Trump keeps picking trade battles in all the wrong places

Donald trumpPool/Jim Lo Scalzo via ReutersU.S. President Donald Trump delivers his first address to a joint session of Congress from the floor of the House of Representatives iin Washington, U.S., February 28, 2017.

President Donald Trump spent much of his election campaign attacking Mexico and China for, in his words, “killing us on trade” because of “bad trade deals.”

However, as president, Trump’s harsh tone with Mexico has persisted while he has mostly backed off the stronger China rhetoric — even though China’s impact on the manufacturing jobs that the president claims to want to “bring back” to the United States is way larger.

The chart below, which shows the path of US manufacturing employment over time, is instructive. One thing that clearly stands out is that despite Trump’s anti-Mexico rhetoric, the signing of the North America Free Trade Agreement with Mexico and Canada did very little to hurt US factory jobs. They had been falling since a 1970s peak but were utterly steady during the 1990s, even picking up their pace toward the end of that booming decade.

Republicans have threatened to slap a tax on imported goods as a way to pay for the tax cuts for households and corporations they have planned. The plan faces political obstacles and sharp opposition from industries that rely on imports, including major retailers.

Trump’s key threat against China, other than campaign talk of imposing sky-high tariffs on the order of 45% that would surely spark a trade war, is to name China a “currency manipulator.” The problem is, China hasn’t been intervening in its currency to boost exports for several years now. If anything, it has had to bolster the yuan to prevent capital from leaving the country.

And where is Canada in all this? Canada is a much more crucial trading partner for the United States than Mexico

Farmers, a major support base for Republicans, are already angry with Trump for pulling out of the TransPacific Partnership or TPP, which favoured US agricultural interests, particularly in dairy, vis a vis their northern competitors.

So why the focus on Mexico and not Canada or China? For one thing, talk of deporting Canadians doesn’t seem quite as useful in riling up Trump’s base. As for China, it’s a much formidable challenger not only on trade but also the military front and one in which Trump has already shown a rather telling conflict of interest.

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