Economy, The Trade War, Uncategorized

Why the Cease-Fire in the Trade War on Christmas?

It's almost like the president is being a hypocrite or something.
August 14, 2019
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"See, it says right here: Trade wars are good and easy to win." (Photo credit should read JIM WATSON/AFP/Getty Images)

Here’s an unexpected wrinkle in Trump’s endless game of Tariff Chicken with China: The White House on Tuesday announced it would hold off on imposing new tariffs of a raft of Chinese imports, including cell phones, laptops, and video game consoles, from the originally scheduled deadline of September 1 until December 15. The stated reason? To allow U.S. retailers to stock up on Chinese goodies for the Christmas season before prices get wrenched up.

“We are doing this for the Christmas season, just in case some of the tariffs would have an impact on U.S. consumers,” President Trump told reporters Tuesday. “So far they’ve had virtually none. The only impact has been that we’ve collected almost $60 billion from China, compliments of China. But just in case they might have an impact on people, what we’ve done is we’ve delayed it so they won’t be relevant for the Christmas shopping season.”

And hey—that’s great! After years of hearing the president insist that only fools would ever think tariffs could hurt Americans, it was oddly pleasant to hear him  admit that, yeah, okay—this one could really sock you, so we’re holding off.

Of course the president’s gloss is pure baloney. There is no mysterious economic law that holds that tariffs are a cost-free windfall for a nation except when they’re placed on stocking stuffers. If the president’s ordinary trade war narrative were accurate, the White House should have been scrambling to make sure the tariffs were in place long before the Christmas shopping season—after all, a juiced U.S. economy means more cash in hand for gift-givers, and shouldn’t we be encouraging them to Buy American?

What’s really happening here is obvious. The Trump administration isn’t delaying this latest batch of tariffs because this batch involves risking greater economic costs than any of the former ones. It’s delaying them because, this time around, the impact of those economic costs would be much easier for consumers to feel at the point of purchase. For previous rounds of tariffs, which have more heavily targeted commodities and raw materials used by U.S. manufacturers, the economic costs have often been diffuse: If your favorite six pack costs an extra buck  or a new pair of shoes is a little more, consumers don’t necessarily associate that with the White House’s actions. Finding out the price of the Nintendo Switch has jumped in price overnight because of the trade war? That’s a little harder to ignore.

The strategy bears an ironic resemblance to a practice many conservatives have railed against for decades: IRS income withholding. The fact that the IRS pilfers part of most Americans’ paychecks before they ever see that money themselves, they argue, is a system designed to desensitize taxpayers to just how much of their hard-won lucre Uncle Sam is helping himself to. (This argument has even been deployed by the pro-Trump right in recent months to defend the president’s signature tax reform act against charges that it was resulting in consumers receiving smaller tax refunds.)

With this tariff delay, however, the Trump administration is doing a similar thing: pushing the economic pain past the point where people notice it enough to inflict any immediate political damage on him. Who cares if consumers feel squeezed next Christmas? If all goes as planned, they’ll already have re-elected him by then.

The situation, then, is simply this. It is a plain economic truth that Trump’s tariffs are a tax the brunt of which is paid by American consumers. It remains unclear whether the president knows this—Trump has demonstrated a remarkable ability to hold fast to demonstrably false beliefs in the face of a mountain of countervailing evidence—but it is undeniable that the people charged with actually creating and implementing the White House’s trade policy know it. And so as the president blusters on about how tariffs are a positive good, insisting that the more tariffs he slaps on, the more free money from China rolls into the U.S. economy, his behind-the-scenes negotiators are hard at work trying to hide the actual damage from U.S. consumers, who might otherwise raise a protest against the fact that their tax dollars are being shoveled into the furnace that fuels the president’s vanity project trade war.

It’s a dishonest strategy from top to bottom, and one with a sell-by date that’s rapidly approaching. The more tariffs the president piles on, the fewer places his advisors will have to hide the ball, and the less effective the play will be. President Trump has made enormous political hay out of the strong economy he has presided over thus far in his term. It may not prove a winning strategy if he is forced to ask the American people: Who are you going to believe—me, or your lying checkbook?

Andrew Egger

Andrew Egger is a senior writer at The Bulwark.