Protectionist Donald Trump Is a 21st Century Herbert Hoover
This column was co-written by Stephen Moore.
Here's a historical fact that Donald Trump, and many voters attracted to him, may not know: The last American president who was a trade protectionist was Republican Herbert Hoover. Obviously that economic strategy didn't turn out so well — either for the nation or the GOP.
Does Trump aspire to be a 21st century Hoover with a modernized platform of the 1930 Smoot-Hawley tariff that helped send the U.S. and world economy into a decade-long depression and a collapse of the banking system?
We can't help wondering whether the panic in world financial markets is in part a result of the Trump assault on free trade.
Trump is also now running full throttle on an anti-immigration platform that could hurt growth as well and alienate Republicans from ethnic voters that the GOP needs if it is going to win in 2016.
We call this the Trump Fortress America platform. He clearly sees international trade and immigration as a negative sum game for American workers.
He recently announced that as president he would prohibit American companies such as Ford from building plants in Mexico. He moans pessimistically that China "is eating our lunch" and is trying to "suck the blood out of the U.S."
But strategic tax cuts and regulatory relief after the anti-business rule-making assault by Obama, not trade and immigration barriers, are the solution to America's competitiveness deficit.
A draft of Trump's 14-point economic manifesto promises that, as president, he would modify or cancel any business or trade agreement that he believes hinders American business development.
His immigration stance would not just deport illegal immigrants, but also lock the golden doors to those who come lawfully for opportunity, freedom and jobs. This could hardly be further from the Reaganite vision of America as a "shining city on a hill."
"Decades of disastrous trade deals and immigration policies have destroyed our middle class," Trump writes in his latest policy manifesto. This "influx of foreign workers," he continues, "holds down salaries, keeps unemployment high and makes it difficult for poor and working class Americans — including immigrants themselves and their children — to earn a middle-class wage."
There's some evidence that competition for jobs in very low-skilled occupations holds down wages, but for the most part immigrants fill niches in the labor market that natives can't or won't fill.
Tech CEOs will tell you there might not be a Silicon Valley were it not for foreign talent and brainpower.
In the 1980s and '90s the United States admitted nearly 20 million new legal immigrants — one of the largest waves of newcomers in our nation's history. Over that time period, the U.S. created nearly 40 million new jobs, the unemployment rate plunged by half, and the middle class saw living standards rise by almost one-third (from 1983-2005).
When Washington gets the macroeconomic policies right — on taxes, trade, regulation and the dollar — economic opportunity flourishes.
Free trade is also one of these prosperity building blocks, and Trump's call for tariffs as high as 35 percent are worrisome in the extreme. We want Americans and workers all over the world to have access to the best quality products at the lowest possible price. This is the centuries-long economic law of comparative advantage first taught to us by David Ricardo.
Take the Ford plant in Mexico. If it's more profitable for Ford to produce trucks in Mexico, fine. As the supply of Mexican trucks goes up, this creates higher income for all Mexicans who then go out and spend the new money, not just at home, but in purchasing U.S. goods and services available on the market. And the purchase of American goods and services builds up the U.S. economy. It's win-win.
Trump is correct that there are unfair trading practices around the world. We know, for example, that China pirates U.S. technologies and patents. They counterfeit our goods.
But slapping Trump's punitive tariff on imported Chinese goods will hurt America at least as much as it does Beijing. The same is true for rolling back the Reaganite NAFTA — a great success. Mexico is now our second-largest export market. China is No. 3.
China is our No. 1 import market, with Canada second and Mexico third. Those three countries together lead our total trade. Do we really want to pick an economic war with them?
Because the U.S is the hub of the global trading system, a lurch toward protectionism in America would give other nations an easy excuse to erect higher trade barriers and the domino effect could shut down the global trading system. No wonder financial markets are so jittery.
Stephen Moore is a distinguished visiting fellow at The Heritage Foundation, economics contributor to FreedomWorks and author of "Who's the Fairest of Them All?" To find out more about Stephen Moore and Lawrence Kudlow and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate Web page at www.creators.com.
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