgrade the Suez Canal for the first time in its 145-year history. Nicaragua has endorsed a 278km (173-mile) route for a $40-billion canal linking the Atlantic to the Pacific, the quixotic-sounding dream of a little-known Chinese magnate and the country’s Sandinista government. Causing further intrigue, on August 8th a delegation of Chinese businessmen from the state-owned China Harbour Engineering Company visited Panama to explore the idea of building and financing a fourth set of locks—even before the third set, part of the existing expansion plan, are in place.

As 100 years ago, numerous commercial and geopolitical interests are at play.  In 1914 Panama’s beauty was its lack of competition. It was the dawn of an American century. The United States’ west coast was enjoying an oil boom and wanted a cheaper way than the steam train to move goods and fuel between the Pacific and Atlantic. The canal lopped 12,600km from the sea route between New York and San Francisco. It also had strategic value. After the Spanish-American war in 1898 gave it territories and protectorates from Cuba to the Philippines, the United States needed a naval route between Atlantic and Pacific.

The gains were swift. By 1922 real shipping rates on some routes had dropped almost one-third below their pre-war average, according to “The Big Ditch: How America Took, Built, Ran and Ultimately Gave Away the Panama Canal”, by Noel Maurer and Carlos Yu. American taxpayers quickly recouped their investment. After the second world war, however, America’s trade with Asia soared above that between its east and west coasts . . . . Competition to the canal came from America’s interstate highways and new diesel-fuelled railways. That led to the Torrijos-Carter Treaties, which handed control of the canal to Panama in 1999.

Panama has done a good job of running it. But competition is emerging on all sides. . . . Nicaragua, once deemed too earthquake-prone for a big canal, is trying to rekindle its 19th-century dream. Many doubt the commitment of Wang Jing, a 41-year-old billionaire, to build a giant waterway through Nicaragua. But the pharaonic project, and the more recent interest of Chinese businessmen in expanding the Panama Canal, reflect the fact that China may want a say in the isthmus’s future.

In a fiercely competitive shipping market, analysts say the key to Panama’s competitiveness in future may be niggling issues like the size of its tolls. But for now it is focusing on the long term. “They’re not doing this for 2017,” says Paul Bingham of CDM Smith, an infrastructure firm. “It’s the 100-year view that’s important.”

 Interestingly enough, one of my nephews just finished a stint in the Peace Corps - in Panama.  Who would have thought that 100 years later, a family member would be once again in love with Panama.