The Other Big Trade Experiment Heading Into Campaign 2020

Shawn Donnan

17 Sep 2019, 01:33 AM IST

(Bloomberg) --

President Donald Trump’s trade wars are giving the world a natural experiment in economics, one yielding new data every day showing how a wave of protectionism alters the global landscape. But there’s another experiment underway that will be just as consequential going into the 2020 election campaign. It will also answer an important question: Have the politics of trade changed in America?

Political minds have been in broad agreement for decades that being “tough” on trade is good politics in a handful of swing states that have lost out to cheaper labor abroad. Bashing Nafta or the eagerness of policy makers in Washington to embrace globalization has always won votes in places like Ohio that have suffered from industrial decay. It was part of Barack Obama’s original playbook in 2007 before it was in Trump’s.

But that has depended in no small part on having a pro-trade consensus in Washington to rail against, like the one Trump challenged in 2016. What happens when “free trade” is an opposition position, as it increasingly appears to be now? Here how it’s playing out so far:

Trump’s Democratic challengers haven’t yet found a resonant message on trade. They have outlined a wide range of positions ranging from Elizabeth Warren’s proposal to give a bigger voice to unions and environmentalists in trade negotiations to the wholehearted embrace of free trade offered by Kamala Harris, Pete Buttigieg and Beto O’Rourke.
There is a common anti-chaos strand of criticism emerging from Democrats and others. The Democrats — and quietly many Republicans — seem to agree Trump’s use of tariffs has been impulsive and unfocused. The critics warn that its effect so far has been to alienate allies and to create more economic turmoil than harvestable results. Voters appear to be noticing, according to polls.
One big wrinkle is Trump’s salesmanship. A major irony of 2020 is that Trump will claim a new version of the 1990s North American Free Trade Agreement — his rebranded U.S.-Mexico-Canada Agreement — as a major economic achievement. The USMCA, which still needs congressional approval, is best described as a marriage of Nafta and the Trans-Pacific Partnership. Trump derided both equally on the stump in 2016. He pulled out of the TPP and wanted to exit Nafta. Now he calls the USMCA the greatest trade deal ever struck.

While it’s a message his base is likely to embrace, there’s a bigger question posed as this experiment plays out: Will the broader electorate believe him?

Charting the Trade War

The Other Big Trade Experiment Heading Into Campaign 2020

India’s new measures announced Saturday to revive a flagging economy through an aid to exporters isn’t as big a boost as the initial numbers suggested.

Today’s Must Reads

Luxury tax | Some high-end European brands are targeted in Trump’s next tariff salvo, which could affect exports of American-bound whiskeys, wine, Champagne and handbags.
China slowdown | A slump in the world’s second-largest economy is deepening just as risks to global growth mount, piling pressure on officials to do more to support the expansion.
Deal with Japan | Japan and the U.S. are reportedly working toward a leaders’ statement that would include a U.S. promise not to hike tariffs or introduce quotas on Japanese cars.
Mercosur mess | It may not be as politically toxic as the U.K. exit from the European Union, but Brazilian President Jair Bolsonaro’s threat to leave Mercosur could prove as disruptive.
South Korea’s turn | South Korea will probably announce its decision to officially exclude Japan from its “whitelist” of trusted export destinations as early as this week, Yonhap reported.

Economic Analysis

Don’t panic | China appears to be managing macroeconomic policy with a long view amid the trade war.
U.S. resilience | Despite trade-war escalation in August, American consumers held up admirably.