Trump Likely to Impose New Tariffs Today: Is This Bad Economics or Madman Theory?
Frankly, I do not know how folks like Mark Perry and Don Boudreaux do it. They are able to keep going, day after day, year after year, refuting the same stupid anti-trade arguments over and over again. I don't have the patience or endurance. Long-time readers will remember I used to spend a lot of time on climate. But the debate never went anywhere. It was like Groundhog Day. At some point I just thought "I've said what I have to say, and now I am done" (though I actually do have a climate update in the works).
Anyway, Trump has put tariffs on Mexican and Canadian steel and aluminum and is poised to do so for European products soon, a tax that will ultimately be paid by every American consumer. Sigh. This is just so economically ignorant it is hard to take it seriously, yet here it is. In the name of 150,000 or so US steelworkers and a bare handful of obviously politically well-connected corporations, we are going to raise prices on essential raw materials that are consumed in one way or another by a huge number of American businesses and hundreds of millions of US consumers. Two or three years ago when US manufacturers are moving oversees for lower raw material costs, you will know why.
Republicans are really supposed to know better on this sort of thing, which to me is just proof #12,465 that our political parties represent tribal rather than consistent ideological differences. Republicans have twisted themselves in so many knots trying to support Trump while knowing better on tariffs that some have actually brought back a version of madman theory.
I am not entirely sure of the intellectual and historical origins of madman theory, but I have always ascribed it to Nixon and Kissinger.
President Richard Nixon and his national security adviser Henry Kissinger believed they could compel "the other side" to back down during crises in the Middle East and Vietnam by "push[ing] so many chips into the pot" that Nixon would seem 'crazy' enough to "go much further," according to newly declassified documents published today by the National Security Archive.
The documents include a 1972 Kissinger memorandum of conversation published today for the first time in which Kissinger explains to Defense Department official Gardner Tucker that Nixon's strategy was to make "the other side ... think we might be 'crazy' and might really go much further" — Nixon's Madman Theory notion of intimidating adversaries such as North Vietnam and the Soviet Union to bend them to Washington's will in diplomatic negotiations
Speaking of Kissinger, the new Conservative explanation of Trump trade (and foreign) policy also includes an element of old-time brinksmanship. I remember reading something in college from Kissinger, which I can't find now so maybe I have it wrong, but I would paraphrase it as, "it is very dangerous to go to the brink over an issue, but one can never make progress without going to the brink."
Some Conservatives are now arguing that Trump's protectionism is "good" protectionism because it is an opening move in a bargaining game where the US can make headway and perhaps get better rules all around. As such, Trump's seeming irrationality and willingness to ignore basic economics is a feature, not a bug, supporting the madman model of negotiation.
Ugh. This might perhaps all be reasonable strategy in a zero-sum game such as, say, negotiating shares of the assets in a bankruptcy settlement (something Trump is actually super experienced at). Trade, though, is not a zero-sum game. By definition, trades that are executed voluntarily have to help both parties, or else they would not be agreed to. As such, anything that reduces the amount of trade between people in two countries is guaranteed to be a net loss for BOTH groups of people. There are no winners.
Mercury:
There's something to be said for strategic ambiguity of which the "madman theory" is a subset.
I mean, at least in the military domain, does anyone still stand by the Obama-esque strategy of outlining ahead of time, to your adversaries, exactly what you will and won't do and under what circumstances?
I generally agree with Coyote that free trade = Win-win but I think in some circumstances that may not always be exactly the case - at least in the short term.
19th century "trade" between Britain and China comes to mind: The Chinese didn't want anything the British had to offer basically so the Brits got them hooked on drugs.
Also, I believe Daniel Defoe's 'Plan For English Commerce' in the 1600s outlined the history of the development of England's textile industry. England had been exporting low-margin wool to Holland and buying high-margin, Dutch finished goods made from the stuff. Some combination of tariffs on Dutch goods and taxes on exported wool bought England time to develop their own textile industry and moved up a rung up the economic ladder from mere commodity production.
May 31, 2018, 12:35 pmmarque2:
To be honest Mark Perry bs's about the whole thing and uses elitist logic that really considers the benefits of huge corporations over the total benefit of the people in general. I am sorry, but if I can produce a hammer for 19.50 in China vs $20 in the US and therefore 10000 people get laid of in the US, it isn't necessarily better for the economy. Oh those folks will all find jobs in computers, and do much better, while everyone else gets cheap hammers to build wonderful things. It really doesn't work that way. It may have in the 1950's when the economy was growing at 4% and anyone who could move could stumble upon an ordinary non STEM job.
