A Trade Nerd Watches the Debate

There has been plenty of reporting on last week’s debate, mostly focusing on the presentation, demeanor, and general performance of the two candidates, with very little discussion of their actual statements. To me this is a mistake. I think debates begin to show us what are true priorities for candidates and potential administrations, as opposed to policy positions posted to a website by campaign staff, never to be thought about again. I also think the rawness of debate dialogue shows us underlying thoughts, feelings, and linkages that might be politely edited out of an official policy position. With that said, let’s look at spots in the debate that were relevant to our interest in the trade policy of whatever administration takes power in January.

Our first point of interest came early in the debate, with moderator Jake Tapper asking former President Trump about the reported 10% universal baseline tariff:

TAPPER: You want to impose a 10 percent tariff on all goods coming into the U.S. How will you ensure that that doesn’t drive prices even higher

TRUMP: ?Not going to drive them higher. It’s just going to cause countries that have been ripping us off for years, like China and many others, in all fairness to China – it’s going to just force them to pay us a lot of money, reduce our deficit tremendously, and give us a lot of power for other things.

Trump then moved out of this question to attack President Biden. On this I was most interested in Trump’s tacit acknowledgement of the 10% figure, not something I had seen confirmed with the candidate himself. “in all fairness to China” is an interesting throwaway line. The language and sentiment also resemble that of Robert Lighthizer in his recent book No Trade is Free.

Lighthizer’s influence came through extremely clearly in this later statement from President Trump:

But before we do that, the problem we have is that we spend all the money. So they kill us on trade. I made great trade deals with the European nations, because if you add them up, they’re about the same size economically. Their economy is about the same size as the United States. And they were – no cars. No – they don’t want anything that we have. But we’re supposed to take their cars, their food, their everything, their agriculture. I changed that.

But the big thing I changed is they don’t want to pay. And the only reason that he can play games with NATO is because I got them to put up hundreds of billions of dollars. I said – and he’s right about this, I said, no, I’m not going to support NATO if you don’t pay. They asked me that question: Would you guard us against Russia? – at a very secret meeting of the 28 states at that time, nations at that time. And they (sic) said, no, if you don’t pay, I won’t do that. And you know what happened? Billions and billions of dollars came flowing in the next day and the next months.

But now, we’re in the same position. We’re paying everybody’s bills.

This statement also showed what I had long suspected, a potential linkage between US defense spending and trade balances. Similar language has been used by the Trump Administration and campaign for both issues, but to see these threads united in a single statement provides clarity.

It was also interesting to see President Biden reiterate his opposition to Trump’s universal baseline tariff. For example:

But this tariff, this 10 percent tariffs. Everything coming into the country, you know what the economists say? That’s going to cost the average American $2,500 a year and more, because they’re going to have to pay the difference in food and all the things that are very important.

And later:

But this guy is – has increased your taxes because of the deficit. Number one, he’s increased inflation because of the debacle he left after – when he handled the pandemic. And he finds himself in a position where he now wants to tax you more by putting a 10 percent tariff on everything that comes into the United States America.

I was surprised by this, surprised that President Biden would choose to be against this universal baseline tariff policy. As President Trump pointed out in the debate, Biden has kept the Section 301 tariffs on Chinese goods implemented by the Trump Administration. I also think Trump’s stance and actions taken against China are remembered by the public as perhaps a highlight of the Trump Administration. Finally, this policy would likely be favored by US organized labor, a longtime supporter of the Democratic Party at least until the Trump era. My assumption therefore was that Biden would be neutral on this policy, preferring to attack Trump on other issues.

By taking a stance against the 10% tariffs, Biden styles himself as the candidate for inflation reduction and fiscal responsibility. This would leave Trump as the candidate for jobs and growth, perhaps a match for his previous and now proposed policy actions. It will be interesting to see how these positions serve the two candidates as the economy takes its course over the coming months.

Discussion of Mexico by both candidates in the debate was of a partner, whether helping reduce the flow of fentanyl or migrants to the United States. This made me curious if a second Trump Administration would give Mexico special treatment when rolling out universal baseline tariffs in return for assistance with other Trump Administration policies.

Finally, it seemed to me that Trump’s tone on China had softened, describing a rival deserving competition but also respect, rather than America’s pure enemy. We see this in the previous “in all fairness to China” line, as well as in statements around the respect that powers like China and Russia would have for Trump. These lines were paired with discussion of trying to avoid “World War Three”, the ultimate outcome between enemy great powers. However, this of course did not prevent President Trump calling President Biden a “Manchurian candidate” and claiming President Biden was receiving payments from China – perhaps we can’t always evaluate candidate language at face value.

I enjoyed watching this debate and found it to be more substantive than most media pundits would have you believe. I look forward to watching both party conventions as well the second debate for further insight. As always, I can be reached at [email protected].