Notes From Underground: But National Security IS Trade Policy

Tonight I am LINKING to the March 1 post about the White House discussed invoking Section 232 of the Trade Expansion Act of 1962. In an effort to justify the idea of placing tariffs on U.S. allies to curb steel and aluminum imports, Commerce Secretary Wilbur Ross noted that a strong steel sector is essential for U.S. national security. Section 232 is so broad that it is organic and can used to justify any action the U.S. deems necessary in regards to trade. In a CNBC interview on Thursday, Ross cited Section 232 again and wrapped it into the tariff discussion by maintaining that we must be strong economically to be strong militarily. Later in the interview he pressed that there can be no military security without economic strength.

But Ross tripped over himself when he expressed disdain for America’s allies for failing to confront the global oversupply of steel and aluminum through collective action. Well Wilbur, is it national security or global over-capacity that’s the justification for invoking trade tariffs including on automobile imports? The Trump administration is way out of bounds in raising Section 232 as the rationale for creating trade friction with long-time allies.

Invoking a piece of legislation that was written into Law October 11,1962. That’s correct, in the middle of the Cuban Missile Crisis. The White House is invoking this section in an effort to muscle up its trade stance. This is the lawyering activity of Robert Lighthizer. Everything can be cloaked in national security when words are stretched enough. Trade in the world of a FIAT RESERVE CURRENCY is a far more complex problem than mere invocation of national security concerns. Did the rules change with the end of the Bretton Woods fixed-currency era?

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11 Responses to “Notes From Underground: But National Security IS Trade Policy”

  1. Stefan Jovanovich Says:

    When Mark Twain said that the only native criminal class among Americans was our Congress, he was reminding his audience that the members were almost all lawyers. Yra is most certainly not guily of that original sin, but I and some of his other fans definitely are. That is our excuse for knowing that Roosevelt abolished the Constitutional requirement that money be Coin was through his exercise of authority as Commander in Chief under the Trading With the Enemies Act enacted in 1917. Trump’s use of his Executive authority under the national security provisions of the Trade Expansion Act may seem utterly perverse to sensible people, but his legal authority is, if anything, more solid than Roosevelt’s was. The Constitution allows the Commander in Chief to enforce tariffs and excises; it does not give the President and Congress authority to veto the requirement that U.S. legal tender be defined by weight and measure.

    • yraharris Says:

      Stefan–I am not minimizing the lawyerly aspect of this White House attempt which is why I have maintained that Lighthizer,a very capable strategist is the brain behind the efforts with Wilbur Ross an old hand at negotiating vulture debt is the attack dog.But I am bothered that utilizing laws drawn up in crisis times for political expediency lead to almost as much turmoil as academics promising utopia and nirvana by relying on their philosophical constructs—I am not crying Wolfe as we head to the Lighthizer.

      • Stefan Jovanovich Says:

        Thx, Yra. I am afraid that I don’t know of any times when Congress and the President have not acted out of political expediency using laws drawn up in crisis times – not where foreign exchange and domestic credit are concerned. The supposedly sane and stable status quo has its origins with the the Gold Reserve Act and Exchange Stabilization Fund and Harry Dexter White’s creations – the IMF and World Bank – all of which were products of crisis thinking and truly bent theorizing. (The failure of any current discussions of Russian influence in the White House to include reflections on White’s status as a Soviet agent is proof that very little of the history of how we got here is acknowledged by either the utopian academics or the mandarins who have presided over the Bush/Clinton/Obama New World Order.)

        Trump’s Lighthizer/Navarro “plan” seems to me quite transparent. There is no way Trump voters can compete directly against wage rates determined in large measure by open immigration from Mexico and untaxed imports. A tariff and a Wall are the means by both domestic wages and employment levels can increase. This is predicted to be awful for “inflation” because the prices of the goods on the shelves at Wal-Mart and on the web at Amazon will rise. It is predicted to be awful for exports because there will be retaliatory tariffs against American grains and Boeing aircraft. What is not predicted is the net decline in U.S. exports of dollars (both from lower volumes of imports and increased tax collections against foreign dollar accounts) or the FX traders’ anticipation of these events – i.e. the bidding up of the dollar vs. the Euro, the Canadian dollar and the peso.

  2. Arthur Says:

    Cars are the most traded product in the world by value, according to the MIT Observatory of Economic Complexity. And America is the world’s largest importer.

    There is madness, but perhaps also method, in Trump’s trade policies. Make threats, strike deals, declare victory.

  3. asherz Says:

    December 7, 1941. Pearl Harbor is attacked and President Roosevelt soon declares that we are at war. The government goes into action to produce tanks, artillery, destroyers and planes. But we import all our steel and aluminum from abroad. We requisition all these commodities from our foreign suppliers. However they are largely unable to fill our orders as they are under attack by the Germans and Japanese. The oceans have enemy submarines that sink the merchant ships that are attempting to reach our shores.
    What do we do now?

    • Yra Says:

      Asherz—that period was in the depression when moth-balled excess capacity was re outfitted for war–my dad worked in a Ford plant converted for such because heading off to the Air Corp–but this implies that the next war will be fought at it was eighty years ago–the U.S. still produces the greater majority of its steel needs and has capacity to meet what ever is required —-so that argument I am not buying

      • Asherz Says:

        Yra- That’s arguable.

        However the tariffs most agree that in general are not a good thing.
        However reading President Trump’s SOP it is a tactic. Walk away from Singapore, and the NK representative flies to Washington and June 12 is on. Cancel Iran Nuclear Deal and the Ayatollah is back on his heels with Russia backing Iran movement back in Syria.
        Saddam’s climbing out of the rabbit hole and Qaddafi hands over his nuclear weapons.
        The tariffs will be short term with many concessions received from our trading partners.
        Peace through Strength.

  4. massivedeplorable Says:

    While I agree with the author’s premise that fiat currency manipulation is a far bigger problem than any other (relative to this argument) I believe Trump is an incrementalist. First build up national wealth by keeping our production at home- be it oil, steel, et al, then when possible attack the fractional reserve Central Banking system. IMO there is no way to cut out THAT cancer without killing the already weakened patient.

  5. Steve M Says:

    Similar to the issue in the current NAFTA negotiations where Canada is being accused of blocking U.S. dairy products from their supply chain. It has more to do with U.S. over capacity looking for a place to dump the excess product. It comes down to who is the bigger bully in the room. The G-7 meeting starting today should be quite the fireworks show.

  6. Arthur Says:

    Yra, don’t forget! Waiting your top list.

    “A theme I am developing is to measure the most significant or dangerous persons to the global or domestic investment environments.”

  7. Asherz Says:

    Trump’s tariffs are just the cudgel he is using to get fair trading practices. The legal justifications are not the key. Why should a Chevy coming into Hamburg be charged a 10% tariff while a Mercedes coming into
    New Jersey be charged 2.5%?
    What should and maybe will happen is that ALL tariffs on automobiles traded between the EU and America are eliminated starting with Germany. The consumer will benefit. And as robots take on a larger part of the cost of labor, free trade becomes more viable.
    What appears to be a dumb policy to some is quite sensible if one takes the long view.
    Sometimes war is necessary to achieve a secure peace.

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