Im-Politic: Why His Adversaries Could be Underestimating Trump Again

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Although the Democratic Party often seems to have gone identity politics-crazy, even many in its identity-obsessed progressive wing believe that President Trump won’t be defeated in the 2020 Presidential election unless the party improves its performance with non-college educated white voters, many of whom work in so-called blue collar industries like manufacturing and fossil fuel extraction. Many of these progressives (including the Mainstream Media journalists who often carry their water) have claimed that this constituency is ripe for the retaking thanks to alleged Trump policy failures or blunders on trade, tax reform, and healthcare, and proceed to cite evidence that the President’s backing in this segment of his coalition is fading significantly.

Given the latest Trump healthcare position – which I agree is block-headed – and his penchant for inconsistency on core issues like immigration as well as trade, I’d be the last person to dismiss this analysis as naive. The more so if Democrats nominate a 2020 candidate with at least some credibility on blue collar social and cultural as well as economic concerns.

But if you’re looking for reasons for deep skepticism, look no farther than a recent account of a Trump Ohio factory visit from B.J. Bethel, of Dayton, Ohio’s WDTN TV. Bethel, (who in the interest of full disclosure, is also a personal friend), covered the President’s March 20 appearance at a Lima, Ohio tank factory.

Mr. Trump’s prospects in Lima seemed mixed. On the one hand, his defense budget proposals have kept the factory open following talk during the Obama administration of closing it. On the other, his trip came two weeks after General Motors completed (for now) the shutdown of a big auto assembly plant in Lordstown in northeastern Ohio – despite Mr. Trump’s campaign pledge to keep the facility open. Moreover, since the Lima factory makes weaponry, its non-supervisory workers belong to government employee unions, which have been especially critical of the President at least partly since their members haven’t been directly affected by the kinds of offshoring-friendly trade policies and Open Borders immigration policies of his predecessors.

Nonetheless, as Bethel wrote for WDTN’s website, “Trump received a rousing ovation when he entered the floor where the speech was held.” His speech was “loved” by the attendees he interviewed. And the President seems to have received his biggest cheers when he “hit hard at union leaders while praising union workers, stating the leaders often say one thing and do another.”

According to Bethel, “‘They’re [the union leaders] good guys, but they’re Democrats,’ Trump said.

He mentioned ‘high union dues’ paid by workers and the shifting of blue collar allegiances from Democrats to Republicans.

This was the only instance of his speech where the crowd chanted ‘Trump, Trump.'”

In some subsequent Twitter direct messages, Bethel elaborated:

Trump goes off on Lordstown, and blames the union leadership for some of the issues GM had at the plant, which I think is debatable, but Trump is savy, he knows what he’s doing.

He talks about union leadership, and he’s so casual in this speech, and he says, ‘I’ve invited union leaders into the White House, I asked them what can we do, they’re extremely nice people, THEY AREN’T LIKE US, THEY’RE DEMOCRATS THOUGH and they’re always going to be democrats, so you know, they go with Hillary while I’m trying to save jobs.’

Then he pivots to this and it’s the most amazing thing I’ve heard a politician do.

He starts hammering union leadership on the basis of how they treat the rank and file in the union. Basically they aren’t doing what’s necessary to back up the money they make and aren’t doing everything they need to do to. And look at the dues you pay, how much do you pay in dues a week or year and how much do you get out of it?

So how does the crowd react?

It roars, ‘TRUMP, TRUMP, TRUMP, TRUMP’ – only time during the entire speech he had his name cheered.

This is a huge union plant. It’s public union, as solid as it gets, their own committeeman are sitting around with them, and they’re cheering Trump as he bashes the leadership.”

As Bethel concludes, “so the GOP is working the unions hard, even the public unions. Trump beats up the leadership, while the rest go in soft. it’s a strategy to completely usurp union workers and complete taking over the working class.”

What’s especially interesting is that this Trump event was extensively covered by the Mainstream Media – as is almost all presidential travel. But the overwhelming focus of the coverage was the President’s attacks on his longtime political adversary, the late Republican Senator John McCain. (See, e.g., here and here.) 

I can’t possibly fault the journalists attending the speech from zeroing in on the McCain remarks. But revealingly, none of the coverage I’ve read (produced mostly by White House correspondents who tend to be politics-oriented, especially as national political campaigns heat up), mentioned the crowd’s reactions to the union-leader bashing by Trump.

The President has been erratic enough to render hazardous any predictions about the 2020 election. But the same Mainstream Media correspondents who overlooked the union rank-and-file response to the President in Lima belong to the same journalistic complex that was taken completely by surprise by Mr. Trump’s 2016 victory – and especially by his strength in the industrial Midwest. Their Lima coverage raises the question of whether they’re about to miss the mark again.

