My dialogue with Bob Zoellick on Trump and trade

What if Donald Trump actually won the election?  What would happen with trade and the economy?

Here is part one, all nice and pretty with photos, part two will come tomorrow.  Zoellick suggests that if Trump abrogated various trade deals, the legal default would be a return to…Smoot-Hawley!  As former USTR, he should know.  Anyway, here is one part of the dialogue:

Cowen: I expect a somewhat slightly more optimistic scenario. I think a President Trump would give us a reality-TV version of a tariff hike. I don’t necessarily think he wants to experience the pain of tariffs going up, markets crashing and all the political fallout early in his time in office.

Yet he’s promised he would do something and he loves to spar with people and claim he’s being done wrong and rail against elites rather than own problems and solve them. So I think what he would probably do is announce that he had abrogated these treaties, not actually do it. There would be a very high level of uncertainty but I don’t think the laws on the books would necessarily change.

The biggest thing at stake here is uncertainty. Under all of these scenarios, the real impact would be on services, which often rely more on the regulatory system. Uncertainty would result in a higher implicit tax on exports of services to the U.S. than on exports of goods.

Zoellick: I think that’s an extremely optimistic interpretation. Remember, he has the authority to act. He can raise tariffs and create havoc.

I agree on your uncertainty point, but I think you may be a little blithe about the risk to markets. Other countries aren’t just going to stand for the U.S.’s blustering.

This is serious stuff. I worked on German unification. I’ve done a bunch of trade deals. I’ve had some experience internationally. If you act the way Trump talks you’re going to pull down a 70-year-old system that got us out of the Great Depression and helped the U.S. become the strongest economy in the world. This isn’t for fooling around with.

Here is the full, raw text with no formatting.  Eleven full pages, that is for me the best version!  There are many, many points of interest, I really liked this exchange.

Comments

"helped the U.S. become the strongest economy in the world"

As far as I know the US became the strongest economy of the world around 1900. Maybe even a bit earlier. Ideology is one thing, facts are another thing.

"China is the strongest economy in the world."

Unsustainable debt, ghost cities and zombie industries aside.

"Does Zoellick know that?"

I don't know if his fantasy life is as active as yours.

I don't think China is the world's strongest economy, but it is ranked #1 by PPP and #2 by GDP. So, declaring it the 'strongest economy' is a bit of a stretch, but it's hardly a rank fantasy.

It's semantics, but China is better described as the world's largest economy, not really strongest.

Zoellick says, "In 1934, more than 70 years ago, Congress started giving the president authority
to negotiate those tariffs to lower them, or, in some conditions, raise them as
part of a new process of making agreements with countries.
If you ended all those agreements, the statutory basis for tariffs goes back to
the 1930s Smoot-Hawley bill, ..."

It sounds to me like he's saying that if we didn't have all the laws passed since Smoot Hawley, what we'd have is Smoot-Hawley as the latest law, which is true but vacuous. What's relevant is whether the President can, given all the agreements since 1934, and without having to prove in court that an emergency situation applies, legally raise tariffs without permission of Congress. For example, can the President end NAFTA with the stroke of a pen?
That is indeed an important question.

"For example, can the President end NAFTA with the stroke of a pen? "

Probably. It has a withdraw provision [6 months notice] and no indication who in the US can exercise it so the Taiwan treaty precedent says the President can exercise the power.

Nothing in the Constitution says who can break a treaty [though NAFTA is technically a statute in the US] though the best bet is the president alone can exercise the power.

I'll probably be a Trump voter but this is one policy he's been consistent on message, and I disagree with. If he gets us into wars, it is most likely going to be to defend an actual ally... followed by trade wars turning hot.

I support free trade and low tariffs with a caveat-that countries that have good environmental or humanitarian records get preferential treatment. 25% tariff per violation if you pillage the environment or have slaves, etc. I am not a fan of doing business with Saudi Arabia.

That's funny. A trade war is the only thing Trump offers. It is the whole product.

If Trump happens to win, the repubs will definitely retain congress and that means tax and regulatory reform, the two things this economy desperately needs. Talk of trade wars is just that.

"If Trump happens to win, the repubs will definitely retain congress and that means tax and regulatory reform"

Hahaha.

It is obvious that dedicated partisans will use Trump as a blank slate, and paint on him anything that helps them sleep at night. Everything he says is thrown away as bargining position, or joking, or just to annoy the elites.

Trumps actual trade policy will be brand new, surprising, and perfect. Am I right?

That's not what MikeP said, he's saying that the R's in Congress will have more of an effect on actual policy than just bluster.

Not quite. I believe the establishment and mainstream media hate trump as much as they say.

With that, Trump offers, by accident, the fourth estate actually analyzing the presidency critically again, and Congress would reclaim some of its authority it passively ceded to the executive. Obama won my support temporarily by campaigning on transparency and limited executive... Trump may do it by accident. PLUS we could get more support for alternative votes or borda counts.

I also don't think we can afford more Progressives on the Court, and I do respect his frontier courage against PC culture. He doesn't offer me much, but more than Clinton and possibly Johnson, who is policy-wise a good match for me.

And I am not gonna deny he carries a big risk of trade wars, hot or cold.

so vote for Johnson. are you really so insecure and intimidated by "PC culture" that you would vote for a clearly unhinged person?

Being "Politically incorrect" is just saying something impolite when you disagree with the standards of what constitutes "polite".

