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Trump finally proposes detailed trade policies, and they don’t make any sense

Economists argue many of them aren’t possible.

Republican presidential nominee Donald Trump. CREDIT: AP Photo/Evan Vucci
Republican presidential nominee Donald Trump. CREDIT: AP Photo/Evan Vucci

Trade is one of Republican presidential nominee Donald Trump’s core issues. He talks about it at nearly every event, rally, and debate.

But he’s long been vague on the details. He rails against past and present trade deals by saying the United States got snookered, but doesn’t say what he would do to amend them. He accuses China of unfair trade practices, but doesn’t get specific as to how he would bring the country to heel. He laments the loss of manufacturing jobs, but doesn’t say how he’ll revive the sector.

Over the weekend, however, he got a lot more specific about what he plans to do. Laying out his “Contract with the American Voter,” Trump offered up specific policy steps he would take immediately upon assuming the presidency, including new details on his trade policy.

Yet even with this clarity, his plan still doesn’t add up.

The trade details come in a section on what he would do on day one to “protect American workers.” He promises to do four things:

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  1. Announce his intention to renegotiate or withdraw from the North American Free Trade Agreement (NAFTA), a deal struck between the U.S., Canada, and Mexico in 1994.
  2. Announce the country’s withdrawal from the Trans-Pacific Partnership (TPP) trade deal with 11 other countries, which is currently in process.
  3. Direct the Treasury Secretary to label China a currency manipulator.
  4. Lastly, direct the Commerce Secretary and Trade Representative to identify any trade abuses from other countries and “use every tool” to end them.

Trump has talked repeatedly about NAFTA before, promising to rip up the agreement, and now he’s made it clear that getting rid of it will be his first order of business. That alone could roil financial markets and spark a trade war, because NAFTA has been in effect for 20 years and the economies of all the countries involved have been built on its structures ever since. As Gary Hufbauer, a senior fellow at the Peterson Institute, previously told ThinkProgress, it would “be quite a shock to the global economic system… Who knows what would happen next.”

Specifically, what Trump proposes would throw a lot up in the air that could fall in uncertain ways. “All these tariffs would go back into play on both sides,” Dean Baker, co-director of the Center for Economic and Policy Research, said on Monday. “There are whole other sets of conditions that were designed to facilitate cross-border investment that are all up for grabs… It would create more uncertainty about U.S. trade with Mexico.”

“NAFTA was a bad thing for American workers, but it’s not clear that pulling out is good for workers.”

Baker is no fan of NAFTA and was against it in the 90s. But he argues that it’s too late to turn back the tide. “NAFTA was a bad thing for American workers, but it’s not clear that pulling out is good for workers,” he said.

The main reason is that the damage has already been done. Factories left the U.S. for Mexico, and those jobs aren’t likely to return even if NAFTA is gone. “A lot of this isn’t reversible,” he said. “All this production moved to Mexico and it isn’t going to come back.” At the most, Trump could hope that undoing NAFTA would slow any new factories from moving across the border, but there aren’t many going there now.

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The second bullet point is perhaps the most straightforward and yet would have the least impact. The United States has not finalized its participation in the TPP, so it doesn’t need to withdraw. Trump could simply say he won’t agree to it, just as his Democratic rival Hillary Clinton has signaled she will do.

Economists argue over whether and to what extent China is still manipulating its own currency by buying up U.S. dollars, boosting their exports and dragging down ours by making our money — and therefore our goods and services — more expensive and theirs cheaper. Baker and others argue currency manipulation is still taking place, and they say it makes sense to take action against those practices to bring the yuan’s value more in line with where it would be without state intervention.

Even so, there are reasons that the U.S. has probably not been eager to call China a currency manipulator. For one thing, American companies benefit from low prices in China; Walmart can stock the country’s low-priced goods, while General Electric can buy its cheap machine parts.

“When we sit down to negotiate with China, it’s not as though the Treasury Secretary necessarily wants China to raise the value of its currency, or raise it by a lot,” said Baker.

And even if it were a top goal, simply saying China should raise the value of the yuan is probably not the right way to do it. Chinese leaders have to answer to their own constituents, who might not be happy to see the country bow to orders barked from the United States. “It doesn’t look good for them to be backing down under pressure from us,” Baker said. “It’s not clear that it’s helpful to have Donald Trump as president say we’re going to make China raise the value of their currency.”

And as in any negotiation, to get one priority you usually have to give up on others. While Trump doesn’t talk about these kinds of trade offs, in order to get China to agree to change its currency practices he would almost certainly have to give in on other issues the U.S. has with the country, such as copyright infringement or human rights abuses. “He’s not going to get all those things,” Baker said, “no matter how good a negotiator he is.”

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An easier way to fight back against China’s devaluation of the yuan would be something more behind the scenes: offsetting the country’s purchases of dollars or dollar-backed assets by buying up the same amount of Chinese assets. That’s something he could easily order the Treasury Secretary to do.

Trump’s final promise to direct officials to end all trade abuses is the vaguest and possibly the least actionable. Trump hasn’t outlined what practices he considers to be abuses, and there is little chance that he could end every single one. “That’s not going to happen,” Baker said flatly. “It’s not as though we could get everything in the world we want.”

For one thing, the U.S. would be throwing stones from a glass house, as other countries likely have cause to complain about our own trading abuses. But even beyond that, it’s again about prioritizing some things while knowing you won’t get others.

Baker does agree that there are abuses worthy of action, such as when countries violate workers’ rights to organize contra many trade agreements. But that would require deciding those took priority over others. “You have to decide what are the ones we care about most,” Baker said. “He’s never indicated clearly that’s how he understands this.”