Comment on “US Trade Policy in the Trump Administration”

• DOI: http://doi.org/10.1111/aepr.12228
• Author: Akihiko Tanaka
• Published date: 01 July 2018
• Date: 01 July 2018

Comment on “US Trade Policy in the Trump

Administration”

Akihiko TANAKA†

National Graduate Institute for Policy Studies

JEL codes: F1, F13, C54

Accepted: 27 February 2018

Noland (2018) successfully puts the Trump administration’s trade policy in an accurate

economic perspective and analyzes, quite sensibly, the negative to catastrophic implica-

tions of various scenarios of the actual implementation of some or all of Mr. Trump’s

campaign promises. In addition to presenting such policy impacts based on simulation

models, Noland also provides useful information on recent trends of “new protection”,

the implications of renegotiation and possible abrogation of the North American Free

Trade Agreement (NAFTA) and the U.S. legal framework surrounding “currency

manipulation.”

A full trade war between the U.S. and China, according to the Noland, Robinson

and Moran model, could have a catastrophic impact on the U.S. economy (see

Noland’s (2018) Figures 1 and 2, and Tables 1 and 2). The model is extremely infor-

mative in that it gives differential impacts on different states and regions. Overall,it is

not reassuring that the states that would be affected worst include Washington, Massa-

chusetts, California and Michigan. Although even Mr. Trump would not dare to start

a trade war that would only have devastating economic impacts on the “blue states,”

he might possibly underestimate the negative impacts of a trade war believing the dev-

astation is limited to them.

In addition to a full trade war scenario, Noland also provides some simulation

results for various cases of different Chinese retaliation against specific sectors such as

aircraft, soybeans, and business services. It is of interest that the worst affected area by

soybean retaliation could be “a band of rural counties running from Mississippi,

through Arkansas, Tennessee, and into Missouri, with 21 counties experiencing a

10 percent or greater decline in employment.”In other words, depending on China’s

reaction, a trade war could have significant negative impacts on the regions that have

large numbers of Trump supporters.

So far, such a trade war has not happened. Given the persuasiveness of the devas-

tating impact of the Noland’s simulation, this is not surprising. It would be an act of

irrationality to start such a trade war. But Noland reminds us that there is a different

†Correspondence: Akihiko Tanaka, National Graduate Institute for Policy Studies (GRIPS),

7-22-1 Roppongi, Minato-ku, Tokyo 106-8677, Japan. Email: a-tanaka@grips.ac.jp

© 2018 Japan Center for Economic Research 281

doi: 10.1111/aepr.12228 Asian Economic Policy Review (2018) 13, 281–282