Also the whole notion that trade balances don't matter, because China ends up buying the USA with the money we give them, doesn't really cut it either. Selling ourselves out to another country in order to get trinkets which China refuses to let us sell in their nation, doesn't make us a stronger power. It is all slight of hand BS.
Also the economists of the world don't seem to care about free trade. If we can buy goods from China but not sell to them, it is all grand, because that allows China to purchase out the USA with the money we give them. That is fantastic! And then when anyone tries to do anything about this issue, because I would think allowing us to sell in China would be better then not allowing this - though Mark Perry would say it doesn't matter for vague unsupported reasons, the scream Smoot - Hawley which is the Godwin's rule of the economic trade world. You try to free up trade, and that will lead to Smoot-Hawley. You try to negotiate, and that would irritate the Chinese, which would prevent huge corporations from exploiting the USA as much.
The libertarian economists are also quite anti - USA. For instance, Mark Perry was aghast that Delta should complain about a Middle eastern country threatening to subsidize flights to the US via a government controlled airline. If the US did this with Delta, the shrieks of government cronyism would be deafening, but let another country do it to us, and its, well a benefit to Americans who fly to Bahrain. No mention that after Delta leaves, the prices will go up per monopolistic principles, no mention of the American jobs lost, and the loss to the US economy from that.
This is why Trump won, because you elitists, are basically lying to us, and pretending to love us while hating the USA.
May 31, 2018, 12:46 pmme:
Well, Republicans are all for free markets (tariffs), deregulation (for too big to fail businesses) and balanced budgets (with no more than a few trillion added year over year).
May 31, 2018, 1:09 pmsmilerz:
I doubt the aluminum and steel tariffs last for more than 6 months. Some of the smaller, more niche tariffs might survive though.
May 31, 2018, 1:22 pmjon49:
If you want manufacturing jobs back in the US you would need to make the US dollar not the dollar of exchange around the world. That was the cost of the Bretton Woods Agreement. Like when Spain (was it Spain or France) got all that gold from South America and brought it home. They inflated their currency so it became cheaper to buy things from other countries rather than their own which caused the dirth in jobs for those in their own country.
I don't understand why people call foul for something that the US did to itself. Well, I understand. People like blaming others for their own problems.
May 31, 2018, 1:45 pmCarl S:
Hmm, I don't agree with his Bart-killing policy, but I do approve of his Selma-killing policy.
May 31, 2018, 2:00 pmNHSGP:
You're missing one biggy.
The USA has a massive trade deficit. That means when you impose tarriffs on a net position, the other countries pay you.
May 31, 2018, 2:01 pmBryan Fine:
This post, Mark Perry and your response tend to pose only the consumer penalty for these types of tariffs. That's not the only problem.
I work for a small aerospace company, our products are assemblies primarily made from machined aluminum and most of our customers are in Europe and Canada. Our buyers are in a tizzy because we have contracts with agreed prices, and there is now potential for significant unplanned price increases and shortages in our primary input.
In the short run we lose money, in the long run we lose future contracts (and US jobs) because we can no longer compete with foreign suppliers. I would wager that companies like ours provide jobs for many more people than those that are directly involved with aluminum production.
Sorry, but if the elitists are against this nonsense, then the elitists are right.
May 31, 2018, 5:07 pmrogerroger:
I am thinking that the grand negotiator is creating a stick to get balance somewhere else. I don't see this as a 1930's tariff repeat. They cannot raise tariffs in response to ours because the targets of the tariffs are already taxing our exports.
May 31, 2018, 5:39 pmColoComment:
"In its current form NAFTA became an exploited doorway into the coveted U.S. market. Asian economic interests, large multinational corporations, invested in Mexico and Canada as a way to work around any direct trade deals with the U.S. By shipping parts to Mexico and/or Canada; and by deploying satellite manufacturing and assembly facilities in Canada and/or Mexico; China, Asia and to a lesser extent EU corporations exploited a loophole.
