Trump is finally vindicated on tariffs

Trump is finally vindicated on tariffs
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The aggressive strategy President TrumpDonald John TrumpWhite House counsel called Trump 'King Kong' behind his back: report Trump stays out of Arizona's ugly and costly GOP fight Trump claims he instructed White House counsel to cooperate with Mueller MORE has taken on trade was vindicated this week as European Commission President Jean Claude Juncker agreed to work toward the elimination of tariffs on U.S. industrial imports in return for the same treatment from the United States. This relationship will increase markets for American small business exporters, who face E.U. tariffs that are roughly 40 percent higher than those imposed by the United States, according to World Trade Organization data. It will also allow American consumers to purchase European goods at cheaper prices, putting more money in their pockets and stimulating the U.S. economy. Notably, the deal also includes promises from the European Union to import more soybeans and natural gas.

This trade agreement will be freer and fairer than the recent trading relationship between the two blocs. It is unlikely that it could have been achieved without the negotiating leverage provided by Trump’s recent tariffs on E.U. goods and threats of more to come. While critics of the administration have rightly pointed out that these tariffs act as a tax on American consumers and small businesses that use imports as inputs, they have not accounted for the fact that such pain in the short term is necessary for gain of a trade reset that equalizes tariffs in the long term.

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With his business instincts, Trump likely recognizes that now is the perfect time to pursue such a trade reset and the temporary pain that goes along with it, given the current economic and labor market strength. Today, the Bureau of Economic Analysis announced that second quarter growth was at a strong 4.1 percent. The national unemployment rate has hit a generational low, with record low rates for minorities across the country. Small business confidence is soaring near a record high, and wages are growing at their fastest pace in a decade.

In other words, the economy can take the small hit associated with tariffs right now in return for the sustained prosperity that will come with freer and fairer trade. Just as any business person would do, you use the good times to fix the problems that existed in the bad times. The analogy of a broken arm here helps make the point: Resetting the fracture is painful but necessary for it to function at peak performance for the long term.

Now the trade attention shifts to China, which will be a more difficult negotiation. According to the World Trade Organization, Chinese tariffs are nearly three times larger than U.S. tariffs, putting American small business exporters at a competitive disadvantage with their Chinese competitors. There are also intellectual property concerns associated with Chinese manufacturers stealing patented U.S. technology.

But China is arguably a more important trading relationship than the one with the Europe Union. The Chinese middle class is bigger than the entire U.S. population. American exporters look at the Chinese market with dollar signs in their eyes. Many American farmers are dependent on the Chinese market. For example, one-third of soybeans, our second largest crop by a wide margin, grown in the United States are sold in China.

This is why Trump has taken an even more aggressive trade stance with China, placing tariffs on roughly half its imports and threatening tariffs on all of them. Like with the European Union, these tariffs put us in a better negotiating position to demand the reduction of Chinese trade barriers in order to expand markets for American small businesses and farmers.

American consumers and small businesses are hoping that the president can quickly replicate the newfound success with the European Union with China to negotiate a freer and fairer trading relationship with our Asian trading partner than what has existed in the past. This would put more money in the pockets of consumers and small businesses, stimulating the economy and labor markets even further, more than making up for any small economic contraction associated with temporary tariffs.

Trump is the first business president of the modern era. His negotiating tactics may be a little to tough for the Beltway elite. But as the deal with the European Union this week proves, they are exactly what is needed to fix this longstanding trade injustice for American businesses. With the strongest economic and labor market results in recent history, the president has earned some wiggle room to take some seemingly unorthodox moves for the betterment of our country in the future.

Alfredo Ortiz is president and CEO of the Job Creators Network.