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Making News: China Trade Talks National Radio Interview Podcast Now On-Line…& More!

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I’m pleased to announce that the podcast of my Thursday night interview on John Batchelor’s nationally syndicated radio show is now on-line.  Click here for a timely update on the fast-moving U.S.-China trade talks provided by John, me, and co-host Gordon G. Chang.

And to follow up, yesterday, the Daily Beast website posted Gordon’s column on the somewhat surprising result of these talks’ latest round – which ended with no announcement that a deal has been concluded or is close enough to warrant scheduling a U.S.-China signing summit.  Here’s the link.

Also, it was great to see IndustryToday.com last week reprint my recent post on the encouraging latest set of monthly U.S. trade figures released by the Census Bureau.  Click here to see it.

And keep checking in with RealityChek for news of upcoming media appearances and other developments.

(What’s Left of) Our Economy: Hold the Gloating on Tariffs and Manufacturing Jobs

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Even though today’s March U.S. jobs figures overall improved dramatically on their February counterparts, the employment story in domestic manufacturing remained remarkably similar: Generally speaking the results were dismal. But the internals still don’t reveal any connection with President Trump’s tariff-heavy trade policies.

Let’s start by reviewing the manufacturing-wide March jobs performance. Industry’s payrolls dropped by 6,000 month-to-month – their first such decrease since July, 2017’s 3,000 dip. At least as bad, the weak 4,000 sequential jobs gain initially reported for February was revised down to 1,000.

As a result, March’s 209,000 year-on-year employment increase in manufacturing was the sector’s worst annual advance since February, 2018’s 206,000 net drop.

But the tariff-test effect can only be seen upon examining the results for the manufacturing sectors most heavily affected. The best evidence comes in metals-using industries. That’s partly because Mr. Trump’s steel and aluminum tariffs marked their first birthday in March and now we have data (though still preliminary) for eleven months of their first year in effect. But it’s also because the jobs data so precisely tracks trends in those sectors.

The first table below presents the results since last April – the first full month during which the tariffs were imposed – for leading metals-using sector. As has been the case consistently during the metals tariffs era, the latest figures show that most of the metals-using industries (three out of five) have out-hired the manufacturing as a whole (non-electrical machinery, fabricated metals products, and aerospace through February) and two (non-electrical machinery and aerospace through March) have created jobs at a faster pace even than the entire private sector.

The big automotive sector, of course, is a noteworthy laggard on both scores, and suffered an especially bad March. Appliances are dealing with not only metals tariffs, but separate levies on household washing machines. But in terms of momentum, fabricated metals products (whose payrolls exceed automotive’s) have held their own, and non-electrical machinery (which also employs more than motor vehicles and parts makers) has actually picked up the pace.

So because the industries most seriously affected by metals tariffs have generated such disparate employment results, blaming the metals tariffs for whatever problems they’ve been displaying seems unjustified. Clearly, their performance is explained by many other, including many other more important, factors.

                                                     Old thru Feb       New thru Feb       Thru March

entire private sector:                  +1.64 percent      +1.64 percent       +1.78 percent

overall manufacturing:              +1.58 percent      +1.53 percent       +1.48 percent

durable goods:                           +2.04 percent      +1.94 percent      +1.85 percent

fabricated metals products:       +1.60 percent      +1.60 percent      +1.60 percent

non-electrical machinery:         +2.82 percent      +2.71 percent       +2.76 percent

automotive vehicles & parts:   +1.11 percent       +1.04 percent       +0.40 percent

household appliances:               not available        -3.63 percent        not available

aerospace products & parts:      not available      +6.40 percent         not available

The same range of employment results emerges from the manufacturing sectors that seem to be most seriously impacted by the Trump administration’s tariffs on imports from China. But much less confidence should be placed in these figures for three reasons. The first levies imposed have only been in place since last July. The match-ups between the products on that first tariff list and the categories tracked by the Bureau of Labor statistics are much less exact. And statistics for many of these categories are available only through February.

Nonetheless, here’s the best I could come up with. And this month, I’ve added overall private sector data, plus two more items I could identify from that first tariff list, to provide one more point of comparison.

