Bloomberg is about as anti-Trump a mainstream media outlet as there is. In their relentless pursuit of tarring the President in every conceivable way, they recently published an interactive map showing how much the Gross Domestic Product (GDP) of various countries would be hurt in a trade war with the U.S.
The intent and narrative of the article and map, “These Countries Face the Biggest Trade Risks” was clearly designed to show all of the damage that could be done by Trump and his reckless trade wars. Here’s the lead to set the tone:
“The backlash against globalization comes with a heavy price.
A wave of disruptions is rocking the world trading system. Britain’s divorce from the European Union has turned messy, while the U.S. trade war with China has investors on edge. The cost of such risks is substantial, according to an analysis by Bloomberg Economics of OECD data. About 2.3 percent of global GDP is tied to trade flows that are at risk from greater protectionism, equivalent to almost $2 trillion in output, according to an analysis by Bloomberg economists.”
But looking at the map they produced through the eyes of negotiations on behalf of United States’ companies and workers reveals something that Bloomberg cannot see through their eyes of Orange Man Bad: America has enormous leverage in every one of these trade negotiations.
This leverage has always been there, but previous presidents in both parties chose not to take advantage of it. Trump, operating under the rubric of America First however, realized that not only have American companies and workers been disadvantaged through poor trade agreements and enormous cheating by China among others, but that America has the economic leverage to be able to create much more level agreements and curb the cheating.
And the map shows just exactly that. It includes the impacts of Brexit, which is why the U.K. and her small trade partners have the biggest percentage impact on the map, which is considering both GDP and Brexit. But the numbers between the U.S. and China particularly wash out the Brexit issue as both economies are so much larger and both trade with Great Britain, leaving us with a mostly GDP comparison.
While the map shows that indeed everyone takes a hit in a full-out trade war, China, Europe, Mexico, even Canada, are hurt far more than the United States. In fact, everyone is hurt more than the U.S. The total impact on the U.S. is a 1.5 percent hit to GDP. But it’s a 4.3 percent hit to China’s GDP. Why? Because we buy more of their stuff than they do of ours. Essentially, the trade deficit exposes their fragility in a trade war. This is true with all of our major trade partners.
What this means is not that the world needs to endure these GDP hits, but that there is enormous and growing pressure on China to come to an agreement with the U.S — including enforcement on trade and Intellectual Property (IP) issues. These declines most likely will not be realized because they are such a threat.
It’s how negotiations work. The Chinese are tough negotiators — a whole lot more savvy and hard-nosed than previous American administrations. But so is Trump, who is willing to walk away — as he did with North Korea — if the deal is not right. To the staid beltway thinking, this is reckless. But to the negotiator, this is the only way to get a fair deal.
In a sense, Trump is doing what Ford and Amazon and Apple and Uber and so many companies have done — disrupt the status quo to create something ultimately better. During the disruption, some get hurt — buggy makers by Ford’s production line, retailers by Amazon’s online surge and taxi drivers with Uber’s emergence — but ultimately life improved for the vast majority on the other side of the disruption.
Rod Thomson is an author, host of Tampa Bay Business with Rod Thomson on the Salem Radio Network, TV commentator and former journalist, and is Founder of The Revolutionary Act. Rod also is co-host of Right Talk America With Julio and Rod on the Salem Radio Network.
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