Monday, August 17, 2015

On Trump's Insane Argentina-Like Trade Policy Thinking

By Mary Anastasi O'Grady

To hear Donald Trump tell it, China is run by a cabal of geniuses who outsmarted the U.S. last week by cutting the purchasing power of their fellow Chinese citizens with a devaluation of the yuan.

“They’re killing us. Now they’re going to take more jobs . . . I mean it’s ridiculous,” the presidential hopeful told Fox News the day after China let its currency slip a measly 2% against the dollar. The yuan subsequently lost another 1%.

Japan is also run by a band of Asian Einsteins, according to Mr. Trump. Prime Minister Shinzo Abe “is a great leader,” who is “cutting the hell out of their currency, cutting, cutting, cutting.” As a result, Mr. Trump explained, “they’re back. Japan is back.”

The fast-talking Wharton alumnus didn’t say what he would do as president when trading partners announce that their currencies are to be marked down in relation to the dollar. But he suggested that devaluation is making China and Japan wealthier and more competitive and the U.S. poorer. China does it, in his view, because “they have no fear of us.”

It’s not clear if a Trump Treasury would seek to restore U.S. economic vitality by weakening the dollar more than the next guy weakens his currency. Or if as president he would simply work to raise U.S. tariffs on imports from countries that devalue. Either way it would be bad news for Americans. It also would damage the Americas if his flawed monetary views were adopted by the region.

Mr. Trump may be impressed by devaluation as a policy tool because Mexico—whose politicians in his eyes are among the cleverest and most “cunning”—practiced it for many years. Yet slashing the value of currency to achieve prosperity is preposterous, as generations of Latin Americans, not only Mexicans, can attest. If “competitive devaluation” worked, Argentina would be the national equivalent of Donald Trump. That means very, very rich, in case you somehow missed the Donald’s constant assertion about his net worth.

Read the rest here.

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