                                                             Old July-Feb   New July-Feb   July-March

entire private sector                           +1.10 percent   +1.10 percent   +1.24 percent

overall manufacturing                       +1.00 percent   +0.94 percent   +0.90 percent

aircraft engines and engine parts:      not available    +0.93 percent    not available

industrial heating equipment:            not available    +2.35 percent    not available

oil and gas drilling platform parts:    not available    +5.97 percent    not available

farm machinery and equipment:        not available    +1.83 percent   not available

ball bearings:                                     not available    +1.54 percent   not available

med/surgical/personal aid devices:   not available    +1.34 percent   not available

X-ray & electro-medical equip:        not available    +2.91 percent   not available 

If anything, when it comes to employment, the China-affected sectors have outperformed the rest of manufacturing and the overall private sector to an even greater extent than the metals-using sectors. (Interestingly, moreover, all these China-affected sectors are heavy metals users as well – so like appliances, they’re impacted by two sets of tariffs.)

So it’s starting to look like President Trump, and the economy as a whole, are looking at diminishing domestic manufacturing jobs mojo. But so far, his trade policy doesn’t belong on the list of culprits.

Glad I Didn’t Say That! The IMF’s Muddled Message on Trade and Productivity Growth

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[S]ince the mid-1990s….declining tariffs have lifted [worldwide] productivity ….”

International Monetary Fund, April, 2019

Over the past decade, there have been sharp slowdowns in [worldwide] measured output per worker and total factor productivity….Even before the global financial crisis, productivity growth was slowing in many advanced economies, such as the United States….”

International Monetary Fund Managing Director Christine LaGarde, April 3, 2017

 

(Sources Chapter 4, “The Drivers of Bilateral Trade and the Spillovers from Tariffs,” p. 103, World Economic Outlook, April, 2019, International Monetary Fund, https://www.imf.org/en/Publications/WEO/Issues/2019/03/28/world-economic-outlook-april-2019#Chapter%204 and “Reinvigorating Productivity Growth,” by Christine Lagarde, Managing Director, International Monetary Fund, American Enterprise Institute, April 3, 2017, https://www.imf.org/en/News/Articles/2017/04/03/sp040317-reinvigorating-productivity-growth )

 

Making News: Back on National Radio to Update the China Trade Talks…& More!

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I’m pleased to announce that I’m scheduled to appear twice tonight on the broadcast media on trade-related issues.

At 8:10 PM EST, I’m slated to be interviewed on Israel’s i24News on President Trump’s recent threat to close the U.S.-Mexico border (or at least parts of it) in response to the immigration-related emergency situation he sees there.  This TV network is available on-line only via subscription, but it does offer free trials that would enable you to watch tonight’s segment if you register on time.  Click here to sign up.

At 10 PM EST, I’ll be returning to John Batchelor’s nationally syndicated radio show to help provide an update on the (reportedly) fast-moving U.S.-China trade talks.  Click here to listen on-line to the segment, which will also feature co-host Gordon G. Chang. As usual, I’ll post a link to the podcast as soon as one’s available.

And keep checking in with RealityChek for news of upcoming media appearances and other developments!

(What’s Left of) Our Economy: Why a China Trade Deal Still Looks Unenforceable

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Yesterday’s Financial Times contained the latest in a long string of press reports – often coming after similar administration pronouncements – that the United States and China are close to concluding a deal that will resolve much and even most of their current trade conflict.

Even with Chinese Vice Premier Liu He currently in Washington, D.C. for the second round of high level talks within a week, heaven only knows if it’s true, given President Trump’s unpredictability; given the repeated (but again, only reported) postponements of a summit between Mr. Trump and his Chinese counterpart, Xi Jinping; and given how fundamental disagreements about enforcement seem to be among the final remaining obstacles.

Nonetheless, this most recent news provides as convenient an opportunity as any to review why enforcement will be not only difficult, but so difficult that it’s tough to see how a system satisfactory form the U.S. standpoint can be created.

In the first place, problems I’ve identified from the start (see, e.g., most recently, this op-ed) remain firmly in place. Chiefly, the Chinese regime has always prioritized keeping its own people in the dark about its policies and practices. That’s why it not only has never created any means of providing transparency and accountability to the Chinese public. Because they understand that knowledge is power, and because maintaining power is its paramount goal, Chinese leaders emphatically reject such principles. And if Beijing is so determined to keep secrets from its own compatriots, why would it share such knowledge with foreigners?

China’s secretiveness and equally strong rejection of Western-style rule of law also mean that the regime’s most important decisions aren’t written down even for most Chinese to see, much less foreigners. And what is written down is typically too vague to be informative. So good luck trying to document Chinese violations of any agreement.

To its credit, the Trump administration appears aware of these difficulties – which is why what it’s divulged about its enforcement proposals depart from the standard American approach of relying on the World Trade Organization (WTO) to resolve disputes and, more important, insist on some degree of American unilateral authority to punish transgressions with tariffs (rather than giving China any authority to block such moves).

