Donald Trump’s most useful political skill is his ability to create a spectacle of almost anything. Trade policy used to be an obscure subject—not particularly relevant to the 70% of us who work in the services sector—and too boring and complicated for even the highest of information voters to follow closely. But the president has changed all that, by turning American trade policy into a series of showdowns with a parade of dumbfounded world leaders, who are unsure of how to limit the political and economic damage the Trump Presidency deals them and their home economies.
Few things are more dramatic than a game of chicken, and in their coverage of the Donald Trump and Jean-Claude Juncker’s substance-free press conference Wednesday, the news media ran with the president’s characterization of their meeting, i.e. that Trump stared down Juncker and won “concessions” in a new trade “deal.” But the only agreement reached was that for the time being, both sides would refrain from escalating the trade conflict that erupted when the Trump Administration slapped new steel and aluminum tariffs on EU powers and other countries around the globe.
The market’s jubilant reaction should come as no surprise, given that the tariffs actually in effect are so far limited. The true threat to the economy and markets lies in the escalation the president had been threatening, particularly new auto tariffs and a third round of tariffs on imported Chinese goods. For the time being, these new tariffs appear less likely to be instituted, but this is not the first time that the President has pulled back from the brink of a trade war, only to conduct an escalating foray if he feels his trade “foes” haven’t submitted themselves fully enough to his bizarre and counterfactual vision of the global trade order.
On the other hand, there was an actual concrete policy announcement this week, when Secretary of Agriculture revealed up to $12 billion in aid to farmers who are suffering from the effects of new tariffs levied on American agricultural goods in response new American duties. The new money doesn’t need to be approved by Congress, and can be drawn from funds already appropriated to the Agriculture Department’s Commodity Credit Corporation. This bloated, Depression-era program is the central mechanism for billions each year that the government funnels to mostly wealthy farmers in the form of commodity payments and crop insurance indemnities.
In response to the larding on of another $12 billion in welfare payments to mostly well-off farmers, many Republicans like Senator Ben Sasse, cried foul. “This trade war is cutting the legs out from under farmers, and the White House’s ‘plan’ is to spend $12 billion on gold crutches,” he said. But of course, when it came time for Sasse to actually take a legislative stand against welfare for farmers, the Nebraska Senator naturally declined. Last month, he voted yes on the reauthorization of the farm bill that once again authorizes tens of billions of dollars that subsidize the U.S. agriculture industry, paying farmers to grow, or refrain from growing, commodity crops that the market doesn’t want.
The overwhelming bipartisan support for maintaining a vast program of subsidies for American farmers puts the lie to the idea that Republicans, Democrats, or the President are really interested in free trade, or have any plan to strike significant new trade deals.
The Trump Administration can do one thing right, and that is stage theater. Yesterday’s production, whereby Trump pretended he had the authority or political capital to eliminate American subsidies of its dominant agricultural industry, and Juncker pretended he had the authority to commit national European governments to approve tariff reductions or increased purchases of soybeans and natural gas. If the show, and the resulting positive news coverage, convinces Trump to stop escalating a trade war he has no plan for winning, then all the better. But investors beware: If past is prologue, the next trade-related temper tantrum is just around the corner.
Christopher Matthews is a writer who splits his time between New York City and Accra, Ghana, with an interest in the intersection of markets, the economy, and public policy. He previously held staff positions at Axios, Fortune Magazine, and Time Magazine, and has been published in Forbes and Debtwire.