It would not be a problem if the standards of politeness were organic, rather than politically motivated. But it is, that's what it's 'political' correctness. Being cruel is bad. Being Communist is stupid. But Political Correctness and McCarthyism are not the answers to those problems.

It is an issue to me, and to many others, and only one candidate is really addressing it. It is AN issue out of many, but it does factor into my decision-making, why I may vote Trump over Johnson. (If we have some sort of cultural awakening that people can disagree without calling each other racist or 'brutes' in between now and November, I'll feel the Johnson for sure).

Anyway! Trade wars are generally bad and stupid! How bad and stupid are they, because Trump is also the candidate for trade wars.

"It would not be a problem if the standards of politeness were organic, rather than politically motivated."

Good point.

Censorship is where the government tells you what you can and can not say or print. That doesn't fit any description of actual "political correctness" that I've seen. Where's the government department of "political speech?"
What it is about is a bunch of people used to keep quiet when people make stupid and crude comments related to race or gender or whatever and now they actually feel like they have the political/social capital to call them out on it. And then you get a bunch of other people in their clique who are willing to back them up and not so many people who care about the person making the stupid comment and so that person ends up looking very bad. I agree that there has to be a limit to this ganging up or it's no longer "free" speech. However, going out and pushing back and pointing out that a stupid comment is stupid is also free speech and is important to society.
The problem for me isn't "political correctness" it's that there's too much tribal bullying on both sides, but also too many people making dumb comments because they want to start an argument and engage in more tribal nonsense.

Maybe I'm crazy, but in my view it is important to stand above the fray and be civil. I doubt we'll see a civil trump or trump rally--ever.

PC is not a "politically correct term for censorship." What is the concern that government will interfere with your ability to use whatever word or phrase you want? Are you on the list for Topaz Mountain? I get the fear that the market will punish you for using unpopular words of phrases, but that's not censorship. Maybe you should vote for Trump if you think that he will protect you from the free market, because he clearly doesn't believe in it. But please admit that in that case you're voting authoritarian to protect yourself from the free market of ideas.

Anyway, if you are "so threatened by censorship that [you] would vote for Trump", perhaps we're just living different lives.

Are you an engineer by chance?

MyName: The tribalism is bad. People shouldn't get punished for saying Merry Christmas. They also shouldn't get punished for saying Happy Holidays. Generally, though, the folks who make a point to say BCE instead of BC or Happy Solstice are precious little snowflakes that get way too offended way too easily. Life's hard, wear a helmet. https://www.youtube.com/watch?v=MMT3vuSQk3g

BDK: Yes, engineer by trade, guilty as charged. What gave it away, by chance?

Both: If you had bothered to look at my links previous, you'd see examples of the government censoring badthink. It has hopped from popular/citizen/self censorship to state-sponsored censorship. It took about 5 seconds of googling. It's... real, it's happening now, I've experienced it myself... I don't really know how to convey the truth to you any better. Do you need 10 links? 20? I can do this if you really really are missing the point. It's not quite so bad in the US right now, but I'd like to keep it that way.

Good. We're getting pretty tired of shoveling up the elephant poop from the French and British parades.

Yet, without its Empire, America will become like England without America and Ibdia or France without Indochina and Argelia or Portugal without Brazil, Angola and Cape Verde: a historical footnote. Americans are surrendering without fighting!

So should France have stayed in Indochina?

From the Frenchmen's point of view? Of course. They allowed their prey to escape.

I know you are Brazilian so let me tell you about what the average American thinks. Americans don't generally consider themselves to be an owner of an empire. Many specifically hate the idea. Most Americans don't think much about the rest of the world and like it that way.

Are Ukraine, Japan, Korea and NATO American 'allies' (your first choice of word) or 'prey' (your last)?

Americans may not like to think about the rest of the world, but the rest of the world thinks about them and nit always kindly as Pearl Habor and 9/11 showed. And there are more American soldiers in Japan and Korea than there are Brazilian soldiers in the Amazonia, that is eight times bigger than those countries' combined areas. Whether they like to call it an Empire is irrelevant, Americans have an Empire, and it cost lots of toil and blood. Will they just give it up?

"Are Ukraine, Japan, Korea and NATO American ‘allies’ (your first choice of word) or ‘prey’ (your last)?"

Their leaders are allies -- and I hope Americans can keep a more equitable and intelligent relationship with them than the French had with the Vietnamese and the Portuguese had with the Angolans--, their peoples can be preys-- ask the Okinawan schoolgirls if you need evidence.

So which is it, should America keep its 'empire' and keep 'preying' on the world, or help its 'allies', or leave the rest of the world alone?

Como de costume você soar insano

As I said, the leaders of those countries are your allies, the common folks are the prey. After all, I never heard of a Japanese prime minister being raped by marines in Okinawa. Maybe you would rather call those leaders "clients". Tomayto, tomahto. America controls Western Europe, most of the Eastern Europe and much of Asia. It is hard to believe Americans will just adopt their own version of the "Sinatra Doctrine" and desert their puppets. Well, you sold the South Vietnamese dictators and the Shah out, you sold out Ukraine and Georgia, maybe you really will sold Shinzo Abe out. I would love to see him hung upside down.

LOL. What have you got against Shinzo Abe?

"without its Empire"

We don't have an empire. Puerto Rico and the Virgin Islands aside.

