War…What Is It Good For?

Trade War

Absolutely Nothing! Not just a song lyric. It’s a truth that’s been proven over and over again. Most of the time we use sentences like this when discussing wars that kill people. And to be honest, like many areas of life these days, using the word “war” is probably something we should get away from when lives aren’t at stake. It trivializes a word that should not be trivialized. Many athletes have gotten away from saying they’re going to battle or to war for just that reason. They’ve met the people that go to war…

Yet, that’s the word this week. The word preceding it is trade. “Trade War.” President Trump has launched one across the bow, to keep the metaphor in place. But it’s the other part of the war comparison that I’d like to draw on, since I’m not going to stop the use of the term in favor of something else; especially since I don’t have a catchy replacement in mind. The part of the war comparison I’d like to use goes back to the song. In the end, has it really accomplished enough to be worth the price?

Don’t get me wrong, some true wars were worth the price. This type of war though? I don’t see it. I don’t think I’m saying anything controversial by saying this is not a good war. We can debate things like the tax cut bill as far as whether or not it is a financial positive for most people in the end. If indeed you do believe that the recently passed tax cuts are a positive, why counteract that with the “effective taxation” we will experience in a trade war. If you don’t think the tax cuts are a positive, well this only makes the situation worse on a family spending power basis.

We’re not playing with amateurs. There is little doubt that some countries have created an unfair advantage for themselves in trade balance. But there are many countries that have sought, as we previously have, to create tariff free trade, or very close to it. And why would we want to fight with our international friends? That may be something we do amongst our own personal friends, but those fights rarely last very long and the stakes are usually not much larger than where should we go to get a drink and laugh at ourselves?

This is bigger. Blood will not be shed. And for that we’re always thankful. But lives will be affected. Don’t think by not paying attention, not understanding, or even going “La la la, I can’t hear you!” that you can escape the impact. These tariffs aren’t things other countries pay while saying it’s no big deal. This is akin to a real war in that each move on any side will bring escalation from the other. Until no one wins. This makes our goods more expensive. Maybe not homegrown goods. But other goods, from other places. This will have an effect on the prices of more things than it won’t.

So who gains? Industries that more than just trade to blame for their woes. This is the age of technology. Has been for a while now. And every advance in technology brings with it the loss of jobs and industries. I’ve previously described the end of my own industry. Commodity floor trading. The pits are gone. Machines execute the trades now. And while some on the floor looked for any sort of intervention to save jobs, even divine intervention was sought by a few), most realized that this was one of those times when technology advances were a two sided sword. That’s just how it works.

China, the primary target of these tariffs owns more US debt than anyone. To go back to the analogies of little kids that just keep popping into my head, I’m trying to think of a time when I was successful at still collecting my allowance immediately after picking a fight with my dad as a kid. Can’t think on one. Probably because it never happened. But those fights ended quickly. I was soon back to collecting regularly. It wasn’t the best strategy however. And I learned that quickly. How can we not know that this is bad strategy with that kind of monetary impact at stake? Actually a very bad strategy.

The part possibly most difficult to reconcile is that we’re not even excluding “friendly” trade partners from the tariffs at this point. It’s just an all-around “I’m taking my ball and going home.” We’ve spent decades working toward free trade with many allies. I’ve rarely heard anyone who sees a reason to fight with Canada over anything! And yet? We’ve decided to extend this to them as well.

Europe? Haven’t we been doing enough lately to piss them off? Do we really need to do this? These are our strongest allies. And a trade war with them weakens us globally. In that real war kind of way. There’s not a whole lot that we need to retaliate against. But let’s do it anyway. Just like Canada. And Mexico. Why not? Scorched earth. What could go wrong?

Too many things, unfortunately. The rise in jobs in dying industries will probably be temporary. The loss of jobs elsewhere is often harder to reverse. Our farmers get subsidies many would like to see end. They get a good portion of the rest of their income from exports. And much of those to China, whom we’re trying to penalize. Call me crazy, I don’t see China just giving in. So let’s do this math. The farmers will sell less. They will go into their own recession. And what will have to happen? Oh, I don’t know; perhaps more and larger subsidies? Well that didn’t work…

And what are the chances this could really go south and throw off our economy’s long awaited growth spurt after a decade of low rates and little expansion? The chances are not trivial. That doesn’t sound like winning a war, or even having a chance of “Victory.” Heck, it doesn’t even sound like winning a video game. In fact, it sounds a lot like losing. So not only are we starting a war that no one can win, we’re starting one we can easily suffer the most from.

“Say it again…Absolutely Nothing!