Thursday, August 8, 2019

Trade, Not Guns, Will Decide The Election

The battle over gun control is heating up after President Trump endorsed the idea of red flag laws in the wake of two mass shootings last weekend. Even though gun control inflames passions on both sides, another story that is being all but ignored is far more likely to determine the outcome of next year’s elections.

At the same time that Donald Trump was making his pitch for new gun regulations, China was launching new salvos in the trade war. On Monday, China allowed its currency to devalue and simultaneously announced that it was halt purchases of US agricultural products. China’s move confirms that a solution to the trade dispute with China remains far off despite previous claims by the Trump Administration that a deal was near.

President Trump has essentially been painted into a corner on trade. If Trump doesn’t give in and make a deal with China, there is the increasing chance of economic fallout from his trade policies. If he does make a deal, he looks weak to his base.

While the debate over the trade war isn’t as sexy as the gun control debate, it does have more far-reaching effects. While about 30 percent of Americans own a gun, virtually every American is affected by the economy. For a president whose Electoral College victory was based on about 100,000 votes in strategic states, even a small deterioration in support could be devastating.

One of the sectors of the economy hardest hit by the trade war is agriculture. The Chinese, who are no doubt acutely aware of this fact as well as the fact that rural white men form the core of Donald Trump’s base, specifically targeted farmers in their most recent trade moves. While some polling shows that support for President Trump is still at high levels among farmers, the tariff war may help to explain why Trump’s support is abnormally low in traditionally red farm states such as Iowa, Kansas, Nebraska, North Dakota and Texas.

The Rust Belt states that swung into the Republican column in 2016 also seem to be swinging back the other way. This may be partly due to the trade war as well. Manufacturing jobs are still be added, as they have since 2010, but new job growth in the sector has slowed since the onset of the trade war in the spring of 2018.

While gun rights is a hot button issue, it may impact the election less than many would expect. Battle lines have been drawn on the Second Amendment for decades with most Second Amendment supporters aligned with Republicans. However, the red flag law proposed by Donald Trump has split the Republican Party. FiveThirtyEight recently noted that majorities of Republican voters support red flag laws as well as gun licensing and expanded background checks, but a large minority of Republican is staunchly opposed to any new gun laws. With almost two-thirds of voters in support of new gun controls in the wake of the recent spate of mass shootings, it is questionable whether the pro-gun platform of the GOP will attract many new voters unless Democrats overplay their hand.

On the other hand, the economy has long been rated as Donald Trump’s strongest point. In July, Fox News found that 52 percent approved of the president’s handling of the economy. It was the only area in which Trump received majority approval. If the trade wars sink the economy, Trump will have little to fall back on in his quest for a second term.

But there are signs that the Trump Administration has underestimated Chinese resolve. As China has resisted his demands, the president has upped the ante by increasing tariffs repeatedly in the hopes that China can be pressured into making a deal as Mexico did. The problem is not only that China is a much larger economy than Mexico but that China is much more stable than our south-of-the-border neighbor. Where the Mexican government is weak and at times barely seems to be hanging on to control of the country, the China is an authoritarian police state that is much less vulnerable to public opinion and anger.

Even after their moves from this week, there are several ways that the Chinese could rachet up the pain for American businesses before the election. In May, China threatened to cut off the supply of rare earths, minerals used in the construction of many smart devices and weapons, to the US. China also holds more than $1 trillion in US debt. A rare earths embargo would wreak havoc on US manufacturing while a Chinese decision to dump its US Treasuries would likely trigger a panic in bond markets around the world.

So far, President Trump is standing resolute. Speaking Wednesday in Dayton, the president said, “Somebody had to do this with China because they are taking hundreds of billions of dollars a year out of the United States and somebody had to make a stand."

Trump added, "And I think our country is doing very well."

Nevertheless, it looks as though the trade war may be a long one if the president doesn’t back down. More news from this week showed that Chinese exports actually increased in July despite the previous round of tariffs. China is also shifting its agriculture purchases to Russia while President Trump considers more bailouts for American farmers.

While China has been damaged by the trade war, so has the United States. Both countries may be heading for recessions due to the trade tiff, but the Chinese government has an advantage in that they don’t have to outlast the American economy, they only have to outlast Donald Trump.

Originally published on The Resurgent

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