Also, I know English is not your first language, but I don't think you understand the meaning of the word 'control'. And I still don't follow your thread here, are you saying the American 'empire' is a good thing worth fighting for or a bad idea where she should be 'surrendering without fighting!' ?

In the book Ghost Fleet, all of our allies abandon us when a joint Chinese Russian attack cripples us. That seems to be the most realistic possibility. the U.K. 20 or 50 years ago might have stood by us, but now? not a chance. The Germans, French, not to mention Ukrainians etc would not lift a finger. They are not allies if they would abandon you at the first sign of trouble.

"LOL. What have you got against Shinzo Abe?"
The LDP is a Fascist gang and must be crushed.

"We don’t have an empire. Puerto Rico and the Virgin Islands aside."

Yes, you have. You still have more soldiers in Japan and Korea than we have in a space bigger than the Roman Empire!

"Also, I know English is not your first language, but I don’t think you understand the meaning of the word ‘control’. And I still don’t follow your thread here, are you saying the American ’empire’ is a good thing worth fighting for or a bad idea where she should be ‘surrendering without fighting!’ ?"
Americans control Western Europe the same way Hitler controlled Pétain's France and Hirohito controlled the Nanjing Regime. You still have more soldiers in Japan and Korea than we have in a space bigger than the Roman Empire! If it is not occupation, what is it? If it is not an Empire what is it? For Americans, the Empire is worth fighting for. Not so much for the Japanese schoolgirls.

"In the book Ghost Fleet, all of our allies abandon us when a joint Chinese Russian attack cripples us. That seems to be the most realistic possibility. the U.K. 20 or 50 years ago might have stood by us, but now? not a chance. The Germans, French, not to mention Ukrainians etc would not lift a finger. They are not allies if they would abandon you at the first sign of trouble."

“In the book Ghost Fleet, all of our allies abandon us when a joint Chinese Russian attack cripples us. That seems to be the most realistic possibility. the U.K. 20 or 50 years ago might have stood by us, but now? not a chance. The Germans, French, not to mention Ukrainians etc would not lift a finger. They are not allies if they would abandon you at the first sign of trouble."

I doubt the Shah, the king of Greece or Ngô Đình Diệm were any nobler than the Europeans are. The Nizam was not any nobler than Europeans are. So what? Should England have given up her Empire soon rather than later? I say, fight, you cowards! "You cursed rascals, do you want to live forever?" https://en.m.wikipedia.org/wiki/Stalingrad:_Dogs,_Do_You_Want_to_Live_Forever%3F

Trump hasn't sold out anyone yet. Bush and Obama (and to a lesser extent Hillary) have. Kurds, anyone? However, given the developments of ISIS and Turkey, the growing power of Russia and China, and the imbecility of Europe, it's worth re-evaluating alliances made in the 1950s.

This is something I'm willing to be educated on. I'm under the impression that most NATO members aren't really carrying their weight (military spending as a % of GDP), UK, France, and Turkey aside. And, Turkey can suck it, and suck it hard, especially considering they want us to extradite some scapegoat for their 'coup', if that is really what it was. Also considering that Turkey is actively aiding ISIS and committing genocide. We could use fewer allies, if that's what an ally is. Is Saudi Arabia an ally? 9/11 didn't seem like a very alliancey thing to do. And THEIR war on Yemen isn't a very nice thing either.

The Ottomans and the Austrians understood what an empire was good for - troops and treasure. All I see us getting out of our empire is young Americans in body bags. Screw that noise.

Thiago, you're proving my point for me. Carl von Clausewitz had something to say about the division of Poland during his time - that if it had a sizable military of its own, just big enough to slow down and hurt the Russians or the Austrians (it did not have to rival them), the politics at the time would have ensured its independence. I'd bet that holds true today. It was true in Vietnam and Afghanistan.

"America helped the Pakistani to butcher innocent Indians and Bangldeshis. You really are in no position to point fingers."

I'm not a fan of bombing wedding parties and genocide in general. That's... kinda why I want to stop being an empire.

"The Ottoman Empire and Austria-Hungaria are not exactly my favorite examples of healthy empires. You really want to be Turkey when it all ends?"

How many empires had happy endings? I'd rather still be the USA when it all ends, and the empire be damned. Liberty and Justice for all.

"I’m not a fan of bombing wedding parties and genocide in general. That’s… kinda why I want to stop being an empire."

It is a little late in the game to grow a conscience, don't you think? The Mexicans, the Filipinos, the Indians, the Nicaraguans, the Bangladeshis, the Japanese schoolgirls, .... All in vain?

"that if it had a sizable military of its own, just big enough to slow down and hurt the Russians or the Austrians (it did not have to rival them), the politics at the time would have ensured its independence. I’d bet that holds true today. It was true in Vietnam and Afghanistan."

Depends of how motivated the enemy really is. After the Paraguayan agression, we forced our Emperor to declare war and, after years of one of the hardest wars in mankind's history, Brazilian matrons-- usually the most peaceful creatures of all and the most doting parents of all-- were openly declaring that they would rather have all their sons buried in Paraguay than have them back alive at home at the price of our government negotiating with the enemy. The people demanded unconditional surrender of the enemy no matter the financial and human costs-- for them or for us. And the Paraguyan enemies, after they ran out of men, they threw boys at us, and after they ran out of boysthey could bully into fighting to death, threw women at us. You really think the Chinese and the Russians are any less determinated to win-- when the control of the world is the prize-- than Brazilians and Paraguayans were to fight until final victory or national suicide? America can't stand alone.

