WASHINGTON • US President Donald Trump’s top economist has a new analogy for those bemoaning the impacts of the administration’s trade wars — just think of the US economy as an 18th century warship battling a scurvy outbreak and Trump’s tariffs and other trade weapons as the bitter lemons needed to cure it.
“If you have scurvy and you don’t get vitamin C, then you are going to die,” said Kevin Hassett (picture), chairman of the Council of Economic Advisors.
“But vitamin C might not always fix you. Maybe it does. So, if I give you vitamin C did I increase uncertainty? You were certain you were going to die before, but now you’re not.”
His point is that the president is repairing a sick economy that has been labouring for too long under the weight of disastrous trade deals that disadvantage the US against economic competitors and trading partners such as China and Mexico.
But it also gets at a broader question that Trump is facing about one of his economic pillars as he heads into his 2020 re-election campaign.
Voters will be wondering if the economic disruption from Trump’s trade policies will be worth it in the end, and looking for proof of their positive impact despite the evidence of mounting costs for the world’s largest economy.
Hassett’s riff on scurvy was made last week in an interview with Bloomberg in the hours after the US International Trade Commission (ITC) released its official, independent assessment of the economic impact of the US-Mexico-Canada Agreement (USMCA), Trump’s replacement for the quarter-century-old Nafta.
The ITC’s headline finding didn’t include the sort of numbers Trump is likely to hail at a rally.
The ITC economists estimated that the USMCA would boost GDP by 0.35%, or US$68.2 billion (RM281.67 billion), and create 176,000 jobs in year six after it took effect.
They also had a less rosy view of what it would mean for the US auto market — higher prices, lower sales and fewer vehicle production jobs.
Moreover, much of the economic gain was ascribed to the removal of uncertainty caused by new rules on data flows and other regulations.
Without those measures, the ITC economists found the new Nafta would actually lead to a modest 0.12% loss in GDP in year six.
The problem for the administration is that, a year after Trump launched his tariff wars, there’s a growing pile of economic research documenting their negative impact on the US economy.
So far, Trump and his team have dismissed contrary findings by offering their own studies and hailing broader gains in manufacturing jobs in a healthy economy as proof that his trade policies are working. — Bloomberg