Nostalgia, National Security Drives Trump's Economic Policies
MICHEL MARTIN, HOST:
We want to turn now to the economy, which was the focus of a lot of attention this past week. Yesterday, the Commerce Department said the economy grew 4.1 percent in the second quarter of the year. President Trump called the news amazing.
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PRESIDENT DONALD TRUMP: As the trade deals come in one by one, we're going to go a lot higher than these numbers.
MARTIN: We wanted to talk more about those trade deals. This week, President Trump agreed in principle to lower tariffs on the European Union. In exchange, the president of the European Commission promised to buy billions of dollars of soybeans and natural gas from the U.S. And this raises several questions we wanted to try to answer. How does this fit in with how American presidents have conducted economic policy in the past? And we also want to know whether this will actually help or hurt the economy in the long run.
To talk about this, we've called Greg Ip. He's chief economics commentator for The Wall Street Journal. He's here in our Washington, D.C., studios, and he wrote about this this past week. Greg, thanks so much for joining us.
GREG IP: Thanks for having me.
MARTIN: So, first of all, let's just start with the premise of how this president conducts economic policy. The shorthand that a lot of people are using is that he's picking winners and losers. Do you think that's the right terminology, and is this something that American presidents have done in recent history?
IP: It's certainly terminology that he wouldn't agree with, but I think it probably does fairly reflect reality. Historically, presidents in the United States were very uncomfortable with the idea that we were going to favor this industry at the expense of that other industry. Now, it's true that if you go back to the 1700s and 1800s, we did used to have a policy of high tariffs, but we really haven't followed that policy since the 1950s.
Trump is really taking us in a very different direction here. It's not just that he believes other countries have unfair policies. He believes things like a country like the United States needs a big, strong, robust, steel and aluminum manufacturing industry. It needs to manufacture more cars here even if that means Americans have to pay more for steel and more for cars. That is what's different. And he's using quite a few different levers of the federal government to try and push the economy in that direction.
MARTIN: And on top of that, I mean, one of the levers that he's using - he announced a plan to provide $12 billion in emergency aid to farmers who may be hurt by the tariffs that he's imposed because other countries have imposed retaliatory tariffs on American products, particularly food. And lawmakers from both parties have criticized this. Republican Senator Ron Johnson of Wisconsin said, we're becoming more and more like a Soviet type of economy here. Commissars deciding who's going to be granted waivers. Commissars in the administration figuring out how they're going to sprinkle around benefits. Now those are pretty strong words, but is that accurate?
MARTIN: Or fair, let me put it that way.
IP: We're definitely not back in the old 1980s Soviet-style central planning days. But there's no question that the more the federal government intervenes in the economy whether it's to apply tariffs to these but not to these, bail out these farmers but not these industries, that somebody has got to make the decisions about who gets what. Other countries have been happy to do this. If you look at China, that's more or less how they've been managing their economy for the last 20 or 30 years. But in the United States, we've often prospered by allowing our sort of competitive advantages, which are basically risk taking, and entrepreneurialism, and our really good higher education system to determine what businesses are going to win.
MARTIN: What motivates the president's focus on these specific industries? Is there an underlying principle of Trump's economic policy? If so, how would you describe it?
IP: There's a mixture of policies here, and that's one reason why I think it's difficult to step back and say there is a single overarching industrial policy here. Part of it, frankly, is nostalgia. He has a vision of the United States when the U.S. steel makers and auto companies stood astride the world and all our cars were made here. That is a world of many years ago. The United States has moved on. We have other industries that we're good at, and some of the less-skilled jobs have moved abroad. He has a view that national security is endangered by not being able to make certain things at home. To a certain extent, he's right. But it's perhaps a little bit more doubtful that, say, treating Canada or Japan and Korea as national security threats is a credible approach to those things.
And finally, and here's what's very important, is that there really is a case to be made that China specifically has been pursuing trade practices that are harmful to the United States economy and its national security. They basically don't allow American companies to sell or export to the Chinese market with the same freedom that they export to ours. They force American companies to hand over their best technology. Sometimes they steal that technology, and that takes away the very competitive advantages that make Americans richer over time. And to his credit, Trump has been much more forceful in confronting China about those problems.
MARTIN: And as we mentioned, we also learned yesterday that the economy reached a 4.1 percent growth rate in the second quarter. It's a cliche that presidents take credit for strong economic growth and they don't want to take blame for poor economic growth or the lack thereof. But what about that number?
IP: That's a great question, and you're absolutely right. A president who did not take credit for great economic numbers would be guilty of malpractice. That's basically what you in politics. Now, we know that that 4 percent number was partly inflated by the fact that a lot of farmers were shipping out soybeans and other products to try and beat the imposition of tariffs from China - some of that will be unwound. But if you look beneath the surface, the economy is doing really well. It's growing at about a 3 percent annual rate. Trump should be very pleased with that. Now, we were also growing at a 3 percent rate back in 2014 or 2015, and it didn't last.
So I think the real question is, when you look below the surface, do you see signs that we are getting out of this low-growth funk? And I would say there's some modestly small positive signs. But once again, it's just too soon to know whether that will last. And I think the more specific issue of whether Trump's trade policies are really behind this - no, not really. The tariffs are relatively new. He's certainly working hard to get a lot of new trade deals. But other than a very modest change to our trade deal with South Korea, there really hasn't been anything there.
MARTIN: That's Greg Ip. He is chief economics commentator for The Wall Street Journal. Greg, thank you so much for joining us.
IP: Great to be here. Transcript provided by NPR, Copyright NPR.