"How many empires had happy endings? I’d rather still be the USA when it all ends, and the empire be damned."

Well, the English at least got to be English and the French got to be French when it all ended. Even the Portuguese got to be Portuguese, which is not the worse thing that can happen, I guess. None of them was the Ottoman Empire, though, they probably didn't know what an Empire is for. I really don't know if a diminished America can still be America.

Thiago, America had no problem crushing Brazil in the Great South American Annexation of 1891, when Benjamin Harrison himself left the White House and led a squadron of brave American soldiers on a devastating crusade throughout Brazil, ending with the hanging of Deodoro da Fonseca and the dragging of his remains through Rio past throngs of weeping Brazilian women and children (as the men had all been massacred). We stood alone then and we can stand alone today! We are The Land of The Free and The Home of The Brave, as the triumphant anthem goes, known the world over as the greatest national anthem in human history.

"Thiago, America had no problem crushing Brazil in the Great South American Annexation of 1891, when Benjamin Harrison himself left the White House and led a squadron of brave American soldiers on a devastating crusade throughout Brazil, ending with the hanging of Deodoro da Fonseca and the dragging of his remains through Rio past throngs of weeping Brazilian women and children (as the men had all been massacred)."

It is ridiculous! It never happened at all!

"We stood alone then and we can stand alone today! We are The Land of The Free and The Home of The Brave, as the triumphant anthem goes, known the world over as the greatest national anthem in human history."

Most Brazilian anthens are much better. My most joyous childhood memories are standing at attention at school singing anthem after anthem under Brazil's merciless sun or marching at the Independence Day celebrations under Brazil's scorching sun. I probably spent most time in my school years marching and singing than learning Math and Portuguese. To be young again!

* "more time singing and marching than ..."

Of course it happened, Thiago! I'm not surprised you find it intolerable to remember this fact of your nation's history, but it was immortalized in the famous American song "Benjy's Boat to Brazil", a song most schoolchildren had to learn by heart in the late 1800s in the US.

It is not true at all! Brazil was never defeated at war! Brazil expelled the Portuguese oppressor, defeated the Uruguayan enemy, humiliated the Argentinian meddlers, crushed the Paraguayan invader, drove back the British imperialists and defeated the Nazi enemy in Italy. As Brazilian martyr Antônio João Ribeiro (no relation) said, when surrounded by the Paraguayan invader who ordered him to surrender, "I know I will die, but my blood and my comrades' will serve as a solem protest against the invasion of my fatherland's soil!".

Thiago, I love you, but if you wonder why Brazil gets abused on this forum, it's because it's a vulnerable spot for you. Just an FYI...

"Thiago, I love you, but if you wonder why Brazil gets abused on this forum, it’s because it’s a vulnerable spot for you. Just an FYI…"

Thanks, but Brazil gets abused here for the same reason it has gotten abuse everywhere for most of its history, because we are peace-loving people.

America will become like England without America and Ibdia or France without Indochina and Argelia or Portugal without Brazil, Angola and Cape Verde

Er... Better off? With trade partners that required no taxes to cover the military costs of?

The USA built its expensive imperial system to ensure it could continue to do business in the wider world, in the face of communism. Now, not so much communism. What is the raison d'etre again? Pointless military confrontation with Russia? Spreading democracy?

(It's probably quite typical of a Brazilian to think that empires tend to be profitable... After all, if they're not, then why is America rich again? There might be some hard answers to that.)

"It’s probably quite typical of a Brazilian to think that empires tend to be profitable…"

Well-run Empires usually are. I don't know exactly what you are doing wrong, but we can send advisors if you want. I somewhat doubt the British resisted giving up India just because they like curry too much. And I am pretty sure Portugal was not doing us any favors when they took our gold and diamonds. Not to mention Angola's diamonds and oil.

Bombing the industrial world into rubble made the U.S. the strongest economy in 1945. Also no immigration, which these economists all like to leave out. By 1965 the US economy was already starting to feel the effects of German and Japanese competition. Inflation starting rising, less than 10 years later the U.S. went off gold. Some measures of wages peaked around the same time.

The trade system makes the U.S. the most powerful country in the world because it also the issuer of reserve currency. It needs to allow countries a way of obtaining the reserve currency, and one major way it issues currency is through the trade deficit. If the U.S. were to exit the trade system or tilt it more in the favor of U.S. workers, it would also set in motion the end of reserve currency status, which would end the trade deficit, and end the government's ability to finance the fiscal deficit and national debt. It would be great for U.S. exporters, but it would be terrible for Wall Street and Washington, DC. It would also be terrible for countries with a great deal of overcapacity such as China (in the short-run).

Excluding natural resource exporters, the countries with the highest proportional trade surpluses generally have equivalent or lower tariff rates than the United States. Economics 101 dictates that a tax on imports is an implicit tax on exports. There's no theoretical or empirical foundation for believing that raising tariffs would narrow the trade deficit. Singapore, Switzerland, and Hong Kong all achieve impressive trade surpluses with effectively zero tariffs. Beyond that Holland, Germany, Sweden, and Denmark rank in the largest net exporters while still having substantially lower trade barriers than the US.

https://en.wikipedia.org/wiki/List_of_countries_by_current_account_balance_as_a_percentage_of_GDP

This was one of the two good things I read this morning. The other was I SPENT 5 YEARS WITH SOME OF TRUMP'S BIGGEST FANS. HERE'S WHAT THEY WON'T TELL YOU. (sorry for the copy/paste caps).