"Through a process of building, assembling or manufacturing their products in Mexico/Canada those foreign corporations can skirt U.S. trade tariffs and direct U.S. trade agreements. The finished foreign products entered the U.S. under NAFTA rules. This exploitative approach, a backdoor to the U.S. market, was the primary reason for massive foreign investment in Canada/Mexico; it was also the primary reason why candidate Donald Trump, now President Donald Trump, wanted to shut down that loophole and renegotiate NAFTA."
https://theconservativetreehouse.com/2018/05/31/canadian-prime-minister-justin-trudeau-holds-press-conference-on-steel-and-aluminum-tariffs/#more-149975
Is that accurate? If so, and if Canada and Mexico refuse to re-negotiate NAFTA so as to close that "loophole" through which outside parties sell products into the U.S. under cover of NAFTA (with Canada / Mexico taking their own profit therefrom), then why shouldn't Trump use the best & strongest weapon in his armory to get their attention?
For all of his other faults, Trump does not make idle threats, a la Obama & other past presidents. He understands that the party that is willing to walk away from a negotiation, that is willing to take the short-term jabs for the long-term TKO, is the party that will prevail.
May 31, 2018, 6:01 pmOneGuy:
How many Americans should we put out of work so you can buy cheap goods? A top 20 list of steel producers list 16 Chinese companies and zero American companies. Is this wise considering it is a dangerous world. If China or any country goes to war with us will they continue to sell us steel? If not, where will it come from? All our strategic materials/resources should be made in America. To do anything else is stupid.
And don't whine about the poor consumers having to pay more while ignoring our high taxes that hurt consumers a hundred times worse that a steel tariff does.
May 31, 2018, 6:10 pmoneteam:
Exactly. Leverage isn't a zero sum game either .
May 31, 2018, 6:30 pmoneteam:
I feel heartened by the comments here. I don't think anyone that follows Coyote is blindly in love with tariffs. Especially permanent ones. But with crazy Uncle Trump at the helm, I think it may get us better deals in the long run. Which is more important than continuing to be the trade welcome mat of the world due to our incessant need to be known as an enlightened free trade country.
May 31, 2018, 6:37 pmmarque2:
That is temporarily tough for you - but a bit of short term pain as part of negotiating a freeer - fairer to is trade deal is potentially worth it. We shouldn't all wring our hands in angst and refuse to negotiate in a tough manner because Mark Perry will be sad, or your company might have short term angst.
May 31, 2018, 7:15 pmColoComment:
Another point. Economists always seem to draw their conclusions "ceteris paribus" -- holding equal or stable all factors other than the single topical one, i.e., the effects of tariffs on consumers. In the best of all possible worlds, yes, all countries would follow true free trade policies, with no subsidies or other interference from any party other than the producers and the purchasers.
But we do not live "in the best of all possible worlds." Other countries impose numerous trade-related policies that are disadvantageous to otherwise competitive U.S. producers.
Suppose, Warren, that the U.S. Forest Service (or whomever you contract with) contracted with foreign recreational camp-management companies that were subsidized by their home governments, and that were exempt from typical U.S.policies & laws, such that they could substantially underbid you.
May 31, 2018, 7:37 pmAnd that because of your fixed costs due to operating as a U.S. resident business (such as federal, state and local business taxes, enviro compliance fees, labor policies, and the like to which your competitors were exempt), you could not reduce your bid sufficient to compete with those foreign companies. Would you still feel as you do about tariffs if the USFS added a "foreign company" surcharge to their bids, in order to allow your company to compete more "fairly"?
TruthisaPeskyThing:
As a professor in Economics, I spend a few hours explaining why trade is good. So I am a believer in trade. However, that does not mean that every trade is good. Some people may remember the song "Sixteen Tons." Although the parameters of the song may be somewhat exaggerated, the basic premise is valid: if a person trades his labor for an arrangement in which he buys food at the company store at a cost higher than the wages earned, it is NOT a good trade. The question is whether the terms of trade can be improved. And to improve the terms of trade, one may need to pay dues to a union and to forego income during a strike. Likewise, the terms of trade could be disadvantageous to the United States, and to improve the terms of trade, one may need to use the tools at his/her disposal.
May 31, 2018, 7:46 pmTo say that Trump does not like trade and likes tariffs is to illustrate ignorance of the situation. Trump wants trade, but he wants better terms in trade, and he has shown great willingness to call off tariffs if terms improve. Past administrations were so desperate for deals that they were not willing to walk away from the table. Their desperation has lead to bad terms for America. If the other side knows you are desperate, you have a weak negotiating position. Hitler knew Chamberlain was desperate for a deal, and the world paid dearly for Chamberlain's weak negotiation strategy.