Unfortunately, the Trump enforcement approach still looks incapable of promoting and defending American interests adequately. Take the new wrinkle mentioned in the Financial Times piece: “One possible [enforcement] compromise could involve a gradual lifting of US tariffs [imposed in recent months by President Trump] based on specific triggers and implementation dates….” China’s aforementioned secrecy raises major questions concerning how those triggers (presumably Chinese steps to come into compliance) would be identified. And it’s clear that, so far, Beijing isn’t on board even with this questionable idea.

Congressional testimony by the chief U.S. trade negotiator, Robert Lighthizer, revealed similarly flawed American ideas. According to this summary, Lighthizer told the House Ways and Means Committee in late February that “The US and China have agreed to an enforcement mechanism” that “would consist of monthly meetings at the office director level, quarterly meetings at the vice-ministerial level and semi-annual gatherings at the ministerial level, with these last meetings convened by Lighthizer and…Liu He, the top US trade negotiator testified….

Lighthizer said the deal-enforcement meetings would allow government representatives from both sides to raise concerns and get them addressed. The meetings would be a chance for Washington to air complaints about any systemic problems, and to pass on any specific grievances issued to the US administration from American companies, he said….If the problems ended up at the ministerial level and could not be resolved there, then the US ‘would expect to act unilaterally’, he said. ‘Proportionally, but unilaterally.’”

But the very complexity of this structure indicates that China is going to enjoy substantial opportunities to haggle for months over any accusations – and possibly long enough for circumstances to change enough to render eventual American tariffs moot.

Ironically, moreover, the Chinese are also likely to take advantage of an American attempt to overcome one of the longest standing hurdles to enforcing deals with Beijing effectively: U.S. companies’ well-founded fear of facing Chinese retaliation if they accuse China of predatory practices publicly. On the one hand, the Trump administration’s stated willingness to bring anonymous corporate complaints would appear to solve the problem by shielding these firms. On the other, what could be easier than for Beijing to respond that it can’t fix a specific problem that an accuser’s anonymity prevents it from identifying precisely?

Finally, Lighthizer’s emphasis on proportional responses both makes any punishments eminently bearable by the Chinese economy, and belies his (accurate) description of many predatory Chinese practices as “systemic.” After all, precisely because they’re systemic, by definition they’re both widespread and approved by the Chinese government. Responding in a limited, indeed tit-for-tat, manner will almost certainly be seen by Beijing as a green light to continue violations of the agreement provisions in question everywhere else possible.

As a result, nothing known about the Trump administration’s enforcement strategy should give anyone confidence that satisfactory enforcement is possible. Which should be no surprise to anyone who’s been monitoring U.S.-China trade and commerce in general dispassionately. Decades of experience should by now have clearly taught the lesson that, at least under the present Chinese regime, mutually beneficial economic ties were never possible. It makes just as little sense to suppose that Beijing will agree to a mutually beneficial enforcement system, either.

(What’s Left of) Our Economy: More Signs That U.S. Metals’ Tariffs are Winning

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As known by readers of RealityChek, President Trump’s tariffs on metals have worked out impressively since their imposition in March, 2018. Specifically, domestic output in tariff-ed steel and aluminum has rebounded impressively, and employment has increased, too. Price inflation has been contained. And partly as a result, production and hiring in the metals-using sectors widely predicted to become major victims of these levies generally have outperformed that of the rest of American industry.

But looking at steel production around the world provides additional evidence of the tariffs’ success – and especially of the administration’s widely assailed decision to apply them across-the-board (which numerous product-specific exemptions to be sure) rather than confine them to China. President Trump’s critics argued (correctly) that it was China whose bloated, government-subsidized output was mainly responsible for distorting global steel trade flows and output patterns.

But the Trump administration and domestic steel producers justified the comprehensive approach by claiming that many other steel-making countries were compensating for Chinese pressure on their own steel sectors by ramping up their exports to the wide open U.S. market, or permitting Chinese steel to be sent to the United States after passing through their ports, or some combination of the two (a practice known as transshipment).

The evidence for success on this crucial front comes from the World Steel Association (WSA), an international industry group that claims its members combine to turn out 85 percent of global output. (So there’s no reason to suppose that its findings are unduly influenced by the tariff-supporting domestic U.S. steel sector.)

Each month, the WSA releases steel output data (in volume terms) for 64 countries that it claims account for 99 percent of world production. And as you can see from the table below (calculated from the statistics found here), a stunning change has taken place in global output patterns since the American tariffs’ onset.

