Trump badly cornered at home by agribusiness and steel consumer lobbies: Trade

US President, Donald Trump (on the left) and Enrique Peña Nieto, President of Mexico, met in Hamburg Germany last week, for the G20 Summit. The two didn’t have an easy encounter, when trade came on the table. (German government work).

Donald Trump, the real estate mogul and TV reality show star, as President, discovered the hard way that international trade is a much more complicated issue than he could have ever imagined. His poor cognitive abilities and his rampant nature didn’t allow him to realize that international trade is a much more complex issue, than producing goods and making money out of selling them abroad. The economic, financial, business, legal, political, historical, geographical and social complexities governing international trade totally escaped the New York contractor.

This week Trump was badly cornered by the huge American agribusiness and steel consumer lobbies, the result of the lobbies’ growing negative feeling towards the President, who now cry loudly against his catastrophic statements about imposing import quotas and tariffs.  The powerful agribusiness lobby doesn’t chew their words. As for the big business groups consuming imported steel, they do not want to be seen openly contradicting the White House. The representatives of the agribusiness, however, directly accuse the President of planning to undermine their jobs and means of living.

Between Scylla and Charybdis

According to a Reuters report, Joe Schuele, a spokesman for the U.S. Meat Export Federation in Denver, Colorado said “…some other sectors of our economy are given better terms and in exchange for that agriculture tariffs would be reintroduced”. In short, meat exporters accuse the White House of preparing to ‘sell’ the animal husbandry sector, in order to gain better terms for the exports of other sectors, like manufacturing, or geographical areas of the US, which vote more massively for Trump. In short, the representatives of the farm sector and the downward businesses fear that the Trump administration is ready to support manufacturing by undermining their interests.

This is not at all far from the truth because the US, if renegotiates the 23 years old North American Free Trade Agreement, the famous NAFTA with Mexico and Canada, cannot expect to win on all fronts. In these games it’s always the same, ‘you lose some you win some’, you cannot have it all. Then the crucial question will be, which sector’s exports will be sacrificed in order to get better terms for another. Canada won’t be an easy interlocutor about renegotiating NAFTA with the US, because it has already signed a major all inclusive free trade deal with the European Union.

Damage already done

Anyway Trump’s unrestricted garrulousness about the ‘America first’ principle in reshaping the US foreign trade, has already started to harm the country’s exports. In the case of NAFTA, the uncertainties about the future have forced Mexico to look elsewhere in the world for supplies, currently covered by American exports of beef, pork and poultry meat, dairy products, wheat, maize, barley etc. The European Union is more than eager to cover Mexico‘s needs in the agrifood sector.

It’s very simple. Protecting, for example, US manufacturing with additional tariffs, will be exchanged in negotiations by reciprocal Mexican tariffs on US exports of animal husbandry products. The current NAFTA arrangement that Trump wants to change, offers full access to the huge Mexican and Canada markets for US farm exports.

It’s as hard as steel

Passing now on to the sector of steel and steel products, things are even more complicated. During his 2016 election campaign Trump promised to introduce import quotas and impose tariffs on excess incoming quantities. Given that the imported products are cheaper than the home produced, if this will be the case, steel and steel products will become more expensive for American buyers. In practice, however, all the key sectors of the US productive constellation, like energy, the automotive industry, mechanical and civil engineering works, infrastructure projects and construction in general use both home and imported steel and steel products.

In all those sectors there are huge corporations with direct access to Washington’s establishment, by operating or employing powerful lobby organizations. Their strong argument is that while the US steel industry employs around 150,000 workers, all the sectors who will be hit by the more expensive steel and steel products offer good jobs to more than ten million people. And this without counting the additional cost the consumers of end products will be obliged to pay, due to the increased input costs. By the same token, the US exports of all industries which use steel and steel products as inputs will be also hit by increased costs.

Political charlatanism

Yet, the case of steel was a benchmark for Trump’s electoral populist verbalism back in 2016. He used this example to amplify beyond recognition his argument about the, arguably, totally corrupt and utterly inefficient Washington establishment. According to this populist construction, the establishment had repudiated the ‘interests of the American people’, by exporting their jobs to Mexico, China and Europe, through seriously detrimental and badly negotiated trade deals.

Wrong perceptions

Obviously, the perception Trump had for steel as described by this word loaded with meaning, was much different than what steel means today for the American economy. Undoubtedly, the US is currently fuelled by high technology and financial services. In short, Trump’s wrong cathexis about what his country is today, seems to be completely outdated and, for that, highly dangerous. Unfortunately, it turns out, that a large part of his electoral audience suffered from the same illusions as him and he duly exploited that.

Now, though, that Trump is gradually brought down to reality by the interventions and the influence of powerful lobbies, he must feel trapped between a rock and a hard place. On the one hand he has to compromise his key electoral promise and, on the other, he cannot endanger the farm sector and the steel using (buying) industries, which constitute the heart of the American productive machinery.

Bush did it

George W. Bush in 2002, during the second year of his first administration unilaterally imposed additional tariffs on steel imports. Soon the countries which were hit, retaliated by levying import taxes on US exports, to such an extent as to finally force Washington to withdraw the extra levies. After a few years, the US steel industry lost tens of thousands of jobs, which wouldn’t have been lost hadn’t Bush started this trade war.

In conclusion, the options are clear. Trump can either imitate his Republican predecessor and undermine what he hypocritically wants to protect, or do nothing and loose face by abandoning his banner electoral promise. Reportedly, he will do both. In any case it’s too dear a price for a lesson on international trade, but Trump, being a total charlatan, doesn’t seem to care much. It will be his country and countrymen to pay the cost, while his personal wealth will surely be much greater when leaving the White House than when he came in. Unfortunately, the populism of politicians is always detrimental for the people who it is meant to support.

 

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