As I say in the other thread, I see a connection.

Traditional Republican solutions have gone bust. The Party of No discovered that no was not really a solution. So what's left? Trump, because Trump means never admitting your error.

I mean you may know in your heart that a wall and a tariff is not a solution, but this non-solution has one advantage - everyone you hate hates it.

Walls seem to work just fine between Israel and Palestine and around the Vatican. I bet I couldn't just waltz on to Mark Zuckerberg's low-population-density plantation in Hawaii either. A lot of Central America would like to be Here; if they all got their wish, it would become There, so build that bloody wall.

I'm not too informed about tariffs but I'm increasingly skeptical of this "free" trade model. It seems to require an awful lot of supra-national bureaucracy and global military presence by the US, and it means a lot of lower-tier Americans find themselves unable to compete so they go on welfare and file lawsuits and comp claims. What's "free" in theory doesn't seem so much in practice.

We have free trade in the US, a continent sized landmass.

A politically and economically stronger lower-tier America would vote for more welfare, both direct transfer payments and corporate welfare subsidies that subsidize their labor. This was the trend in the 60s and 70s.

That's my point, they are trapped. They can't vote "left" for cultural reasons, and the right has not offered the poor right redistribution.

Will they? It that part of the shift? No more makers vs takers?

The US is a hegemonic entity governed by powerful sovereigns with loads of legal infrastructure. Multiplying that times whatever to get "free" global trade seems nightmarish.

Free trade leads to greater wealth for all parties involved. However, There Ain't No Such Thing As A Free Lunch, even in this case. Supposing a country had no external trade whatsoever - it would be an autarky. It would not rely on other nations for its energy, but it would have less energy available. It would not rely on its enemies for its food, but it would have less food in general.

An increase in tariffs results in less wealth, it is true, but it also results in more self-sufficiency. I don't really want to have to tighten my belt, but I also don't like being reliant on China for our missile guidance chips, or on ISIS for our oil, or Russia for our mail-order brides. I think that in cases where there's an environmental, cultural, or strategic reason for independence, tariffs do help provide that... it's just expensive.

We have our share of Donald Trump's in my profession (law). Lots of bluster and threats and posturing that add little to the goal of resolving whatever differences there are between our clients; indeed, they foment conflict and end up costing their clients a lot more in fees, while getting results for their clients that are usually no better or even worse than they would have obtained if they were represented by someone focused on resolving conflict rather than fomenting conflict. Yet, their clients love them, love them for their bluster not in spite of their bluster. It's irrational. I recall a transaction years ago and meeting with opposing counsel to go over my draft of the asset purchase agreement. He wanted to know why the agreement had to be so long and complex. I explained to him that many of the provisions in the agreement were intended to avoid litigation. He flipped through the pages, then looked up at me and asked, "why would we do that?" Why, indeed. Those who thrive on conflict can get away with it because they are in the minority; if everyone copied them, the world would be in chaos.

Hillary Clinton is the candidate of Invade The World/Invite The World. Our old friends Kagan, Frum, Kristol, Wolfowitz, Podhoeretz have all said they'd prefer to see her in office over Trump.

Wow. My coincidence detector is redlining.

All those neocons supported John McCain in 2000 against George W. Bush, who ran on a non-interventionist, anti-"nation building" platform. Bush of course ended up being a very interventionist presisdent. He had no personal commitment against interventionism, nor did he have the kind of personality disinclined to interventionism.

By the same token, Trump has no philosophical or ideological commitment towards anti-interventionism, nor does he have the personality that is inclined towards non-confrontation. Quite the opposite.

He has laid things out very clearly in his speeches. He promotes the US national interest, not a vague, malleable, global interest. He thinks ISIS is a barbarian cancer and he plans on killing them. Otherwise, he is not interested in going to war with the second or third most powerful country on the planet over the Ukraine or the Baltics, nor does he want us bogged down in "regime change" in the byzantine Middle East.

Hillary wants globalism and universal democracy, which requires endless overseas military deployments and endless immigration. Very unstable and fragile model.

"We have our share of Donald Trump’s in my profession (law)."

Lawyers who are waiting for judges to sign bills? ;-)

Fabuous! "What if DJT *actually* wins the election"? Come on, there's no chance - he only leads by 3% in the latest LAT pol - what about all of those Hillary's Superdelegates? I can personally guarantee that DJT is not going to get much more than 500 votes from the whole US!

Seriously, from what I've heard, congitive dissonance hurts, and it hurts a lot. Here we have two people who are still desperately holding on to the belief that Trump got where he is by being incompetent, stupid, bigoted, sexist, dishonest, lazy, inept,... lucky... SOB.

Yes, definitely his lead in one poll that has generally shown favorable numbers for him is the one you should hang your hat on, and not the dozens of others that don't. I mean, yes, he could win, so perhaps Tyler's remark strikes you as inappropriate, but if the election were held today, or indeed at any point in the last month or so, he'd have lost, possibly badly.

Vote for this guy, because he won't really do what he says he will do.

That's reassuring.