Chiefly, the month before the tariffs began, both Chinese steel production and global steel production were both growing considerably faster than America’s on a year-on-year basis. This past February (the last month for which data is available), Chinese output was still outgrowing the world’s as a whole – but so was U.S. steel production.

And as is evident, the American industry has consistently outperformed its collective global counterpart – as well as Chinese steel-makers for the most part – for several months. The clear implication: Because the tariffs have been worldwide in scope, they’ve shut down opportunities for other countries to cope with the China problem at America’s expense.

The figures also demonstrate that Chinese steel output remains feverish despite Beijing’s numerous promises of restraint and capacity cuts. But as long as the other steel-producing countries – many of which are clearly getting squeezed as a result – keep foot-dragging on cooperative efforts to end the Chinese world steel glut, the universal Trump tariffs will keep the United States in the enviable position of being able to say, “Not our problem,” and “mission accomplished.”

Steel output y/y    Feb.        Jan.       Dec.       Nov.       Oct.       Sept         Feb. 18

World                  +4.1%   +1.0%    +4.2%     +5.8%    +5.8%    +4.4%      +3.5%

China                  +9.2%    +4.3%    +8.2%    +10.8%   +9.1%    +7.5%     +5.9%

US                      +4.6%  +11.0%   +12.4%   +11.8%  +10.5%    +9.0%     +0.4%

Im-Politic: After Mueller/Barr, Can Trump Be Trump?

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A week ago, I posted on the likely political impact of the end of Special Counsel Robert Mueller’s investigation of what have become known as the Trump-Russia scandals and of the release of Attorney General William P. Barr’s summary of its principal conclusions – which appear to put these charges and the threat of presidential impeachment they created behind Mr. Trump.

Now it’s time to think about a related and at least equally important subject: the policy effects. They could be profound enough to redefine the Trump presidency and the chief executive’s chances for reelection – even though the early indications seem to be saying exactly the opposite in ways that are sure to disappoint much of Mr. Trump’s political base. Here’s what I mean.

Ever since his administration’s opening months, I’ve believed that Mr. Trump’s policy choices have been strongly influenced by impeachment fears. Specifically, (and I have zero first-hand knowledge here) because President Trump feared that the Democrats and many mainstream Republicans were after his scalp, he concluded that he needed to appease his remaining allies in the latter’s ranks with policy initiatives they’ve long supported even though they broke with his own much less conventional and more populist campaign promises. 

In other words, it was the Russia and related scandal charges that were preventing “Trump from being Trump.”  

Moreover, this reasoning makes sense even if the President was certain that he faced no legal jeopardy. For impeachment ultimately is a political process, and although establishing criminal guilt is clearly helpful, it’s not essential.

The main evidence for my proposition has been the early Trump decision to prioritize Obamacare repeal over trade policy overhaul and infrastructure building; his almost libertarian-like initial budget proposal (at least when it comes to non-defense discretionary federal pending); his business-heavy tax cut; and numerous foreign policy moves that more closely resembled the globalist approaches he decried while running for the White House than the America First strategy his promised.

But although President Trump now seems certain to finish out his first term in office, he still seems to be currying favor with the Republican establishment. Just look at his latest budget proposal, and decision to go after Obamacare again – the healthcare move reportedly made despite the pleas of establishment Republicans like House GOP Leader Kevin McCarthy to move on from an issue now stamped as a major loser politically and threat to the party’s 2020 election prospects across the board.

It’s true that many of Mr. Trump’s trade and immigration policies still clash with the donor-driven agenda of the Republican establishment, and especially the party’s Congressional leaders. But even on these signature issues, the President arguably could be breaking even more sharply with the longstanding Republican and conservative traditions.

For example, Mr. Trump continues to keep suspended his threat of higher tariffs on many imports from China in apparent hopes of reaching a successful trade deal even though Beijing still seems determined to avoid significant concessions on “structural issues” (like intellectual property theft and technology extortion) and on enforcement.

On immigration, the President has just raised the 2019 cap on visas for unskilled largely seasonal foreign guest workers to levels never reached even during the Obama years. His administration also has permitted visas for farm workers to hit record levels and done little to stem the growth of work permits for foreign graduates of U.S. college and universities that critics charge suppress wages for high skill native-born workers.

One intriguing explanation for this continuing policy schizophrenia comes from New York Times columnist Ross Douthat. In a piece this past weekend, Douthat made the case that, although President Trump’s actual record has been largely heretical in mainstream conservative terms, when it comes to staffing (and especially key staff positions)

there are effectively two Trump presidencies. One offers something like what the president promised on the campaign trail — a break with Paul Ryan’s green-eyeshade approach to entitlement reform, a more moderate tack on health care, an indifference to Obama-era conservative orthodoxies on fiscal and monetary policy.

