You might think that recent events — market turmoil, weakening growth, declining manufacturing production — must be producing some soul-searching in the White House, particularly over Donald Trump’s view that “trade wars are good, and easy to win.” That is, you might think that if you haven’t paid any attention to Trump’s past behavior.
What he’s actually doing, of course, is attributing the economy’s troubles to a vast conspiracy of people out to get him. And his recent remarks suggest, if anything, that he’s preparing to open a new front in the trade war, this time against the European Union, which he says “treats us horribly: barriers, tariffs, taxes.”
The funny thing is that there are some aspects of European policy, especially German economic policy, that do hurt the world economy and deserve condemnation. But Trump is going after the wrong thing. Europe does not, in fact, treat us badly; its markets are about as open to U.S. products as ours are to Europe’s. (We export about three times as much to the E.U. as we do to China.)
The problem, instead, is that the Europeans, and the Germans in particular, treat themselves badly, with a ruinous obsession over public debt. And the costs of that obsession are spilling over to the world as a whole.
Some background: Around 2010, politicians and pundits on both sides of the Atlantic caught a bad case of austerity fever. Somehow they lost interest in fighting unemployment, even though it remained catastrophically high, and demanded spending cuts instead. And these spending cuts, unprecedented in a weak economy, slowed the recovery and delayed the return to full employment.