Donald Trump’s trade wars are not going the way his critics said they would.
The president signed a landmark “Phase One” trade deal with China Wednesday that calls for the purchase of billions of dollars in American goods, capping off a year and a half of trade tensions that critics predicted would explode the American economy. To the contrary, writes Trump adviser Pete Navarro in a new op-ed; the robust Trump economy proves that new economic models are needed in order to understand the positive impacts of Trump’s tariff and trade strategy.
“This is a very important and remarkable occasion,” Trump said at the signing Wednesday. “Today we take a momentous step, one that has never been taken before with China, toward a future of fair and reciprocal trade as we sign Phase One of the historic trade deal between the United States and China. Together, we are righting the wrongs of the past and delivering a future of economic justice and security for American workers, farmers and families.”
Trump signs “monster” China trade deal
Trump’s detractors have often argued that his trade war was hurting the economy, especially farmers. But advocates, including the president, have long claimed that tariffs lead to short-term pain that is necessary to extract more balanced trade relationships.
The president will make a dramatic step towards delivering on that promise Wednesday with a “phase one” agreement that secures concessions from China to balance trade, including a commitment to purchase $200 billion in U.S. goods over the next two years, including about $40 billion in farm products and $75 billion in manufacturing goods, CBS reported. The “big beautiful monster” trade deal also calls on China to stop stealing American intellectual property and manipulating currency.
Trump administration officials have hailed the deal, just one part of a potentially three-phase trade agreement, as a major victory for the president, although some are skeptical of China’s promises. Phase One leaves $375 billion in tariffs in place on Chinese goods, but the trade war will now enter a period of much greater calm.
“Between the two great nations, nothing like this has ever happened before,” National Economic Council director Larry Kudlow told CNBC Wednesday. “This is such an important deal.”
Trade adviser touts tariffs
Since rising to the office, Trump has slapped billions of dollars in tariffs on Chinese imports in an attempt to balance trade and help American workers. China’s trade surplus with America, though still large, decreased 12% last year, according to the Wall Street Journal.
Conventional economic wisdom says that tariffs always hurt growth, that they kill jobs, and that they’re a “tax” the consumer eventually has to pay when the cost of production goes up. But Trump’s tariffs have not led to the kind of economic catastrophe the critics predicted, at least so far. To the contrary, the economy is rather robust, writes Pete Navarro, a trade adviser to Trump and a key advocate of the president’s trade policies.
The strength of the Trump economy — evidenced by 7 million jobs added since the president took office, 50-year low unemployment rates, an increase in median household income, and wage hikes for low-income laborers — proves that the old-fashioned wisdom on tariffs needs to be reconsidered. In the conventional model, a steel tariff raises costs for producers downstream — like automakers — and leads to net layoffs, but such models don’t take a broad enough view of the larger economy to see the positive effects of the “new investment tariffs induce,” Navarro opined.
Moreover, Navarro writes, Trump’s tariffs have made threats of additional ones “more credible,” giving the president leverage to hammer out new trade deals with America’s partners, such as the recent United States–Mexico–Canada Agreement. A more accurate model would account for “widespread market distortions that currently disadvantage American workers, parse the complex ways tariffs affect trade partners’ behavior, appropriately discount short-term price impacts, [and] dynamically score the many long-term positive effects.”
It looks like Trump’s America First trade philosophy is beginning to pay real dividends.