For decades, bad terms of trade did not lead to extremely bad outcomes for the U.S. because American industry was such a behemoth in the world. But those decades are gone, and it is not appropriate to continue those outdated deals. So despite incredible shallow thinking and arguments in the media and in the political arena, Trump is out to negotiate better and fairer deals. He is doing this not because he dislikes trade -- and, especially, not because he wants the tariffs -- but because he wants good trade, and just like unions need to show that they can handle something they do not want (a strike), Trump must show that he is willing to live with tariffs if better terms are not reached.
TruthisaPeskyThing:
For Trump, tariffs are a tool to achieve better trade terms. For Democrats, tariffs are a goal. "Too big to fail" is a product of Democratic-inspired legislation and regulation. Bush was willing to let Enron fail. You may have a point on balanced budgets, but the key is the deficit as % of GDP, and Republicans have been okay there. Also, government accounting systems are sometimes misleading. For example the trillion dollar FY 2009 deficit was largely due to an investment (preferred stock) in Financial institutions. That investment was repaid later in the Obama administration along with a $66 billion profit. So Obama's deficits were even worse considering that his deficits were reduced by the return of and the return on that investment.
May 31, 2018, 7:57 pmTruthisaPeskyThing:
Obama twice imposed tariffs on steel. Once it was for 225%
I do not remember Coyote or the nation going bezerk when those tariffs were imposed.
May 31, 2018, 7:59 pmTruthisaPeskyThing:
If Coyote was to argue that the current terms of trade are not bad enough to warrant tariffs, he might have a chance of winning the argument with statistics. But if argues that Trump wants tariffs so that Americans will pay higher prices, he does not have an winnable argument because he is putting up straw men.
May 31, 2018, 8:04 pmoneteam:
Exactly!
May 31, 2018, 8:10 pmColoComment:
IIRC, and correct me if I'm wrong, but aren't the current deficit numbers also reduced by the "profits" of Fannie and Freddie, which are paid into the Treasury's general revenue fund. A quick Google search found this: https://www.reuters.com/article/us-g7-summit-finance/allies-in-g7-vow-to-fight-u-s-tariffs-see-threat-to-growth-idUSKCN1IW2NM
May 31, 2018, 8:40 pmian parkinson:
There are arguments both ways on whether doing something crazy and being unpredictable are good or bad moves in a negotiation and will it work to get to a deal where both sides end up with lower tariffs than before, e.g. it is hypocritical that the EU are outraged that they are being asked to cut tariffs on US cars to the level that the US charges on EU cars. However, the problem is who you are negotiating with. Sitting on this side of the Atlantic I was pleasantly surprised that the initial EU response was that tariffs hurt both sides and are bad policy. That lasted about a day. We then had "we won't be bullied and refuse to talk to the US whilst we are being threatened" [not that only applies to the US, it is important to keep talking to Russia etc regardless of what they do] Now we have, "tariffs are dumb so we are imposing tariffs too". On denim and whiskey - how do they choose this s**t. The guys driving the bus at the EU are so insulated that the economic side doesn't matter, this just gives them a chance to posture against the US and stick up some protectionist barriers for their national champion buddies.
The right response is tariffs make both sides poorer, this is unfortunate but we are not going to retaliate as that would make a bad situation worse. Luckily we will never see that as the shock might be too much for my system.
June 1, 2018, 1:22 amslocum:
"Likewise, the terms of trade could be disadvantageous to the United States"
If we did go to war with China, it would be nothing like WWII -- fought by future Rosie-the-Riveters cranking out countless, low-tech tanks and airplanes. And there's no scenario for going to war with every steel-producing nation, nor are steel factories hard to re-create.
"And don't whine about the poor consumers having to pay more..."
It's not just consumers having to pay more, it's American producers having to pay more for raw materials, which will make their products less competitive on the world market and lead American companies to move production off-shore in order to get around the tariffs. Boeing, for example, uses a lot of aluminum. If you raise the cost of aluminum in the U.S. compared to elsewhere, Boeing will shift more production to offshore factories and use more offshore suppliers for its components. It would be the same with Caterpillar and Whirlpool for steel -- tariffs will hurt their competitiveness and lead them to look offshore for production and suppliers.