I would change "won't" to "can't"

What may be equally, perhaps more, significant are the current French and German political movements to withdraw from TTIP negotiations.

We may be back at the cycle of the 1930's trade constraints as a foil to the adverse European reactions to "Globalization" and its countervailing effects on social (political) policies and dilution of the influence of those political coalitions forming the European "elite."

Gotta love that "actually" thrown into the first sentence. No bias here!

Maybe tomorrow he'll tell us what will happen if a career criminal with concussion actually wins the election.

If you act the way Trump talks you’re going to pull down a 70-year-old system that got us out of the Great Depression and helped the U.S. become the strongest economy in the world. This isn’t for fooling around with.

It didn't get us out of the Depression, nor did it get Britain out of the Depression. This lie alone is enough to discredit anything else he says.

I agree with Tyler. Trump is bluster on trade to please the rubes, but will continue doing business as usual.

The great risk is that Trump is a rube. No studying. An aversion to actual expertise. Everything I know I learned from cable news and fringe Twitter feeds. Sure, trust that guy to do the right thing when the buck stops with him.

Not to mention a serial believer in conspiracy theories.

I mean if all I knew was that one candidate was an anti-vaxxer, I would know how to vote.

I find Tyler's comments more reasonable than Zoellick's.

Smoot Hawley created a tariff war that disrupted international trade and cut off America's export markets. It raised the average tariff rate from 13.5% in 1929 to 19.8% in 1933. Currently the US duty rate is around 3%.

Yes, Trump is talking about a 45% tariff, but only on China, and only because of its unfair policies. It would have no impact to any other country. And if you think that level is strange or terrible, you need to understand the US already assigns high duties in cases of anti-dumping or countervailing duty (ADD/CVD) against subsidies. If you think 45% tariff rate is high, you'll brain will explode when you see some of the rates imposed on specific exporters because of ADD/CVD. For some Chinese made tire companies, they got hit with an additional ADD and CVD that combined were over 50%, 80%, even 100%. That is in addition to the normal 4% duty. Here is a link as an example:

http://www.moderntiredealer.com/news/402154/doc-affirms-tariffs-increases-rates-for-nearly-all-tire-makers

That is being done now - and there is no end of the world. Granted, that is being done only on individual markets or commodities. But there is no real debate that China is gaming the system. When Chinese trade was low and the US was trying to encourage its good behavior, this was tolerable. It isn't anymore.

The post-WWII system was designed to make sure everyone had access to international markets and that every country would have access to the raw materials they needed for their economies. Nothing Trump has said threatens that. He is not complaining about the vast majority of trade the US does.

While Free Trade is the orthodoxy since WWII, historically the Republicans (and their elder antecedents among the Whigs and Federalists) were the part of high tariffs. The average duty rate from 1821-1900 was 29.7%. The US and the world is very different now versus then, but high tariffs (combined with either a large internal market or export lead development to the world's large markets) has been the key to industrialization and development for the US, Germany, Japan, and the Asian Tigers.

Tariffs are so low right now, that the marginal benefits of lowering them even further are low. Any danger by Trump is disruption of current trade which would be bad, but what he is talking about is nothing like Smoot Hawley. And the idea that low tariffs specifically got us out of the Depression is simply false. The changes Trump would make would not be an overturning of the post WWII economic trade order, but a correction of either "bad deals" or an end to China's currency manipulation and mercantile policies.

I happen to support NAFTA as a long term strategy. Mexico is still a hard place to do business, but it is improving. China is an entirely different case as its government is actively pursuing mercantilist policies and should not have been allowed to join the WTO.

Trump is a loudmouth and he doesn't act Presidential. He needs to know when to shut up. But this is a good debate we should be having.

It's not tariffs, per se, but the non-tariff barriers that reduce trade in the 21st century.

We also have to worry about foreigners stealing our intellectual property.

America has low tariffs. Some of our competitors have high tariffs. Treaties like the TPP pull down foreign tariffs and expand IP protections more so than they reduce American tariffs.

Even on the goods that we do impose high tariffs, I fail to see much benefit for average Americans. Our sugar tariffs keep US sugar prices at 2X the world price. I just don't see how that benefits America in any way.

+1 for Cooper and the "steal our IP' sentence. A lot of people don't realize how screwed inventors and their employers are by the present IP system, and even more screwed overseas. I'm all for reform. And yes I use Piratebay, but that's because the current system is broken. We need a better IP system and Trump might be able to deliver (if he was more consistent and intelligent, which he is not).

By "our IP" you mean in large part public research transfered to capitalists in the misguided belief that maximizing prices maximizes societal returns.

I read this book and recommend it: Peddling Protectionism: Smoot-Hawley and the Great Depression Hardcover – February 13, 2011
by Douglas A. Irwin (Author)

It debunks the idea the the (relatively) small increase in tariffs in Smoot-Hawley had anything to do with the Great Depression.

I think a Trump tariff would probably add money to the US Treasury and not be that bad to world trade. This is because the USA is a monopsonist, meaning they have a monopoly on buying. The Chinese know this and would lower their prices, and pay for the tariff, as would the American people. And in these deflationary times a price increase is not that big a deal. That said, I'm for zero tariffs and unilateral free trade (since it's hard to turn back the clock anyway).

What happened is that the banks in exporting areas of the country failed causing a cascading failure. It wasn't only the US policy, but the responses of other countries who would lose their US market access so they put barriers to protect against inexpensive US imports.

