John Oliver tackles tariffs and trade deficits on Last Week Tonight

On Last Week Tonight, John Oliver outlined the trade woes currently plaguing the United States and beyond. What are the sources of the issues?

On the latest episode of Last Week Tonight, host John Oliver talked trade. Of course, given that the show only runs for half an hour, Oliver was only able to skim the surface of the current trade disputes swirling about in international politics. Still, you should at least leave this episode with a better sense of what a tariff is than the current President of the United States.

Now, Donald Trump seems to think that he’s pretty good at trade. He knows all of the different kinds of trade, guys. He’s been talking about it for decades. Now, all of those years of talk have culminated (at least currently) in tariffs. Specifically, Trump has implemented tariffs on steel and aluminum imports, claiming that Chinese markets have undercut American ones. By taxes imported steel and aluminum, Trump reasons, American producers will get a much-needed boost.

Well, except that’s not really how tariffs work. After all, other countries don’t pay tariffs. Importers have to pay tariffs. They then charge more for imported goods, meaning American consumers are really the ones paying for these international taxes. There’s no magical way that other countries are going to pay tariffs and then make up for money lost in trade.

This also means that importers might start cutting jobs. Specifically, they might start cutting jobs in American manufacturing plants, which depend on decently-priced exports to do business.

Farmers and the agricultural sector in general are starting to feel the pain of these import taxes, too. After all, when large nations like China stop buying American agricultural products as a result of the aforementioned tariffs, American people will feel the effects more keenly and directly than most people in the White House.

How bad is it?

Is this really as much of a mess as it seems? Are trade wars really “good and easy to win”, as the President has tweeted? If so, why are things appearing to get worse, while China and other large trade partners refuse to buckle?

While we’re here, it’s important to note some of the rhetoric used by Trump when talking about trade. For one, he’s often discussed trade deficits as if they are a clear indicator of economic health. If America’s trade deficit is relatively high, or indeed anywhere above zero, then that’s bad. Right?

Well, not exactly. International trade is a complex and constantly moving set of situations. For one, trade deficits aren’t necessarily bad. Neither is it entirely fair to say that they are uniformly awful. In fact, our more-or-less current trade deficit is probably right where it should be.

And, while we’re at it, international trade relationships aren’t wholly responsible for dwindling American manufacturing jobs. Automation holds a fair amount of the blame. Where American manufacturing seems to have actually enjoyed a modest rise, the number of jobs available has fallen. Multiple experts predict that, by 2030, millions of American workers could be pushed out their jobs by robots.

What does Trump understand?

Alas, however, President Trump does not appear to have reviewed his vocabulary cheat sheet. European Commission President Jean-Claude Juncker reportedly had to explain trade deficits to Trump using colorful cue cards. Angela Merkel was forced to tell Trump at least 11 times over that he has to make economic deals with the European Union instead of individual countries like Germany.

“The real problem with Trump not understanding trade is that he, therefore, does not understand its consequences,” said Oliver. If Trump were the only one to reap those consequences, we wouldn’t have to worry quite so much. And yet, he remains in his current position at U.S. President, meaning we have to deal with the effects of his administration’s decisions, too.

Let’s go back to those manufacturing jobs, for example. According to Oliver, “Distinguishing between a foreign product and an American job can be a lot trickier than you think.” That’s especially, vividly true when discussing auto manufacturers. Trump has reserved particular ire for German automakers such as Volkswagen and BMW. In his speeches, it often seems as if Trump thinks that whole cars are imported into the U.S., or at least large, assembled portions thereof.

Yet, that is very definitely not the case. Companies like BMW have a fairly large footprint in local U.S. economies, as it turns out. How large? In Spartanburg, South Carolina, a large number of people work at the largest BMW plant in the entire world.

Over the years, that plant has put billions of dollars into the local economy, but now it’s starting to feel the effects of these tariffs. Many people living in and around Spartanburg could be seriously hurt by steel and aluminum tariffs that put economic pressure on their employer.

The person driving the decisions

Who’s behind all of these confounding economic decisions? That would be one Peter Navarro, Trump’s “trade guy”. That is, he is the Director of Trade and Industrial Policy for the White House.

Navarro has said that trade with China is a “zero sum game” with the United States, meaning that only one country involved can win in an intense trade war. It’s worth noting that Navarro’s zero sum position and general hard-line policies are pretty rare in the realm of economics, for some reason.

With so little economic clout, how did Navarro get in at the White House? “It’s way dumber than you are thinking,” said Oliver. Well, how dumb? It has to do with Jared Kushner.

See, Kushner found Navarro’s books on Amazon. He then invited Navarro to the White House and, well, that’s pretty much it. Navarro essentially secured his current role by writing an alarmist economic tome and utilizing some decent SEO skills in the process.

Navarro’s book, Death by China, makes it seem as if China is ready to annihilate America. Sure, China has some really suspicious economic and related social policies, but is it really going to aim laser satellites at D.C.?

The effects of tariffs

Unsurprisingly, Trump has called Death by China “right on.” Navarro has also said that his job is to find analytics that confirms Trump’s intuition. Wouldn’t you know it, that means Trump’s so-called intuitions are conveniently always right.

Where does that leave us? “We’re engaged in an escalating trade war which almost no legitimate economist supports,” said Oliver. The effects of said war are almost the exact opposite of what we ostensibly wanted. People are losing jobs and suffering through economic insecurity. Meanwhile, important economic partners like the EU and China are growing increasingly frustrated by U.S. actions.

In an attempt to get his point across to Trump and his associates, Oliver then debuted a hyperbolic “documentary,” akin to the one that was released with Death by China. It was filled with plenty of dramatic narration, along with computer-animated gore and explosions.

Will it work? Hard to tell, though even gambling types might not want to put too much money on the prospect. If nothing else, said Oliver, “You probably shouldn’t find your key economic advisor on [expletive] Amazon.”