Re: Are Trump's claims valid with regards to Canadadian tariffs?
There have been two excellent essays in the New York Times recently that help understand the issue. They are both by Neil Irwin, who seems to have been more or less hired for the purpose of explaining somewhat complicated economic concepts without Krugman's vitriol.
In "What is the Trade Deficit?" from two days ago, he gave a balanced picture of the issue, explaining why trade economists don't worry about the U.S. trade deficit (it is a counterpart to a financial inflow, if exchange rates are flexible) and even why it is a good thing for the U.S., at least on some level (as provider of the world's reserve currency, we will receive goods and services in exchange for our dollars, and this is a plus; however, the U.S. trade deficit has exceeded the amount represented by provision of world reserves for decades now.)https://www.nytimes.com/2018/06/09/upsh ... ficit.html
He mentions, in this piece, the fly in the ointment: getting free goods is all very nice, but when people are worried about jobs a trade deficit looks like a failure: we are buying from somewhere else when we could be employing Americans to make the goods. As policy guidance this is really rather bad, but it makes for good politics. Even with unemployment below 4 percent.
In another piece earlier in the year, he observed that the trade deficit had hit a record high in January and got into the nitty-gritty.https://www.nytimes.com/2017/03/07/upsh ... ahead.html
The main value of it is that he notes that a higher dollar could be the reason. The cut in corporate taxes is supposed to result in repatriated profits. (It's not entirely clear that it has, or indeed will). But that would be a capital inflow, probably a large one, and so it will swell the trade deficit by raising the dollar, which makes our exports look more expensive and makes imports cheaper.
The idea that the trade deficit reflects an imbalance in tariffs is bogus. It is easy to cite "spikes" left behind from the most recent round of reductions, which was 20 years ago at the WTO creation in 1995 (known at the time as the conclusion of the "Uruguay Round.") But every country has spikes, and the tariffs are very low on average (as Irwin shows with examples).
[Sorry, the numbers are not in the Irwin piece but in Krugman's comment on Quebec:https://www.nytimes.com/2018/06/09/opin ... uebec.html
Outside of agriculture, countries are not allowed to have barriers against a particular country's products. This non-discrimination or "Most Favored Nation" rule, requiring all member countries to be given the tariff offered to the "most favored nation", applies to all manufactured goods outside agriculture. The tariff is on a product, not depending on the origin (the other exception is that free trade areas, including the EU and NAFTA, can have lower tariffs without having to offer the same low tariff to all WTO member exporters).
One of the reasons Trump's "national security" tariffs on steel and aluminum are so disastrous is that he is ripping up the non-discrimination principle in the process. The damage to the world's system of international treaties is incalculable. I can't begin to explain what the WTO has meant to international law, or how much damage Trump is doing to it. Suffice it to say that, despite the current Republican line, the introduction of WTO discipline to the Chinese system has done more for bringing the rule of law in China than anything since Mao and the Gang of Four were ousted. It's far from perfect, but the effect has been night and day.
The idea that Canada is somehow ripping off America, or stealing from our piggy-bank, is non-sensical. Trump has been making these sorts of noises since the 90s, and that is indeed how he sees the matter, but it comes out of his general penchant for picking fights and portraying himself as champion of the little guy using symbolism even while gutting the little guy on substance.
The big substance issue on trade is China's surge since 2005. As documented by Autor, Hanson et all, their penetration of U.S. markets has had serious effects, sometimes devastating on the Rust Belt communities of Western Pennsylvania, Ohio, Indiana, Michigan and Wisconsin, which of course are the states that surprised everyone with their swing Red in the last election.
Before China was allowed to join the WTO, they were required to reduce their tariffs and other trade barriers, on the rationale that the other countries had been reducing their Most Favored Nation rates with each other while China did not participate in the negotiations. In hindsight the West seems not to have insisted on enough openness (China still had 100 million unemployed when they joined the WTO, and a GDP per capita below Peru or Thailand). No one seems to have anticipated their stunning success in manufacturing (to be fair, a lot of the income goes to foreign companies, many East Asian, some U.S. or European) - I certainly didn't. Combined with their pressure on foreign investors to share technology (a practice which Japan demonstrated first in the 70s and 80s) there has been sufficient reason to, essentially, renegotiate the terms of Chinese accession to the WTO.
But Trump is trying to be cozy with China while he negotiates with North Korea's Kim, (and may have been literally bought off in the bizarre case of the ZTE chip imports), so instead he is targeting allies. All about appearances. Unfortunately for 45, politics is often about pocketbooks instead.