By Robert Pembroke
Donald Trump has had zero experience in global trade. All his business entities are property-based. Yes, he does have hotels and casinos in faraway places, but these businesses do not raise the cost of goods to the American people. A trade war does.
I am hearing very little discussion about what the effect of trade wars is on the pocket books of Americans. It seems to me that if you have tariffs on foreign goods or services, the local distributors will have to raise prices. It also seems to me that if a country retaliates with tariffs of their own, this raises the cost of American goods and services in that country. This is not win-win.
Donald Trump has fired or received resignations from the three people in his administration that have had extensive experience in global trade. They are Gary Cohn, Rex Tillerson and Carl Icahn. First-class management is essential for the success of any organization. This was a lesson that I learned while running a small business that cost our company’s owners a few greenbacks.
Donald Trump should take a lesson from the Golden State Warriors on how to run an organization. First, hire top-notch management. Second, adapt to what the competition is doing.
The owners of the Golden State Warriors hired Bob Myers as president of the basketball operations and general manager. Myers hired Steve Kerr as head coach, who then hired Ron Adams as his assistant. There was a 40-year championship dearth (1975) prior to the hiring of these three. They won championships in 2015 and 2017 and are on their way for a third try in 2018. These guys are first-class managers.
Every day, while running our families shop, I would get up and read The Wall Street Journal to find out what my competition was up to. The Golden State leaders are doing the same thing. But rather than reading The Wall Street Journal, they are reading statistics and taking advantage of what the competition is doing. Golden State led the league in three-point shots in 2015 while the competition was defending against layups. Then in 2017, they adjusted to mid-range jumpers while the competition was defending three-pointers.
China started the trade war long before Trump. For years, China has been forcing U.S. businesses to transfer variable technology to Chinese firms and restricting access to Chinese markets. What Trump is doing is very risky, as you can see from the volatility of the stock market lately. As noted above, Trump has fired or had resign, three of his top economic adviseos and seems to be relying on Peter Navarro, who is a professor and author, whose “views on trade are widely considered fringe and misguided by other economists,” according to Wikipedia.
I have long considered free trade as beneficial to all Americans. It lowers prices and allows Americans to help pay the exorbitant cost of healthcare that they face.
Trump wants to be reelected president in 2020 and seems to believe that trade wars will help him accomplish it. If I were his Democratic opponent, this would be the single issue to whack him with. My campaign ads would explain to the American electorate just how much the trade wars emptied their pocketbooks.
The U.S. lost a lot of manufacturing jobs to Japan because they were able to surpass us in manufacturing by using common horse sense. We eventually caught up in cars and copiers and created a lot more jobs in technology and services. China is not like Japan and by stealing America’s ideas, it is becoming an economic and military powerhouse. Political systems do make a difference. Japan is democratic and transparent. China is authoritarian and opaque.
“This, however, means that the collateral damage of a trade war, and thus the risk of Mr. Trump’s strategy, are all so much greater.” The Wall Street Journal, “China Started the Trade War, Not Trump,” March 23, 2018.
Robert Pembroke is the former chairman and CEO of Pembroke’s Inc. in Salt Lake City.