June 1, 2018, 5:48 amslocum:
"They cannot raise tariffs in response to ours because the targets of the tariffs are already taxing our exports."
What!? Of course they can. Even if it were true that there were already tariffs in place on U.S. goods, those tariffs could be increased. Do you think the U.S. sells nothing overseas that could be affected by retaliatory tariff impositions or increases? No airplanes? No heavy construction equipment? No movies, no software, or agricultural products?
June 1, 2018, 5:54 amslocum:
Or maybe it'll be OK after his company decides to move its production across the border to Canada. Which is what Lifesavers did with their candy factory in Michigan due to U.S. sugar tariffs -- which, BTW, have not gone away after a few months, but appear to be permanent.
June 1, 2018, 6:00 amJD Will:
Well said. My thought is that Trump believes the scale of the American economy can absorb some pain better than the trading partners that he want to improve the terms with. He expects them to cave before he has to.
June 1, 2018, 6:16 amHoldfast_II:
Also, if those 150,000 workers end up on long-term SSDI, that’s also a tax paid by the American people. A choices have consequences, and doing nothing is also a choice.
June 1, 2018, 6:38 amPeabody:
No, he is definitely not arguing that Trump wants Americans to pay higher prices.
June 1, 2018, 6:42 amBrent Glines:
I suspect he is laying groundwork for negotiations under mutually favorable terms. If temporary, the tariffs give him negotiating leverage.
The Art of the Deal.
June 1, 2018, 7:01 amIan Deal:
Our economic policy stems from politicians paying off a wide variety of donors with often contradictory goals. From domestic agriculture to aerospace, congress and the White House have signed deals good for some industries or specific companies and bad for others. It's not about philosophy or economics, other than campaign contributions. Trump got elected because he is not beholden to the donor class. Do other countries think he's crazy? No, but they do think he is unpredictable and that's the next best thing in a negotiation. He called China's bluff in getting NK to tank the nuke talks, and they backed down. Obama negotiated with such a narrow focus on his own singular goal he was routinely outmaneuvered by weak adversaries. He is already negotiating better on behalf of the US than any president in recent memory.
June 1, 2018, 7:06 amDirk Dungo:
Exactly. What most conservatives and libertarians call "free trade" is actually 1 way free trade. China is the best example of this. They export goods to the U.S., at no cost, yet impose large costs on U.S. imports. All countries do this to some extent, even U.S. allies. Past administrations called this the cost of maintaining good relations and the cost of world peace. Trump's take is that the U.S. is the 800lb gorilla in any room and can easily force a better deal using tariffs. So far he's been proven correct.
June 1, 2018, 7:13 amDirk Dungo:
"Boeing, for example, uses a lot of aluminum. If you raise the cost of aluminum in the U.S. compared to elsewhere, Boeing will shift more production to offshore factories and use more offshore suppliers for its components."
Maybe. It depends on how the U.S. plays its cards. If you give Boeing a big tax break first, then impose tariffs. the tax breaks can help offset the costs. Also, if it's clear that the goal of the tariffs is a better deal for Boeing, Boeing can eat the costs in the short run and enjoy bigger gains in the long.
June 1, 2018, 7:16 amdavesmith001:
No, it does not. It means that US consumers pay the US government. (Much of the tax incidence of a tariff is on the consumer.)
June 1, 2018, 7:22 amTeeJaw:
I’m in favor of free trade but I believe we need to wait a bit to see what comes of this.
I believe the madman theory and so do a lot of America’s adversaries. They’ve been doing it to us for a long time and we’re sick of putting with it. In one of my favorite episodes of the long-gone TV show NYPD Blue, Dennis Franz in the character of Detective Sipowitz is counseling his son on street smarts. The memorable line is when he says to his son: “You’re too good looking to have the advantage that I have. I look like someone who might do something crazy, and that that has served me well on the streets.”
That worked so well for the dramatic moment because the real-life Dennis Franz does look like someone who might do something crazy. I think Trump has that advantage, not exactly by his looks but by his record. If that’s what is going on right now these tariffs will be temporary, just until Trump can make the art of deal work in his favor in negotiation. Another President who successfully used this tactic at Reykjavik was Ronald Reagan.
June 1, 2018, 7:27 amOneGuy:
OK. I get it. You are OK with the U.S. NOT having strategic production capability. Don't understand WHY you feel that way but you do.
