Will Trade Barriers Make America Great Again?

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Will Trade Barriers Make America Great Again?

Riding a populist wave, Donald Trump vows to use America’s power to bring jobs back to the United States. Where is this leading?

United States President-elect Donald Trump may have lost the popular vote in November, but he easily won in the Electoral College because he broke through the Democrats’ formidable “blue wall” with narrow victories in Pennsylvania, Michigan and Wisconsin. These states used to be part of America’s booming Manufacturing Belt. But after decades of factory shutdowns, population loss and urban decay, the region is now known as the decaying Rust Belt. Donald Trump’s promise to bring back jobs to these vacant factories really resonated with disaffected working-class voters.

“They’re taking our jobs; … they’re taking our money; they’re taking everything,” Mr. Trump said about America’s trade partners during a stump speech last year (July 11, 2015). “We’re going to put people back to work,” he promised. “We’re going to take our jobs back, and we’re going to use our power, including our power of taxation” (May 19, 2016).

So if U.S. companies close factories at home and move them to Mexico to take advantage of cheap labor and free trade, he explained, those companies will be penalized with a 35 percent tariff added to every unit they sell back to the United States.

“They’re not moving,” Mr. Trump said about those companies. High tariffs will prevent it. And even if they do move, the United States will be making money hand over fist, he says. So it’s a win-win for America.

With Chinese exports, President-elect Trump told the New York Times earlier this year that he would slap a 45 percent tax on all the goods coming into the United States—goods that American consumers purchase, by the way.

“China is ripping us on trade,” Mr. Trump said at a Republican debate in January. “They’re devaluing their currency. And they’re killing our companies. … We have great economic power over China. … If they don’t start treating us fairly and stop devaluing and let their currency rise so that our companies can compete—and we don’t lose all of these millions of jobs that we’re losing—I would certainly start taxing goods that come in from China.”

What if these protectionist measures lead to trade wars with America’s trade partners? Who cares, says Donald Trump. We’re already losing hundreds of billions of dollars to China in trade. Who cares about a trade war?

These kinds of statements brought applause at Trump rallies. It is a popular message with working class voters. But what kind of impact will this anti-free-trade platform have on the rest of America—and the rest of the world?

Why Free Trade

The United States of America—the freest, most prosperous nation in the world—has long been a strong proponent of free trade. Since World War ii, every U.S. president has worked to expand free trade. Of course, free trade doesn’t automatically mean fair trade. Donald Trump is right to draw attention to the unfair trading practices of America’s partners—things like government subsidies, currency devaluation, etc. And as Ronald Reagan said during his presidency, there are positive, result-oriented actions the United States can take when trading partners attempt to gain an unfair advantage. But stiff tariffs and high trade barriers are not the way to level the playing field. Reagan said a protectionist trade strategy is actually destructive!

In 1986, Reagan vetoed a trade barrier bill that would have saved tens of thousands of jobs in the textile industry. But it would have cost American consumers $44 billion! “Even worse,” Reagan said, “these temporarily protected jobs would be more than offset by the loss of thousands of other jobs—jobs in retail, marketing and finance, and jobs directly related to importing, such as dockworkers and transportation workers. And then there are all those who would be thrown out of work as we began to feel the effects of foreign retaliation, and you can bet there would be retaliation” (Aug. 2, 1986).

In a piece for Conservative Review, Mark Hendrickson wrote, “[P]rotectionist measures do not save American jobs on a net basis. Protectionist measures tend to save some American jobs at the expense of other American jobs” (emphasis added throughout).

In 2002, for example, President George W. Bush put a tariff on foreign-produced steel to help struggling domestic steel companies. Thomas Sowell wrote in his book Basic Economics, “[S]teel tariffs produced $240 million in additional profits to the steel companies and saved 5,000 jobs in the steel industry, [but] those American industries that manufacture products made from this artificially more expensive steel lost an estimated $600 million in profits and 26,000 jobs.”

In other words, if you slap tariffs on steel imports, the price goes up—which helps American steel companies. But what about other American companies that have to buy steel to make their products? As Hendrickson put it, protectionism “simply redistributes job losses.” He continued:

As it is, our government first cripples American competitiveness through burdensome taxes and regulations, then throws them a consolation bone by protecting them from foreign competitors. This is layering error upon error, all to the detriment of American standards of living.Instead of this tired old agenda of big government, we need a freedom agenda—freedom from taxation, freedom from excessive regulation, freedom for Americans to produce and trade. Such an agenda will invigorate American businesses, produce a thriving job market, and raise American standards of living.

This is what America used to stand for—smaller government and fewer regulations and more freedom for the individual and for American businesses!

History Lesson

While there may be some short-term gains to come from Donald Trump’s anti-free-trade policies, what will be the long-term impact of this protectionist platform? It’s one thing to stir up the base in Indianapolis, but how will nations react in Europe, Asia, Central and South America? As Ronald Reagan said, you can bet there will be retaliation!

What if China stops lending America money? It already owns more than $1.15 trillion in U.S. bills, notes and bonds. What if it stops financing America’s enormous debt? That debt, by the way, is projected to rise from 75 percent of America’s gross domestic product to 105 percent over the next decade, according to the Committee for a Responsible Federal Budget.

The dollar’s reserve currency status is already being challenged from every direction, as Trumpet writer Robert Morley wrote in a 2010 piece “This Means War.” In that article, Morley compared pre-World War ii economics with our climate today: “Post-World War i industrial America, reeling from the effects of the stock market crash and subsequent job losses, erupted into protectionist fervor. Riding a populist wave, U.S. politicians imposed the Smoot-Hawley Tariff Act—one of the most draconian protectionist policies in America’s history.”

Ronald Reagan called the Smoot-Hawley Tariff Act “the most destructive trade bill in history.” It turned what could have been a standard stock market course correction into a decade-long depression, followed by World War ii.

History teaches us that trade war leads to hot war! A dangerous scenario is now developing. The post-World War ii period of unprecedented prosperity is coming to an end. Nationalism is on the rise—as are trade barriers.

Notice what my father wrote in “China Is Steering the World Toward War”: “The United States and Britain are going to be left out in the cold as two gigantic trade blocs, Europe and Asia, mesh together and begin calling the shots in world commerce. These nations of Israel are going to be literally besiegedeconomically frozen out of world trade!” (Trumpet, July 2016).

This forecast is based on prophecies like the one in Deuteronomy 28:52: “And he shall besiege thee in all thy gates, until thy high and fenced walls come down, wherein thou trusted, throughout all thy land: and he shall besiege thee in all thy gates throughout all thy land, which the Lord thy God hath given thee.”

As my father wrote, you can already see these prophecies moving toward their fulfillment! Another prophecy in Ezekiel 4 and 5 shows that a third of our nations (U.S. and Britain primarily) will be destroyed by social unrest brought on by an economic siege.

“America’s problems are a direct result of America’s sins,” my father wrote in Great Again. “No political candidate is going to ‘make America great again.’” Greatness will not return to America until after the return of Jesus Christ and the establishment of God’s Kingdom on Earth.