President Donald Trump recently tweeted that “Trade wars are good and easy to win,” as he moved to slap tariffs on China and other countries that he accused of “assaulting our country.” Stock traders were immediately spooked while commentators across the political spectrum warned of job losses, price increases, economic peril, and trade wars. Republicans were generally negative; conservative Senator Mike Lee denounced the tariffs as a “huge, job-killing tax hike on American consumers.” New Democrats joined in railing against the move. Former Virginia governor Terry McAuliffe accused Trump of an “effort to close America off from the world.” Chicago Governor Rahm Emanuel said he was “playing Russian roulette with the American economy.”
Progressives like Ohio Senator Sherrod Brown and Elizabeth Warren showed more sense—they cautiously praised Trump for challenging China’s mercantilist policies. So did Conor Lamb, the surprise victor in the House special election in Pennsylvania. They understood that just because Trump denounces our “lousy trade deals” doesn’t mean they have to defend them.
The Trump-induced hysteria about protectionism and trade wars largely ignores the reality that our globalization strategy, defined by and for global corporations and banks, has savaged working people—and the wealthy have cleaned up. Best estimates suggest the “China shock” alone—the result of running the largest deficits with one country in the history of the world—cost 2.4 million US jobs between 1999 and 2011. Companies used the threat of moving abroad to bludgeon workers into accepting cuts in wages and benefits. Our callous globalization strategy contributed directly to the rising incidence of divorce and suicides, the spreading opioid epidemic, declining life expectancy, extreme inequality, and Trump’s election victory.
The establishment of both parties has championed corporate globalization, with an argument that has been “basically dishonest,” as free-trade advocate Paul Krugman belatedly admitted, and one that featuring “false claims of inevitability, scare tactics (protectionism causes depressions), vastly exaggerated claims for the benefits of trade liberalization and the costs of protection, hand-waving away the large distributional effects.”
In fact, trade agreements increasingly have little to do with actual free trade. Tariffs were relatively low before the North American Free Trade Agreement and its successors. Trade agreements generally consist of thousands of pages formalizing deals forged between powerful interests. Multinational banks and drug companies made out like bandits. Corporations gained their own closed legal tribunals. Trade accords increasingly focus not on tariffs but internal rules—on investment guarantees, subsidies, health and safety, and intellectual property rights.
The classic economic case for free trade holds that, while there would be winners and losers, the benefits were so great that the winners can compensate the losers. But the deals are about political power, not economic theory. Corporate globalization has empowered the few, and it has largely scorned the losers.