Crypto News: Supply Lines: US trade politics

If there ever was a honeymoon for the Biden administration's "worker centered" trade policy, it is now most certainly over.

At least in the eyes of some prominent economists in Washington, the latest of whom is Adam Posen, president of the Peterson Institute for International Economics.

Posen, a former Bank of England policy maker and Federal Reserve economist, provided a useful reality check for supporters of Brexit and Trump's trade wars when those debates were raging.

Now he has leveled a scathing review of Biden's trade policies in Foreign Policy magazine and taken to the airwaves, highlighting the perils of protectionism that's moved from the fringes into a bipartisan majority in Congress.

"We have to confront that these views, even if popular and widespread, are wrong," he said this week on Bloomberg TV.

Zero-Sum Fallacy

Posen writes that that the US administration's effort to "take away production from others in a zero-sum way" will ultimately backfire and leave America worse off in the end. Read his essay yourself, but here are some key takeaways:

Decoupling from China will raise costs for US consumers and businesses
Disregarding the interests of US allies will erode US influence abroad
Made in America policies raise costs and make US exports less competitive
Subsidy races breed corruption and stifle innovation
Friend-shoring will increase the fragility of global supply chains
Industrial planning will not significantly reduce income inequality

Posen isn't the only one heaping criticism. Last week, Biden's top trade official received a grilling from lawmakers who demanded to know why the US was no longer negotiating traditional free trade agreements.

In response, Trade Representative Katherine Tai testified that previous trade deals have made the US economy more vulnerable and led to the decline of American industries.

"We are not pursuing traditional fully liberalizing trade agreements, because we see those as part of the problem that we are trying to correct for," Tai told the Senate Finance Committee.

Meanwhile, American public opinion remains solidly on the side of trade as an opportunity rather than a threat, according to the latest Gallup polling, even after a trade war with China and the political drumbeat to re-shore US manufacturing jobs.

For the 11th year in a row, a majority of respondents said the economic benefits of US exports outweighed the possible damage from foreign imports, Gallup's latest annual survey on the issue found in February.

—Bryce Baschuk in Geneva

Gaining self reliance | India plans to substantially reduce its imports of thermal coal, a dominant source of energy in the country, in three years as local production gathers momentum, Coal Minister Pralhad Joshi said. The nation aims to stop inbound shipments of the coal varieties that are locally available, Joshi said at an event in New Delhi to start the latest round of mine auctions. However, imports of the high-grade fuel mainly used by coastal power plants will continue, he said.

Expressing optimism | Premier Li Qiang called China an "anchor for world peace" while expressing optimism about the recovery in the world's second-biggest economy.
Chip shop | TSMC's chairman called on the island to produce more of the equipment essential to advanced chipmaking, shoring up its already critical role in the $550 billion industry. Separately, South Korea's parliament easily approved a bill to boost the country's powerhouse semiconductor industry.
Tighten the belt | Malaysian Prime Minister Anwar Ibrahim made a pitch for China to reinvigorate its Belt and Road Initiative, as he urged for collaboration among countries.
Exiting Russia | The two biggest western shippers of Russian grain, Cargill and Viterra, will halt purchases for export in a shift that will give local firms more control over shipments.
Recovery path | Toyota said global output rose 1.4% in February as the Japanese automaker recovers from a shortage of semiconductors for automobiles and lingering disruption from the Covid-19 pandemic.
Demand forecast | US retail sales are expected to reach between $5.13 trillion and $5.23 trillion, growing 4% to 6% by the end of 2023, according to the latest forecast from the National Retail Federation.

Reshoring bet | RXO, the freight broker spun off last year from trucker XPO, is opening a new Texas warehouse to capture increased shipments accompanying a boom in trade between the US and Mexico.
China demand | North American rail traffic fell 4.8% in the week ended March 25, according to AAR, with automotive and agriculture leading gains and intermodal declining significantly. But a surge in China coal imports could spur demand in the coming months, according to Bloomberg Intelligence.
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