I would suggest that it be very wise for the US and other countries to do something to prevent the Chinese economy implosion from harming them. How, I don't know.

A change in policy can have a major impact in the short term, and if there are other brittle parts of the economy, they will shatter in response. BC put a 15% surtax on foreign purchases of property, and the real estate sales dropped substantially, to being about 1/5th of what they were previously. That may settle out, but with the house price decrease and the effect it has on the secondary mortgage market and stability of banks, it could cause an outsize response.

I think the dangers of trade disruption with the #2 economy in the world and our second largest trading partner (by country) is not something you can just take lightly. Especially when so many of our businesses depend on the Asia supply chain to keep goods being built. You would either need to create massive loopholes that make any change ineffective, or you'd have to believe that we can magically rollback 30+ years of economic change and expect U.S. companies to remain competitive. It's not like you can just magically create workers with the skills needed at a wage that makes sense for the company. Moving overseas was a hard choice and alot of work for these companies and moving back would be just as tough.

Remember back in January when Tyler linked to that paper concluding that "[a]t the national level, employment my has fallen in U.S. industries more exposed to import competition, as expected, but offsetting employment gains in other industries have yet to materialize?" Remember how Tyler called it some of the most important work done by economists in the last twenty years? Well, forget all that. We have it on good authority from Bob Zoellick, who should know because he's done a bunch of trade deals, that the status quo isn't for fooling around with.
http://marginalrevolution.com/marginalrevolution/2016/01/autor-dorn-and-hanson-on-what-we-know-about-china.html

Hey! No fair! We're supposed to respect authority, 'cause Trump is crazy and totally not on to something.

'Here is the full, raw text with no formatting.'

That PDF text is formatted. Maybe you meant something along the lines of formatted, but not copy edited for length PDF text?

Because anyone doing a transcription that clean would be a truly rare talent, particularly by doing the formatting on the fly.

Almost everything Trump says is to establish a negotiating position. He's setting the outside boundary conditions before he engages in the actual negotiations. Certainly China isn't going to relax any of it's protectionist trade positions if there's no serious threat that the US will take a hard line.

"Certainly China isn’t going to relax any of it’s protectionist trade positions if there’s no serious threat that the US will take a hard line."

Just like the mullahs were not going to release the hostages in 1980 until they were faced with a Reagan about to become president, not a Carter.

When you think your opposition is a loose cannon, its amazing how reasonable you can become.

This is the actually an aspect of Trump that is appealing, I do think a guy like that could do some good in trade negotiations. But it's buried under a mountain of awfulness and pathological narcissism and sociopathy. It's too bad you have to endure the whole package, and it's too much for me. Not that my vote matters in a non-battleground state, nor yours.

No single vote matters. [Though Ohio is a battleground state.]

Trump having the reputation of being crazy [no, he is not actually] is the strongest point in his favor. DC can use a good scare.

Some think he's crazy, but he's obviously not. NPD and sociopathy don't really count as 'crazy'.

You're planning to vote on the basis of superficialities when your positions are better aligned with Trump than with Clinton. Does that make sense?

Nah, Clinton is 'Obama's third term' and I am satisfied with how Obama has governed. And like him nothing she wants to do will happen because Congress will be Republican. I favor divided government, and a Dem President with a Rep Congress is best IMO (like 2010-present, or 1994-2000). Trump's positions are very hard to discern, and the most salient are not appealing to me. I was just noting that if he's got any positives it's deal-making.

I'm deeply dissatisfied with Obama, but I thought the other Clinton did pretty well. I also like divided government.

Trump is basically center-left with a plan to reform trade and immigration policy.

msgkings, that's a good reason to vote for Clinton. I feel like a lot of people pulling the levers for their candidates are not doing it with their eyes open. Trump is a clown prince with plenty of flaws. Personality matters as well as policy. Hillary's also got flaws, and same with my policy guy Johnson. *shrug* Once the hysterics die down, we'll have a vote and we'll accept the results, for better or worse.

@Sam, agreed. People get so worked up every 4 years, every election is the most important one in decades. But really, not really.

And as already mentioned, it doesn't matter how I vote so making sense is not that important.

I'm in the same boat.

And finally, presidents are not just policy robots. In fact policies are among their least important attributes, Congress makes sure of that. The president is our nation's leader. They represent us and what we value, every 4 years we have a referendum on who we think we are and who we aspire to be. I prefer our nation to be represented by a Roosevelt (either one), or a Truman, or an Eisenhower, or a Reagan, or a Clinton, or an Obama. Both major candidates running are awful on this basis. Trump is worse. And again, Dem pres Rep Congress is best.

There is nothing sociopathic about Trump. If anything he's the opposite of a sociopath.

Starting positions?

Good God. Look at Trump's clown show of a campain. There is no steel mind beneath the bluster. There is only bluster and mismanagement.

What actual good campaign manager did all his starting positions bring? What skilled spokespersons and surrogates did he land?

Were Christie and Giuliani the best votegetters this political mastermind managed to land?

"This is the actually an aspect of Trump that is appealing, .... Not that my vote matters in a non-battleground state, nor yours."

Well my vote matters to me. And that's what really counts ;)

And I most admit, I'm happy to let Clinton win. A Clinton win is good for me from a selfish perspective.

A) When Obamacare collapses in the next few years, a Clinton Presidency will leave the Democrats owning the mess.

