At the moment, the Trumpian trade war appears to be on. And I’ve been getting some questions from readers about how this is possible. Congress, after all, hasn’t voted to back out of our trade agreements, and one suspects that it wouldn’t even if Trump asked for such legislation: to all appearances, a lot of Republicans are pretty much OK with the near-certainty that he colluded with a hostile foreign power and is currently obstructing justice, but policy actions that might strand and devalue a lot of corporate assets are something else entirely.
So how does Trump have the authority to do this? And what are the consequences for the world? It seems to me that this might be a good time to write down a brief, non-scholarly primer on how the trading system – and U.S. trade policy within that system – work.
The key thing you need to understand about trade policy is that the Econ 101 case for free trade plays very little role in actual policy, certainly in trade negotiations. That’s not because policymakers either reject that case or fail to understand it; some do, some don’t, but either way it doesn’t make that much difference. (In fairness, there’s an academic literature arguing that the underlying economics matter more than I’m suggesting, work that I consider admirable but unpersuasive.)
True, for the past 80 years the U.S. has sought to make trade gradually freer; this reflected in part the (very) indirect influence of economic theory, in part the belief that closer economic integration was good for peace and the free world alliance. But the process by which trade liberalization was sought was all about political realism rather than abstract ideals.
Yes, and, here are the two top comments I endorsed. Note that Mr R. Law is the source of the post before this by John Brennan, CIA director to four presidents. He warns that Trump is a treat to democracy and freedom.