The other offers a continuation of the Tea Party’s insistence on spending cuts and Obamacare repeal, and appropriately its present leader is a former Tea Party congressman — Mick Mulvaney, the Zelig of the administration, whose zeal is apparently the main reason that the Obamacare lawsuit now has administration support.”

And the main reason for this confusing mix? The President has relied “on personnel who are associated with 2010-era G.O.P. orthodoxy, rather than elevating the kind of conservatives who have actively theorized for a more populist right.”

It’s so hard to argue with Douthat’s facts that I won’t. But they still leave the main puzzle unexplained – why so many of the President’s personnel picks have been so un-Trumpian. And much of the answer points to a problem that was clear to me ever since Mr. Trump’s presidential candidacy achieved critical mass and momentum, and that doesn’t seem solvable for the foreseeable future.

Specifically, as I’ve previously noted, conservative populists (I’m never been thrilled with this description of “Trumpism,” but for the time being it’s convenient) have never created the institutions and therefore cohorts of first-rate policy specialists remotely capable of staffing a conservative populist administration. Even if you want to identify immigration as an exception – where organizations like the Center for Immigration Studies put out top-flight studies – it’s clear that nothing of the kind has ever existed on the trade and foreign policy fronts.

And even worse, because of the long lead-times needed to achieve these goals, Mr. Trump appears doomed to dealing with shortages of competent true-believers as far as the eye can see. In fact, he’ll face a special challenge in the next few months, as the second halves of first presidential terms tend to see the departures of many early, often burned out appointees. And of course, the Trump presidency has already experienced much more than its share of turnover.

So I’m expecting an indefinite continuation of the eye-popping sequence of events of the previous week – in which Trump Education Secretary Betsy deVos announced an end to federal funding of the popular Special Olympics program, a public outcry ensued, and the President abruptly reversed her decision.

It’s hard to imagine that this kind of zigging and zagging can win President Trump reelection. But it’s also conceivable that the post-impeachment situation will “Let Trump be Trump” just enough – especially if the Democrats err in picking an overall strategy for opposing him.  After all, nothing has been more common in recent American political history than completely off-base predictions of Mr. Trump’s demise.

Our So-Called Foreign Policy: Why the Venezuela Crisis is Getting Really Scary

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No one who lived through it or knows about it (me in both cases) would ever say lightly, “The X situation reminds me of the Cuban Missile Crisis.” So that’s at least one reason to be very worried about the largely under-the-radar situation that’s been unfolding in Venezuela lately. It shows signs of turning into the kind of Western Hemisphere incursion by Moscow that put the world on the brink of superpower nuclear war in October, 1962. What’s worse – there are major reasons for assigning (pre-Trump) U.S. globalist leaders much and even most of the blame.

Normally, I wouldn’t be too concerned about what happens inside any South American country, at least from the standpoint of U.S. national interests. And you shouldn’t be, either. None of the continent’s countries is strong or rich enough to endanger the United States militarily or economically. Further, although chronic misrule is always a threat to generate refugee crises, even the South American countries closest to the United States are too far away to send many to these shores.

The last few weeks in Venezuela, however, have been anything but normal. It’s not just that the country is descending into the kind of economic and political chaos that makes President Trump’s term “a big fat mess” look like happy talk. It’s that Russia – a long time ally of the leftist dictators whose corruption and incompetence have turned this oil-rich country into a bona fide failed state – looks to be establishing a military presence inside Venezuela’s borders.

Moscow’s forces so far are tiny. But there’s no guarantee that they’ll stay small – at least as long as the current Venezuelan regime remains in power. And P.S.: They include specialists assisting with the operation of a battery of anti-aircraft missiles – although in fairness, the Venezuelans bought the system back in 2009. That’s why President Trump has stated that “Russia has to get out.” At the same time, that’s going to be easier said than done without the United States using armed force. Which is scary because Russia is a full-fledged nuclear power. As a result, the President could well be faced with a genuinely agonizing dilemma: Either back down, and open the doors to a big, conspicuous, dangerous violation of one of longest-standing and most crucial pillars of U.S. national security doctrine; or challenge Russian leader Vladimir Putin militarily, and risk a conflict that could quickly escalate to the nuclear level.