B) Any of Clinton's redistributionist policies will further direct money away from high income Blue states to lower income Red states.

It always amazes me that nobody wrote a sequel to "What's the matter with Kansas?" called "What's the matter with Massachusetts?". All those people voting against common sense. There ought to be a law!

A) I think Obamacare will be forever 'owned' by the Dems simply because of the name of it, no matter how it evolves (or doesn't).

B) From a selfish perspective, doesn't it depends on your tax bracket? If she is able to raise taxes to redistribute more goodies doesn't it depend for you on whether you are getting higher taxes or more goodies, personally? And anyway, nothing she wants to do will happen, because divided government. So (domestic) policy doesn't matter much in this election. I'm proud of this country, and I want to be proud of its leader. Clinton sucks at this, but Trump so obviously sucks more IMO. That's what 'acting presidential' means, taking it seriously, having a positive and adult vision for the country, etc. Clinton is bad but come on.

" Clinton is bad but come on."

Yes, that is indeed another side benefit of a Clinton Presidency. She's obviously corrupt and hasn't been particularly good at hiding it. So, more than likely, we'll have 4 years of a scandal filled administration.

And I'm doubtful she has the compromising qualities her husband showed. So, there won't be any bipartisan successes. Instead it will be 4 more years of grid lock. But that means relatively low deficits as most discretionary spending will be locked in to current levels.

On the negative side, she'll likely appoint Liberal judges who will further weaken the Legislative branch in favor of the Executive branch.

But a divided government and even more obstructionist Senate would mean she can't get the most lefty judges in there. Gridlock is good, JWatts.

"Gridlock is good, JWatts."

Well it's generally the sign of an ineffective President. But yes, who wants a President incapable of working with the US Congress to have unfettered power? So, yes, I'm certainly in favor of Checks and Balances. No matter who's in charge.

The current administration didn't pay attention to years of Chinese dumping of below-cost steel (some of it of very shoddy quality) until the middle of this year. The reason wasn't to protect American steel mills but to force an enormous trading partner to play by the rules. The Chinese have sent us faulty products in areas ranging from children's toys to crap sheetrock; their widespread theft of intellectual property are other concerns.

I'm no trade expert, but the TPP -- a multi-country counterbalance to renegade Chinese market manipulations, including self-dealing currency manipulation -- makes sense to me. I'm not impressed with Hillary Clinton's flip-flop on it after checking to see which way the political wind was blowing. I don't get the impression that either of our candidates has the big picture in mind here. It's just pander, pander, pander.

These matters are not a new Smoot Hawley; they are far more complex. We've been lulled into stupidity by candidates who don't have integrity to talk straight.

Hear, hear! The candidates fail at this because one is a classic pandering politician and the other honestly has no idea what the hell he's talking about.

If Trump is President, it will be fun to see how much loot he can get for the U.S. for selling Alaska to Russia. Of course, Canada and China will get to bid, but I bet Alaska gets sold to Russia. I mean, we weren't really using Alaska anyway.

Would trading Alaska for 20 trillion dollars be a good deal?

Would trading Detroit for $5 million be a good idea?

Ha! Well-played. Detroit is totally crappy, you nailed it.

Per capita industrial production in the US is down to the levels of a mid-range developing country (Morocco, Iran, Ecuador). If we are to have any economic future, we need immediate massive reindustrialization. Trump is the only one even suggesting this. Otherwise, in a few years we'll be as relevant as any typical non-industrial economy; Burkina Faso with nuclear weapons. The only silver lining, is that free trade economists will suffer with the rest of us; Tyler will be begging in the streets or selling candy on a street corner in five years.

I'd be willing to bet 5 trillion RMB that the whole US university ecosystem, banking system and everything else will be totally destroyed by 2023.

If we can agree on a definition of 'totally destroyed' I'll take that action.

Excellent discussion!

Trump, now believing electoral college projections, goes all in on a Mexico bet.

It will be interesting.

My guess is that nothing will come of it, but Trumpians will say "nothing" is reason to double down in support for this loser.

I'm voting for Trump because otherwise three things will happen. First, she will enact (by pure executive fiat) a dry-foot/dry-foot immigration policy, in other words, if you can get two feet in, you're in. Second, a Hillary-appointed Supreme Court will conclude that "hate speech" is not protected by the First Amendment, and third, neither is ownership of "assault weapons" under the Second Amendment.

So at that point, the only ethno-cultural groups inclined to lex rex, individual rights in property, and free market economics will be out-numbered, out-voted and out-thugged, and they won't be able to say anything or defend themselves.

Correction: I'm voting for Trump in the hope that he wins, because if he doesn't, three things happen ...

You are voting Trump because you made up a policy or three for Clinton.

Got it. Genius. Not emotional rationalization at all.

She has made it absolutely clear that the southern border will not be enforced, and the government's resources will be deployed to helping all the new Americans along to citizenship (i.e., Democratic voter registration).

Immigration is THE issue, because it determines who decides all the other issues.

It’s impossible to think that far, as it’s also very unlikely, but we just need to make sure we keep things simple instead of complicating it via thinking too much. I am lucky enough to be with OctaFX broker since with them, I am able to do it all easily with their support. I really enjoy using their ECN account here which helps me stay calm and due to their smooth trading platform and daily market updates, it’s ever easy for me.

Comments for this post are closed