by Mitch Kokai
Senior Political Analyst, John Locke Foundation
TWO BIG THINGS threaten the improving U.S. economy: a weak dollar and trade protectionism. Both routinely seduce policymakers, and both always result in bitter aftermaths with terrible political consequences. Yet some in the Trump administration are playing with both–and with fire.
–The dollar. Great nations do not have weak currencies. Nonetheless, with a surety born of ignorance, Treasury secretary Steven Mnuchin has bluntly stated his desire for a weak dollar.
Thankfully, President Trump immediately contradicted him. But the fact that Mnuchin and his department want to undermine the value of our currency is troubling. Mnuchin has bought into the alluring fallacy that trashing the greenback will help sell more of our stuff overseas, thereby strengthening the U.S. economy. Such false and toxic notions obviously mean the poor fellow has completely forgotten real-world experiences. …
… Trade deficits? In and of themselves, they tell you nothing. The U.S. has had merchandise trade deficits for most of its existence. A key to our growth has been–and still is–investment capital coming to our shores. We’re starting to get inflows of hundreds of billions of dollars, thanks to the Trump tax bill.
It’s one thing to update trade agreements such as Nafta, quite another to blow them up or try to dictate specific outcomes, such as forcing companies to move their facilities back to the U.S.
Ditto trade abuses, such as China’s unfairly restricting access to its markets for foreign companies or forcing businesses to part with their proprietary technology, not to mention its outright theft of trade secrets via hacking.
But the thrust of trade negotiations should be reducing barriers, not erecting them via import taxes or anti-import regulations.