Never the less, as Trump has said, he is ONLY going to sign a FAIR trade deal and as long as Canada, Mexico and Europe insist on keeping these deals that hurt the U.S. he will not make the deal, period! And that is the way it should be.
I do agree totally with you that Americans deserve to pay less. Ebd the state and federal gas taxes!! Whoop whoop! That would save us a fortune AND make American businesses more competitive internationally. Surely you agree since you are all about saving us poor consumers.
Also it is important to understand that tehse bad deals we entered into weren't simply accidents or because our negotiators were stupid. We were sold down the river when they wrote NAFTA and the negotiators all became millionaires because of it. It was graft and crony politics. And the claims about how much the new deal will hurt us is the whining of those who benefited at our expense by these bad deals.
MAGA!!
June 1, 2018, 7:35 amOneGuy:
Bryan, you may be 100% correct in your comment. But what you forget or don't know is the old deal was bought and paid for by big business and every American was screwed over by that deal. In other words through no fault of yours and probably through no fault of your company you are benefiting from fraudulent deals and when they were implemented someone else lost their job and some other companies went bankrupt. Did that matter to you then?
The ONLY right way to fix this is to make a fair deal. If the other nations who have benefitted at our expense all these years won't agree to a fair deal then we will have to use the tariff to make it so. But the status quo is wrong.
June 1, 2018, 7:39 amOneGuy:
Absolutely. Move offshore. Pay a tariff to get your product back that will make it exactly as expensive for you as if you had stayed and kept the jobs here. I would call that FAIR. Move offshore to avoid taxes and get cheap labor but we should not make it easy for you then to exploit us by selling us your cheapo crap.
June 1, 2018, 7:42 amslocum:
You don't understand. His company's customers are mostly in Europe and Canada. If they move to Canada, they'll get the cheap aluminum and certainly won't pay any U.S. tariffs selling Canadian produced components to Canadian and European countries. AND what makes you think they'll be any tariffs on selling those components to U.S. companies? Are you suggesting tariffs on *every* product that has any steel or aluminum content now?
June 1, 2018, 7:53 amOneGuy:
When you talk about cheap goods produced overseas you are talking about not having to pay U.S. taxes and U.S. workers. It is exactly the U.S. consumers who benefit from these U.S. taxes and U.S. jobs that the cheap goods steal from us. So don't look at only one side of that equation.
Also there is a lot of fear drummed up about a trade war. But if you are the number on market in the world, which we are, why would your providers of goods and services want a trade war with you. They would rather slit their wrists. Just imagine if Germany got made at us and refused to sell us any more VWs and Mercedes. Yeah that will get even with us won't it?! It would never happen. Germany sells more cars to the U.S. than the rest of their entire total export market. They cannot afford to cut their throat. It is 100 times worse for Mexico. Mexico's entire economy depends on the U.S. market. They aren't going to have a trade war with us. They might bluff and make noises but they have no other choice.
June 1, 2018, 7:57 amXennady:
"Fought by future Rosie-the-Riveters cranking out countless, low-tech
tanks and airplanes. And there's no scenario for going to war with
every steel-producing nation, nor are steel factories hard to re-create"- wait, what?
Low-tech tanks and airplanes?? Excuse me, but the tanks and airplanes built by the US during WWII were anything but, as I thought everyone would know. For example, the B-29 introduced a pressurized fuselage and the M-4 Sherman was quite advanced, if inadequate for other reasons. As to "steel factories, " I can only conclude from context that you mean factories that make steel from rocks that happen to contain iron. These are most definitely NOT easy to recreate. In my experience as a former steelworker it takes years-plus to built such a facility. This is the case even though almost all the equipment is purchased from overseas, which presumably makes it cheaper and better, per free trade dogma. But today there isn't much choice, because the American firms that used to do such work mostly no longer exist.
"If you raise the cost of aluminum in the U.S. compared to elsewhere,
Boeing will shift more production to offshore factories and use more
offshore suppliers for its components."
How do you explain Boeing moving production overseas now, despite the absence of tariffs? Hmmm...I've never been involved in that industry, but from what I've read Boeing did that because of foreign governments were worried about the fate of their own industry, and wouldn't let their airlines purchase Boeing aircraft without domestic involvement in their production. I'm not sure I can technically call that "tariffs," but the end result is that economic activity leaves the United States, with ugly implication for the future of the US economy. And free traders have no answer, none at all.
