A Republican who has dealt with the steel industry complaints about unfair trade in the past believes President Trump is a “sucker” who is making a giant mistake with his import tariffs on steel and aluminum.
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David Stockman, who served as budget director under Ronald Reagan (1981-1985) said today on CNN that the U.S. has a “huge trade problem” with an annual $800 million deficit “but steel is the least of our problems.”
He said Trump is listening to the lobbyists and not addressing the real issues.
“The steel industry are the crybabies of the beltway lobby farm,” said Stockman. “They gang tackle every new president and then comes in with their tale of woe. In this case, they’ve got the biggest sucker yet.”
“This is a fig leaf for rank protectionism that’s focused on the wrong industry,”‘ Stockman told Wolf Blitzer “because there’s so much excess capacity for steel in the world that there will never be a shortage and we’re just barking up the wrong tree.”
In 1982, recalled Stockman, the Reagan administration heard the same cry and instituted an 18 percent quota on foreign steel.
“They all pledged on their honor after five years they would be competitive,” recalled Stockman, “they wouldn’t need the protection anymore.”
“And here we are, 30 years later,” he continued, “and one device they’re had in protection in one decade after another and it’s still the same old story.”
There is a real problem, said Stockman: “An $800 billion trade deficit is nothing to ignore.”
We have run a deficit for 43 straight years, which adds up to $19 trillion over four decades.
“But steel is the last of our problem,” says Stockman. “The steel trade deficit is about $20 billion which is two percent and the argument we need this for national defense is actually ludicrous.”
The U.S. produced 82 million tons of steel last year, he explained, while Canada, Mexico, and Brazil, who are our allies, produced another 13 million.
“So we’ve got 100 million tons available,” said Stockman, “and the Department of Defense says at most they need three million tons a year.”
Stockman said Trump “thinks a 17th-century version of mercantilist trade policy is going to make America grow again. That isn’t remotely correct.”
The real problem is that 90 percent of the U.S. deficit is with ten countries – Mexico, China and South Korea among them – and we need to figure out how to deal with them on that.
The U.S. trade with the other 150 countries in the world actually produces a positive surplus of about $2 trillion.
“We need to focus on what’s wrong with the exchange rates, what’s wrong with corporate America that constantly uses all of its cash flow for stock buybacks, M & A deals, LBOs, leveraged recapitalizations,” said Stockman. “They are not investing in competitive ability for us to compete in the world market.”
That is also what is wrong with the recent Trump tax reform legislation.
“This tax cut did nothing for it,” said Stockman. “It’s a giant mistake that’s going to drive up interest rates and cause huge windfalls to Wall Street and the one percent and 10 percent who own the stock.”
This is wise counsel from a sophisticated observer of the markets and economy that Trump just does not get, even when it is explained to him by experts like former Goldman Sachs head Gary Cohen, who resigned rather than go along with this huge mistake.
So now in addition to being liar-in-chief, we can call Trump sucker-in-chief, as once again he listens to those who talk the loudest, give the most to his political campaigns and compliment him while ignoring reality, truth and past history in his rush to make the wrong judgments.