President Trump's current trade policies appear like the Reagan administration's protectionist trade policies back in the 1980s.

Apple Boston

2018-07-03 11:42:00 Tue ET

President Trump's current trade policies appear like the Reagan administration's protectionist trade policies back in the 1980s. In comparison to the previous target of Japan back in the 1980s, the current target is China that causes large perennial U.S. trade deficits nowadays.

In the 1980s, President Reagan and Republican senators worried about the sharp increases in U.S. trade deficits with Japan and its aggressive entry into particular industries where America used to dominate in history. The Reagan administration focused on automobiles, steel exports, and semiconductors. The 1980s trade war involved a specific taxonomy of tariffs, quotas, and even embargoes on Japanese companies in these fields. Eventually, the 1980s trade policies led to the Reagan administration’s inability to tame trade deficit growth. In fact, the U.S. trade deficit exacerbated from $36 billion or 1.3% of total GDP in 1980 to $170 billion or 3.7% of total GDP in 1989. Not only did the Reagan tariffs and quotas fail to deliver high economic growth in the aftermath of the 1987 stock market crash, these measures constrained economic output expansion from trickling down to benefit the typical American.

Several economic lessons emerge from this historical context. First, erecting trade barriers may not necessarily shrink the current U.S. trade deficit. These tariffs and quotas may or may not reverse the current Sino-American trade dilemma. Second, U.S. consumers, households, and companies may end up paying higher prices for intermediate goods and services in the specific areas of steel, aluminum, and other tech-savvy intellectual properties. Higher inflation induces the Federal Reserve to accelerate the current interest rate hike that in turn adversely affects U.S. financial market developments. Third, the specific industries such as steel, aluminum, and semiconductor technology may receive little help in light of higher production costs. When China and the European Union lash back with retaliatory tariffs and quotas, some U.S. companies such as Harley Davidson would have no choice but to move production overseas. The resultant decrease in total demand for domestic blue-collar workers may mean an inevitable increase in unemployment in these heavy-metal industries.

This adverse impact may spill over toward American agriculture that relies heavily on its exports to Canada, China, Europe, and Mexico. As history may repeat itself, the law of inadvertent consequences counsels caution.

 


If any of our AYA Analytica financial health memos (FHM), blog posts, ebooks, newsletters, and notifications etc, or any other form of online content curation, involves potential copyright concerns, please feel free to contact us at service@ayafintech.network so that we can remove relevant content in response to any such request within a reasonable time frame.

Blog+More

Netflix suffers its first major loss of U.S. subscribers due to the recent price hikes.

Rose Prince

2019-08-14 10:31:00 Wednesday ET

Netflix suffers its first major loss of U.S. subscribers due to the recent price hikes.

Netflix suffers its first major loss of U.S. subscribers due to the recent price hikes. The company adds only 2.7 million new subscribers in 2019Q2 in stark

+See More

AYA finbuzz podcast offers fresh insights into the latest stock market topics and economic trends for better stock investment decisions.

Daphne Basel

2019-09-30 07:33:00 Monday ET

AYA finbuzz podcast offers fresh insights into the latest stock market topics and economic trends for better stock investment decisions.

AYA Analytica finbuzz podcast channel on YouTube September 2019 In this podcast, we discuss several topical issues as of September 2019: (1) Former

+See More

The Trump team receives a 3.2% first-quarter GDP boost as Federal Reserve halts the next interest rate hike in May 2019.

Olivia London

2019-05-07 09:30:00 Tuesday ET

The Trump team receives a 3.2% first-quarter GDP boost as Federal Reserve halts the next interest rate hike in May 2019.

The Trump team receives a 3.2% first-quarter GDP boost as Fed Chair Jay Powell halts the next interest rate hike in early-May 2019. This smooth upward econo

+See More

Financial institutions benefit from higher equity risk premiums and interest rate spreads.

Charlene Vos

2017-04-01 06:40:00 Saturday ET

Financial institutions benefit from higher equity risk premiums and interest rate spreads.

With the current interest rate hike, large banks and insurance companies are likely to benefit from higher equity risk premiums and interest rate spreads.

+See More

Peter Schuck analyzes U.S. government failures and structural problems in light of both institutions and incentives.

Dan Rochefort

2023-04-28 16:38:00 Friday ET

Peter Schuck analyzes U.S. government failures and structural problems in light of both institutions and incentives.

Peter Schuck analyzes U.S. government failures and structural problems in light of both institutions and incentives. Peter Schuck (2015)   Why

+See More

Platforms benefit from positive network effects, scale economies, and information cascades.

Rose Prince

2019-07-25 16:42:00 Thursday ET

Platforms benefit from positive network effects, scale economies, and information cascades.

Platforms benefit from positive network effects, scale economies, and information cascades. There are at least 2 major types of highly valuable platforms: i

+See More