Robert Lighthizer is expected to head USTR

From the WSJ:

Mr. Lighthizer has three decades of experience arguing for punitive tariffs on overseas companies. Given Mr. Trump’s deep skepticism of trade agreements such as the North American Free Trade Agreement, or Nafta, Mr. Lighthizer probably wouldn’t prioritize major new trade agreements, at least in the early days of the administration, according to people following Mr. Trump’s trade plans.

Still, Mr. Lighthizer has negotiating experience from his time in the Reagan administration, and if confirmed, he would take the lead in talks that could culminate in the bilateral deals that Mr. Trump’s team prefers—a departure, for instance, from President Barack Obama’s focus on a 12-nation Pacific deal.

Mr. Trump’s advisers have said his pick for Commerce secretary—billionaire investor Wilbur Ross—also could play a leading role on trade policy, as well as economist Peter Navarro, who will lead a new trade council at the Trump White House.

Here is Lighthizer’s 2008 NYT Op-Ed criticizing free trade.  None of this is good news.


Assume the worst. Trade war means another Smoot-Hawley, right? So that means stock market crash, which is not an unlikely prediction considering that we've been hitting new highs recently. Might mean going short (or buying puts) is the right move today, but betting on an expected market move before it happens is always risky. Wait for the crash, and then buy. Buying at the bottom of the Great Depression was a good move, but judging when you're at the bottom is hard. Crash was in '29, bottom in '32. I've more often than not called the direction right, but my most common mistake was moving too soon.

So what's an early sign of a crash, and what's the best way to profit from it?

Shorting before a crash is attractive but profits tops at 100% unless leverage is used. Buying at a bottom even if it's not the absolute bottom can yield 200-300% profit, but patience is needed.

As a risk averse guy, I see shorting attractiveness in being right more than making profits. Some people have got rich predicting a crash and going short with leverage......I don't feel that lucky.

"So what’s an early sign of a crash, and what’s the best way to profit from it?" [SNIP]

A: a) Day traders, moving in too soon b) Short yourself.

If your country's stock market isn't hitting all-time highs every few years, and dividend yields are only 2%, your publicly-traded companies are not doing very well.

"Smoot-Hawley, right? So that means stock market crash"

Smoot-Hawley being the cause of the Great Depression is classic #FakeNews.

You do know Smoot-Hawley was *after* the crash, right ? Also, if heavy tariffs automatically triggered depressions, The US would have been a basket case from the Civil War on out...

'None of this is good news.'

Of course it is - the clown show is just getting started.

Das dicke Ende kommt noch.

My reading of this, is that the US will lock itself into existing trade patterns for the Trump Era, but not expand into new trade relationships. The impact of Trump imposing tariffs, whilst hurting US consumers and producers (with producers effected by disruption to global supply chain), will be less than the negative effect of the global supply chain and value add premium adjusting around the US.

So open and connected econmies with skilled workforces eg Singapore, and those countries that continue to develop trade relationships (almost all of Asia Pacific), will be able to enhance their global supply chains and value added premium at a rate faster than the US.

I would worry less about the potential trade blow back, and more about how the global supply chain moves on without the US.

So open and connected economies with skilled workforces eg Singapore, and those countries that continue to develop trade relationships (almost all of Asia Pacific), will be able to enhance their global supply chains and value added premium at a rate faster than the US.

ALL the lucrative value chains END in the USA. Other countries largely trade with each other insomuch as to furnish products destine for the American end consumer. The economies of most other major industrial nations whether they be China, Germany, Japan, Canada, etc. exist solely to sell to Americans. Singapore is more service-sector oriented but its most important end-customer is also undoubtedly the USA:

Good lord what a dumb comment. You couldn't even take the time to fact check the amounts exported? Sad!


Ha ha! Sick burn bro.

"almost all of Asia Pacific"

Countries like China, Korea, and Japan? Protectionist as hell.

Wow, seems like Trump truly believes in all those crazy things he said while campaigning ...

The crash was in 1929. Smoot Hawley passed in 1930

The crash didn't cause the depression. Smoot Hawley was a contributing factor, and a big one, not not the only one. A Hoover tax increase under pressure from FDR during the campaign on deficit spending was the wrong move. Another key factor to prolonging it was FDRs National Recovery Act, which set wage and price controls.

The stock market bottomed in 1932 and FDR did not take office until 1933.

Would you please explain how the National Recovery Act prolonged the stock market crash since it was not enacted until long after the market bottomed.

I'm sure all of us would like to learn how to have policies that impact the economy retroactively.

Nothing you said disagrees with the parent commenter. He said the NRA prolonged it, not caused it.

Hoover was a deficit-spender until his general election opponent attacked him for recklessly running up the deficit.

For a policy first enacted in 1933 to impact the stock market before 1932 it has to have had a retroactive impact. That is what the parent commentator said and I think my comment is still correct and disagrees with the first comment.

By the time of the 1937 bear market the NRA was already dead.

So I still have trouble seeing how it prolonged the bear market which was the claim I disagreed with.

