President Trump’s trade war is a brutal gap in traditional American trade policy. His trip off the beaten track has given birth to the whispers of a new order of global finance and trade, which some people nicknamed “the Mar-A-Lago agreement”.
What do we know about this agreement so far? On the one hand, we know that it is an original idea of the president and two of his main economic advisers: the secretary of the Treasury Scott Bessent and Stephen Miran, who chairs the Council of Economic Advisors. Indeed, last year Bessente says it He “would like to be part of the realignment of Bretton Woods”. But the best snare of the Mar-A-Lago agreement that we have to date is a paper published By Miran last November entitled “A user guide to restructure the world trading system”. Essentially, the agreement is a program whose planned aim is to restore American production and employment by devaluing the dollar and by imposing prices on foreign goods.
Unfortunately for President Trump, the alleged agreement is full of contradictions. From the start, the policies of prices and devaluation of the dollar themselves are contradictory. The prices would initially increase the value of the dollar by reducing the supply of dollars in international trade. In addition, the promoters of the agreement suggest that the prices will have little or no effect on the American prices of tariff goods. But using the own example of Miran of his article – Trump’s prices 2018-19 on China – we see that this is false. A 2020 Johns Hopkins work paper By Olivier Jeanne and Jeongwon Son suggest that around 53% of these prices could have increased at higher prices for Americans. Indeed, a well -studied and expected effect of a rate is to increase the prices of prices and the prices of indoor goods to be imported. This is the only reason why a price should increase the production and employment of understanding imports of importation.
President Trump, in an effort to cover his protectionist policies and inclinations, said that prices in Canada and Mexico are supposed to encourage our neighbors to control the cross -border movement of illegal fentanyl. But he also has champion An “external return service” designed to permanently perceive the income of the prices. He cannot have the two ways – prices are temporary pressure tactics, or permanent sources of income.
What about the objective of the agreement to restore American production? It turns out that, in the long term, the prices reduce The productivity of the American import sectors. When prices are implemented, they erect a wall against foreign producers, creating the illusion of increased interior competitiveness. This reduces pressure on American companies to innovate and improve technology to compete with more productive foreign workers and their businesses. This artificial coverage inevitably leads to that companies delay or ignore the necessary changes they need to compete with foreign competitors. In other words, it allows American companies to rest behind a price wall.
Thus, the agreement is clearly full of contradictions. In fact, we have already seen these contradictions take place in the global arena. In the 1930s, the United States and other countries engaged in competitive attempts to increase prices and devalue their currencies in the efforts of the demand for goods and services to foreigners and their national economies. The Smoot-Hawley rate adopted in 1930 is considered the avant-garde effort in the adoption of these policies. Such initiatives have been called “begging” policies, and they resulted in the reduction of world trade, world production and employment, and even extended the great depression. Their failure assured that the United States will stick to the principles of free trade for the century that followed.
That said, President Trump is not the first to offer such an agreement. The Mar-A-Lago agreement recalls the agreement of the 1985 place, in which representatives of the United States, France, Western Germany, Japan and the United Kingdom met at the Plaza Hotel in New York to coordinate a depreciation of the US dollar. What was the result? While the place agreement was partially successful (the dollar has devalued), the United States experienced A crisis in its share of global trade, and its investment, its productivity and its growth in production compared to Europe and in relation to its prior resurgence linked to the policy of the American tax were much lower.
It seems that President Trump and his advisers have forgotten everything about the harmful effects of the United States pricing program in the 1930s, as well as previous unhappy agreements. Unfortunately for the Americans, those who forget history are condemned to repeat it.
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Find out more:
- Triffs Trump: fly to the game book in China – to stimulate car manufacturing in America
- The prices will not make America again large: the former president and president of the Export-Import bank
- Trump knowingly directs the cliff economy with prices
This story was initially presented on Fortune.com
