Thursday, May 31, 2018

To Reliate or Not, That is the Question

What is a betrayed ally of the United States to do when Donald Trump raises tariffs on important sectors?  Retaliation seems irrational since it hurts oneself as well as the US--it makes products expensive for consumers and hurts industries that rely on those products for their own goods.  If one uses American steel for one's pipes (oops), and one raises tariffs (remember, a tariff is a tax on an import) on that steel, then the pipes become more expensive.

But to do nothing?  That ain't good either.  First, it reinforces Trump's believes that "maximal pressure" works, although Trump's extreme confirmation bias means he does not really notice when behavior contradicts his expectations.  Second, the key logic for trade has long been reciprocity--that one responds to cooperation with cooperation and one responds to defection with defection.  Third, there is a domestic political logic that can't be ignored--doing nothing in the face of this would give plenty of ammo to the opposition parties.  Fourth, there is an international political logic as well--that it unites Canada with Mexico, the EU, and probably Japan.  This might help foster more cooperation among these actors, whereas Canada sitting out this round of retaliation might leave it alone.

What I don't know is how the list of items to be sanctioned lines up with ... Congress. When the EU threatened sanctions, they targeted Republican leaders via key products--bourbon to hurt Senate Majority Leader McConnell and Harley Davidson to hurt Paul Ryan as those products are made in McC's state and Ryan's district, respectively.  Soya sauce?  Prepared mustard?  Sleeping bags?  Automatic dishwasher detergents?  Whiskies?  The list seems random, but I can guess one of two logics or both--either these line up with key districts and states in the US so that it mobilizes key politicians in Congress OR it is a way to protect Canadian sectors that are currently suffering and/or in key Canadian ridings (that is Canadese for electoral district).

Update: here's an article that explains the targets and their political logic

I am betting on the former so I made this pic:
Given all of the bad policy options, having targeted retaliation that meets the value of the American sanctions "dollar for dollar" makes sense to me. It ain't great, and tit for tat reciprocity can foster cooperation or unending spirals of conflict.  But I can't see there being another option.  Unlike, say, pipeline politics.

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