Anyone can misread a sentence, but to persist in it when it remains in full public view is foolish, dishonest, or both.

You need to improve your reading comprehension skills.

"None of this is good news." True, but it's better news than Hellary becoming President.

We have had about 8 years of recovery from the Great Recession. Hillary was the status quo candidate. So, "better" to discard status quo recovery for high economic risk .. because?

Does anyone even remember anymore?

If you say "emails"or "corruption" try to pair it with this

Who cares? Hillary lost the election, and she is almost certainly never going to be a candidate again. What she'd have been like is irrelevant to any possible future we may face. We might as well argue over what the world would look like if we were just finishing up eight years of McCain/Palin.

What matters now is what the Trump administration is going to do, and how the rest of the world (inside and outside the US) is going to respond. A conventional politician who'd spent the campaign slagging on free trade would probably be looking to pivot toward the middle now, and take some cosmetic anti-trade actions while keeping things more-or-less the same. It's not clear if Trump will do the same. He might--he's clearly into symbolic victories (see Carrier), but he might also actually put people in place who will roll back free trade agreements. He might even intend to take only symbolic action, but end up with things spiraling out of his control--that seems to happen often enough with lifelong politicians, so it's probably even more likely to happen with a relative novice to political power like Trump.

Thank you for this. Just like some people cannot get over the fact that they lost, there are also people that cannot get over the fact that they won.

+1 to both of you

From the 2008 op-ed: "Conservative statesmen from Alexander Hamilton to Ronald Reagan sometimes supported protectionism and at other times they leaned toward lowering barriers. But they always understood that trade policy was merely a tool for building a strong and independent country with a prosperous middle class."

No mention of the freedom to choose what to do with one's own money.

2016 was the year some "free to choose" voters chose to back the authoritarian candidate. Hardly a plot twist to notice this now.

Maybe we'll get lucky and the tariffs will prove to be symbolic.

A related and specific comment by Mr. Trump, 2 hours ago:

Please stop posting links to Twitter, for Christ's sake, man.

To me that seems a really odd request. We have, for the first time ever, a President-Elect who posts "hot takes" on world events.

Is "I just don't want to know" a reasonable answer? Or is it some kind of avoidance?

I have to admit, with Trump quoting Julian Assange this morning, it is pretty hard for me to take as well.

"punitive tariffs on overseas companies"

How is this different from recent policy? In descending order of size, since Obama entered the White House, the following overseas companies have been fined: BP ($18.7bn), Volkswagen ($15bn), Deutsche Bank ($14bn), BNP Paribas ($8.9bn), GlaxoSmithKline ($3bn), Odebrecht ($2.6bn), HSBC ($1.9bn), UBS ($1.5bn), Toyota ($1.2bn), Siemens ($0.8bn), BAE Systems ($0.4bn). Even the Samsung vs Apple patent lawsuits can be considered as a form of punitive tariff ($1bn before appeals).

These are just the ones I've heard of - there are probably countless others, large and small. Doing business with the USA is increasingly risky. For overseas banks, the risks are so great that many of them won't even open a bank account for a US taxpayer (the FATCA legislation).

Frankly, a new system of clear and fair tariffs would be preferable to the current system of haphazard fines.

Why do you think the "clear and fair" tariffs will be *instead of* those fines? Why won't they be *in addition to* those fines?

It's purely wishful thinking. My best guess is that "punitive tariffs" means business as usual (as described above).

I know no theory of free trade that makes importers exempt from domestic criminal law.

Sure, but overseas companies seem to be hit a lot harder than domestic ones. Consider the three car companies:
- GM: ignition switch flaw, 124 deaths, $0.9bn fine;
- Toyota: unintended acceleration, 37 deaths, $1.2bn fine;
- VW: dieselgate, between five and 104 deaths, $14.7bn fine;
( source: )

For similar crimes, the foreign companies have been punished more harshly than domestic ones.

It probably is true that juries judge foreign companies more harshly, but cases by case error vs intent varies greatly as well.

Is hiding a mistake less bad for jurors than directly cheating?

Are they really "haphazard fines"? It's becoming more and more apparent that US regulatory bureaucracies have obtained the capacity to extort fines from any business they choose. In the regular media accounts of these incidents no mention is ever made of the identity of the bureaucrat that determined the fine, on what basis its size was established and what account the fine actually ended up in. A cynic would look at it this as evidence of a kind of banana republic extortion program.

By "cynic," chuck means "any rational observer."

Apples and oranges... most companies you listed were not punished for trade laws violations but financial fraud, AML and corruption related issues.

When are you going to talk about the Russian First party crippling the Office of Congressional Ethics now that a Russian First President is in charge?

Ethics for thee, but not for me!

Donald is on the right side of this one:

Though perhaps there is some clever positioning. It was "unfair" to whom?

And this tweet mattered. News is that the House abandoned the change.

Postponed. The change will be "studied" until a later date.

From the NYT Op-ed

..".................:how low the dollar falls."

Yeah, sure.