Hence, Trump, tariff aficionado.
June 1, 2018, 8:14 amXennady:
Shrug. I have all the sympathy for you that free traders had for displaced steelworkers, autoworkers, and the people who once worked at the tens of thousands of American factories that have closed since NAFTA.
"I would wager that companies like ours provide jobs for many more
people than those that are directly involved with aluminum production."
By the way- this statement ALSO applies to all those companies free trade destroyed or chased out of the country, post NAFTA. Somehow that fact never mattered for them, so I see no reason why it should matter now, for you.
Good luck. Maybe your next job will be more viable.
June 1, 2018, 8:45 amXennady:
Surely these sugar tariffs are those referenced by Marco Rubio in one of the GOP debates as vital for national security, or some such.
Which is yet another reason I don't accept free trade dogma. If any given tariff benefits some politically connected bunch- sugar-growing Florida GOP donors, for example- then the tariff is vital for national security, even if you're a free-tradin' globalist like Marco Rubio.
If it doesn't benefit the politically connected, then refer to free trade dogma. Thumbs down.
June 1, 2018, 8:57 amRandolph Carter:
If these tariffs are so bad, why do other countries do them to us? Don't they know? They must imagine that they are getting something out of this arrangement. What do they imagine they are getting out of their tariffs?
June 1, 2018, 8:57 amRandolph Carter:
To say nothing of our brutal regulatory and environment regime making all kinds of manufacturing cost more, which our trade partners rarely have to deal with. Yes, I like a clean environment and I don't like workers losing fingers, but those regulations imposed by the government entail a cost. If it makes us uncompetitive, then we have to do something to balance that scale.
June 1, 2018, 9:00 amRandolph Carter:
It is accurate. The 'satellite manufacturing' was usually a a warehouse with workers putting finished pieces in boxes. It's been well-documented and is googleable. Canada and Mexico loved it because they got import tariffs for being middlemen.
June 1, 2018, 9:04 amslocum:
"Excuse me, but the tanks and airplanes built by the US during WWII were anything but, as I thought everyone would know."
Sigh. Yes, they were advanced for the day. But nothing compared to now. During WWII, the U.S. produced almost 13,000 B-17s and almost 20,000 B-24s and many thousands were lost in combat (as expected). In comparison only about 100 B1 bombers were ever built. The U.S. now builds small numbers of enormously expensive, stealthy, highly sophisticated military aircraft and expects combat losses to be extremely rare. We will never be converting a Ford plant to crank out thousands of aircraft again -- it's a different world.
"How do you explain Boeing moving production overseas now, despite the absence of tariffs?"
Partly because it is easier to sell airplanes to countries if some of the components are produced there. And partly to reduced their vulnerability to stupidities like the current aluminum tariffs. Just as they opened a second production facility in South Carolina not to held hostage by the unions in Seattle, the offshore production capability may help them not to be hostages to Trump and his merry band of protectionists.
June 1, 2018, 9:07 amslocum:
Right. Tariffs on inputs will lead to demands for subsidies to users of those inputs (or more tariffs on foreign products using those same inputs) and all of those policies will have vested interests who will hire lobbyists and gear up to fight tooth-and-nail to keep their 'temporary' measures in place and you may end up with a mess that lasts somewhere between years and forever. This is swamp filling, not swamp draining.
June 1, 2018, 9:12 amslocum:
Erecting high tariffs to protect domestic producers from more efficient foreign competition is exactly the approach that made so many South American countries such economic powerhouses.
June 1, 2018, 9:19 amColoComment:
Yes. Wanniski's "wedge" imposes production cost burdens that producers in those other, lower-cost countries (whose cheaper products "benefit" consumers) do not have to bear. It's an irony of dispassionate economic analysis that to support the [unarguable] consumer-benefits of unilateral no-tariff trade policy inevitably results in production being moved off shore to less-regulated and environmentally poorer locations in search of the lowest cost to produce -- in order to remain competitive.
June 1, 2018, 9:54 amrosetta_stoned:
Trump wants trade, but he wants better terms in trade, and he has shown
great willingness to call off tariffs if terms improve. Past
administrations were so desperate for deals that they were not willing
to walk away from the table.
Quoted for truth.
June 1, 2018, 10:27 am