I use the word “dangerous” because that national security doctrine, the 1823 “Monroe Doctrine,” correctly assumes that the stationing of foreign military forces in the Western Hemisphere would pose an intolerable threat to America. The missiles the Soviet Union planned to place in Cuba in 1962 raised the prospect of a devastating attack on the U.S. homeland delivered with almost no warning – and thus no way to stop them. Even a Russian deployment in Venezuela falling well short of this scale could bring alarmingly close to U.S. borders significant Russian intelligence capabilities along with military units. The latter could carry out missions ranging from interfering with shipping in the Caribbean and all along America’s Atlantic coast to protecting other anti-U.S. strongmen and interfering in civil conflicts throughout Central and South America whose consequences could well spill across U.S. borders.

Moreover, if the Russians succeeded in creating these kinds of footprints, what would stop the Chinese – who also boast an impressive nuclear arsenal? Even strong opponents of America’s numerous foreign military ventures should worry about these developments.

It’s tempting to look at the Cuban Missile Crisis and conclude that America’s major nuclear edge over the Soviet Union enabled the naval blockade of Cuba to succeed and ultimately force Moscow to back down – and that similar measures could kick Russia out of Venezuela today and keep it out of the hemisphere.

But this temptation needs to be resisted. Declassified documents have thoroughly debunked the reassuring accounts and interpretations that followed the Missile Crisis’ resolution – colorfully summarized by then Secretary of Dean Rusk’s claim that “We’re eyeball to eyeball and I think the other fellow just blinked.” In fact, the crisis ended because President John F. Kennedy secretly agreed to dismantle American missile deployments in Soviet neighbor Turkey, and to pledge to stop seeking to overthrow Cuba’s Communist dictator Fidel Castro. And since the United States has long since lost any nuclear superiority over forces controlled by Moscow, Washington would have even less leverage today to achieve an acceptable compromise.

Fortunately, the basis of such a deal exists – and ironically, because of a reckless American policy that surely prompted Russian leader Vladimir Putin to show his flag in Venezuela (and elsewhere, as in Crimea and Ukraine). That policy entailed the decision following the end of the Cold War and the collapse of the Soviet Union to expand the North Atlantic Treaty Organization (NATO) right up to Russia’s borders.

As I’ve argued previously, the United States should publicly offer to declare NATO expansion a mistake and to promise not to add further members in return for Russia’s agreement not to threaten the security of new members already admitted. In addition, Moscow would keep military forces out of the Western Hemisphere.

Washington could sweeten the offer by proposing to neutralize the new NATO countries whose membership has most rankled the Russians – the three Baltic states of Estonia, Latvia, and Lithuania, which had been forcibly annexed into the old Soviet Union in 1940. If Austria could be successfully neutralized during the height of the Cold War (1955), a Baltic deal should be eminently achievable today.

Many if not most American globalists would condemn this arrangement as a modern version of spheres of influence diplomacy that they contend have long carved up regions for the benefit of large powers and needlessly ran roughshod over the interests of smaller countries that were denied the fully internationally recognized right to determine their own destinies – including their own security arrangements. What the globalists consistently ignore is that such hard-hearted realism can be an effective way to prevent great power conflicts – many of whose worst victims tend to be those same smaller countries.

Ultimately, however, the strongest argument for offering this deal to Putin is that it creates the optimal realistic net benefits for the United States. As a result, it’s an opportunity that a President elected in large part on an “America First” platform should eagerly seize.

(What’s Left of) Our Economy: New Trade Figures Indicate Trump Progress Back on Track

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Of course it’s a coincidence – but what a coincidence! The same week that the Special Counsel and the Attorney General have issued highly favorable reports about President Trump’s alleged campaign collusion with Russia and related obstruction of justice charges, the Census Bureau has issued a monthly U.S. trade figures report full of evidence that the President’s tariff-centric policies have resumed making progress toward one of his major promises to voters: bringing America’s chronic, gargantuan, and growth- and jobs-killing trade deficits under control.

Even better, this trade deficit progress has come as the economy continues to grow – once again contradicting the economic conventional wisdom that trade deficits only shrink when the economy weakens and even falls into recession.

Today’s trade figures (for January) revealed monthly improvements in the combined goods and services and China trade flows big enough to establish numerous multi-year bests and even a new all-time record. Moreover, they cleaned up some (but not all) of the short-term statistical noise created by Mr. Trump’s recent levies on imports from China. This conclusion is clear from the large number of trade flows in which much better results in trade balances, and in exports and imports, followed comparably dismal results in December.

Let’s start with the overall figures. In January, the nation’s total trade gap narrowed month-to-month by the greatest extent (14.61 percent) since last March (14.84 percent). This drop-off came right after the biggest such increase in the trade shortfall (18.55 percent) since March, 2015’s 35.63 percent nosedive.