I don't want punitive tariffs. I want fair tariffs and to end punitive taxes. If our own government feels that it is OK (i.e. not punitive) to tax American companies at 39% Why would it be punitive to tax foriegn goods and services at 25% of their retail price?

What we have now is a kind of arbitrage game going on. Move your company overseas make your product or services with incredibly cheap labor and then sell it back into the worlds largest market without having to pay any of the taxes of that market. Now that the game is being threatened the players who have profited hugely don't want to pay the piper. Tax the goods and services that have until now evaded taxes and hurt our own economy and stop the bleeding.

Foreign companies already pay corporate tax in their home jurisdiction...Why should they be taxed twice?

"that have until now evaded taxes and hurt our own economy"

As soon as imports hit the dock taxes on them begin. But these imports don't hurt our own economy because consumers willingly purchase them. They're making a rational choice, paying less for the imported dish towels so they have money to spend on other things, maybe rent, cell phone contracts, beer or cigarettes. Congress has raised the tariff on imported Chinese steel in an effort to keep Minnesota taconite plants in operation while raising the cost of production of thousands of US made products. Every US citizen is paying a tax to keep a few Gopher state miners on the job. Why wasn't a similar policy enacted to protect the jobs of buggy whip braiders, typewriter mechanics and square-rigger sailors? Pulling the power plants out of US ships and replacing them with sails would put a lot of guys and gals to work.

And yet the market continues to approach 20,000.

I'm as perplexed as everyone else.

So it is - domestic sparkling wine for our inauguration party on the 20th!

The surging market is surely an important datum. Larry Summers is upset that the market doesn't recognize the dangers his crystal ball sees on the horizon. Why does no one listen to the market and allow it to correct their priors?

Let me make a suggestion that would stop a lot of this:

China, reduce your tariffs unilaterally.

I'd recommend all the free trading pundits to start pressuring Chinese colleagues with this suggestion.

Really, you needed to have rammed this point home to all of your Chinese grad students, too.

China has too many tariffs and non-tariff entry barriers, and required too many domestic investment by foreign firms to access their market.

If you haven't been doing this enough, what do you expect Americans to do?

"If you haven’t been doing this enough, what do you expect Americans to do?"

I think this is the crux of the issue. It seems like a lot of free trade economists are pushing for treaties that are asymmetrical under the rationalist approach that any gain is still a gain.

The two critical factors that they seem to down play are:

1) Humans are irrational creatures and will be upset by an "unfair" deal, even if there is a gain.

2) By pushing for asymmetrical treaties, they tend to reset the base line lower, and the other side knows that they can get a favorable deal from the US by insisting on it.

Trump is pushing for an agenda that is more symmetrical. There is a lot of verbiage about "free trade" agreements, but neither NAFTA nor the TPP are remotely "free". They are highly structured documents with specific winners and losers.

Yes. I wonder how many free trade economists have read NAFTA or TPP.

Many trade economists may be stuck in 1980's thinking. An unbelievable as it may sound, poor countries got special deals because it was felt they had a hard time accessing the US market. These poor countries were allowed to keep tariffs high, because they were still "developing" nascent industry but I think now its obvious that China isn't in that category.

The China trade became huge in the early 2000's, and some point to WTO. I wonder if it wasn't the internet making finding customers much, much easier and cheaper.

A trade deal with China or India is always going to be asymmetrical. There's zero incentive for either country to go all-in on free trade when the US, Japan, and many other countries built their industrial foundations by using heavy tarrifs. A country like China is happy to sacrifice increased productivity and consumer satisfaction for the higher employment (and social stability) that a tarrif regime brings.

US trade people get this and so they push for phased reductions in tarrifs. The US-Korea agreement gives Korea 10 years to eliminate all tarrifs on potatoes, for example, by knocking off a few percentage points each year. My guess is that US-China don't have an agreement yet because China won't agree to phase out tarrifs on certain protected goods.

"A trade deal with China or India is always going to be asymmetrical. There’s zero incentive for either country to go all-in on free trade ..."

I'm pretty confident that access to the American market has a value far in excess of zero.

I'm not as confident as you are that we can actually block stuff from being imported. I visited a Chinese factory once that was exporting through a South Korean subsidiary to get better tarrif treatment. The boxes on the factory floor even said Made in Korea. My meaning is that market access might not be a very powerful weapon unless trade is scrutinized extremely closely

In the op-ed by Lighthizer that Tyler links to Lighthizer refers with apparent approval to the quantity restraints Reagan negotiated with Japan on cars. IIRC what happened was:
1) Japan was exporting large numbers of economy cars to America
2) Reagan bullied Japan into agreeing to a cap on the NUMBER of cars Japan could export to America
3) the Japanese car makers responded by going up market into higher quality higher priced cars and basically destroyed the Detroit auto industry.

Lighthizer is a trade lawyer. They seem to spend a lot of time dreaming up various forms of sophistry to allege that countries like, say Sweden, are subsidizing products like ball bearings, or that Canada is trading "unfairly" by cutting down public trees.

Lighthizer should start by asking Trump: "Which of our trading partners do we most want to harm and piss off?"

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