On Friday, President Trump hinted that a solid jobs report was forthcoming:
This violated a longstanding taboo against the president biasing the markets in advance of the report’s release. But Trump wasn’t wrong to be excited, at the very least — the unemployment numbers continue to be terrific. In fact, according to the Bureau of Labor Statistics, employment increased by 223,000 in May, with the unemployment rate dropping to 3.8%, the lowest in 50 years. The labor force participation rate remains stubbornly low, at 62.7% — approximately the rate it has been for the last five years. But there’s no question the economy is booming under President Trump.
Which raises a serious question: why in the world would he want to start a trade war with China, Mexico, Canada, and the European Union?
In the past 36 hours, Trump has announced massive steel and aluminum tariffs (25% and 10% respectively) against the EU, Canada and Mexico; he had exempted those countries until now. These countries are all American allies, and all of them immediately responded with their own tariff threats. Mexico threatened tariffs on lamps, pork, fruit, cheese, and flat steel. Canada announced tariffs on $12.8 billion in U.S. exports.
Trump’s excuse for tariffs: national security.
Now, under the Constitution, the legislature has the power to control trade, not the executive branch. But since 1962, Congress has tossed the ball over to the executive in cases of national security. Trump now claims that we have to tariff Canadian lumber and EU steel because of . . . war, or something. That’s nonsense, and it’s economically ignorant nonsense.
And Trump wants to go further by targeting imported vehicles. So far, the Trump administration has been able to curb Trump’s tendencies toward thinking trade wars are “easy to win.” But flying high, Trump now seems determined to engage in trade wars not for the purpose of lowering tariffs, but for the purpose of “outcompeting” our allies. This will undoubtedly have significant effects on the economy — the Dow dropped 200 points on Trump’s trade announcement — and will dampen the roaring economy for which Trumpian policy is at least partially responsible.