The deficit in goods – which represent the vast majority of U.S. two-way trade, and which has attracted special attention from President Trump – experienced its biggest sequential decrease in January (10.10 percent) since March, 2016’s 11.82 percent decline. And this plunge again followed an unusually big monthly increase in December – 12.30 percent, the largest since March, 2015’s 21.35 percent.

At least as interesting, given the seasonality of much U.S. trade: The combined goods and services trade gap narrowed on a January-January basis for the first time (3.66 percent) since 2014 (5.27 percent). As for the goods deficit, its drop between the last two Januarys was only the first since 2016. But the magnitude was much bigger (2.77 percent versus 0.83 percent).

Also important: The January trade deficit progress came partly from stronger exports, not simply falling imports.

The January on-month export rise (0.95 percent) was the strongest since September’s 1.52 percent. The increase in merchandise exports (1.31 percent) was also the biggest since September (when they advanced by 2.02 percent sequentially).

Yet the same kind of possible mean reversion was visible in these accounts as well. For the new export gains came right after the biggest goods and services export decline (1.88 percent) since January, 2016’s 1.98 percent. And the merchandise exports increase also followed their biggest decrease (2.87 percent) since January, 2016 (4.11 percent).

As for imports, in January, the overall total sank sequentially by its greatest extent (2.56 percent) since November’s 2.76 percent. And the goods imports monthly fall-off (2.97 percent) was the biggest since February’s 2.38 percent.

Here, too, however, the January results amounted to sharp reversals of the December figures. For overall trade, December saw the biggest monthly import rise (2.36 percent) since February’s 2.49 percent. For goods trade alone, the comparable drop was bigger (2.97 percent), but that result in turn directly followed a 3.45 percent sequential decline November.

The impact of Mr. Trump’s trade policies is even more apparent from examining trade flows minus oil and services. Since the former is rarely the subject of trade diplomacy or policymaking, and liberalization in the latter is still in early stages, the remaining trade in non-oil goods represents the U.S. foreign commerce most directly influenced by trade policy decisions.

In January, the non-oil goods deficit (which RealityChek regulars know can be called the Made in Washington trade deficit) recorded its biggest month-to-month decrease (10.01 percent) since March, 2016’s 10.93 percent. And revealingly, the improvement followed the biggest sequential widening of the non-oil goods trade gap (12.03 percent) since March, 2015 (27.52 percent).

Adjusting non-oil goods trade flows for inflation matters greatly, because these so-called real results are used to calculate the most widely followed statistics tracking the growth (or shrinkage) of the entire economy – the after-inflation gross domestic product (GDP). But the adjustment doesn’t change the story significantly.

As with the non-price-adjusted data, the January drop in the real non-oil goods deficit (also 10.01 percent) was the biggest sequential decrease since March, 2016 (10.85 percent). But December’s 12.40 percent monthly increase was the biggest since March, 2015’s 29.55 percent.

America’s bilateral goods trade deficit with China – its largest bilateral merchandise shortfall by far – in January hit its lowest monthly level ($34.47 billion) since June ($33.48 billion). In addition, on a January-January basis, this trade gap recorded its first decline (4.13 percent) since 2016’s 0.64 percent. In addition, the January-January decrease in strongly seasonal U.S.-China goods trade was only the second since 2010.

This China deficit improvement came despite the lowest monthly level of American goods exports to China ($7.13 billion) since September, 2010’s $7.11 billion. In addition, the scale of the January sequential export decrease (22.31 percent) was the biggest since last January’s 27.92 percent.

Nonetheless, blaming the trade war and China’s retaliatory tariffs on U.S. goods probably doesn’t tell the entire story. After all, between the previous two Januarys – well before Mr. Trump’s initial tariffs – U.S. goods sales to the PRC plummeted by 32.70 percent on month.

The China goods import figures do seem strongly trade war-related. American merchandise purchases from China in January ($41.60 billion) were the lowest since April ($38.23 billion). Much more revealing: The January-January shrinkage in goods imports from China (9.14 percent) was the biggest reported since 1985, when this data series began. Moreover, it was only the second such decrease since recessionary 2009 – when the fall-off was only 5.53 percent. (Between January, 2015 and January, 2016, such imports also fell – but by a much smaller 3.74 percent.)

Oddly, since manufacturing dominates U.S.-China trade, the huge global American manufacturing trade deficit actually rose on month in January – from $87.35 billion to $89.13 billion, or 2.04 percent. U.S. manufactures exports were down 5.10 percent sequentially in January, while imports were off by only 1.59 percent.