Protectionism

With Bombardier Tariffs, Trump Continues His Protectionist Mania

Anti-dumping tariffs don't lead to more fairness, they just lead to more tariffs.

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Bombardier C-Series Plane
Yan Gouger/Wikimedia Commons

If there is one thing Donald Trump likes more than NFL players standing for the national anthem, it is shafting American consumers with protectionist trade tariffs.

On Tuesday, the Commerce Department slapped a whopping 220 percent tariff on Canadian jet-maker Bombardier, reportedly tripling the price of its C-Series jets from $19 million to $61 million.

The tariff is a win for Bombardier competitor Boeing, which had accused the company of benefiting from unfair subsidies granted by the Canadian and British governments.

That argument is bit rich coming from a company that has received tax breaks from the state of Washington, subsidized sales from the Import-Export Bank, and billions in lucrative contracts from the Department of Defense.

Nevertheless, it was an argument Secretary of Commerce Wilbur Ross found convincing, saying in a statement that Canada must "play by the rules" and that "the subsidization of goods by foreign governments is something that the Trump Administration takes very seriously."

Indeed, it does.

Trump entered office with an explicitly protectionist platform, promising to "to stop the dumping and stop all of these wonderful other countries from coming in and killing our companies and our workers."

In late April, the president commissioned an anti-dumping investigation of imported steel.

A few days later, Trump hit Canadian softwood lumber producers with duties averaging 20 percent, claiming that the Canadian government was charging artificially low "stumpage fees" to timber companies logging on government land.

Last week, the U.S International Trade Commission sided with domestic solar companies complaining the subsidies it gets from American taxpayers are insufficient to keep it competitive with even more subsidized Chinese manufacturers. Tariffs on those Chinese panels are now in the works.

Protectionism as a means of fighting protectionism is not new, and is one of the rare instances where tariffs are permitted under international trade law.

It also strikes many voters and politicians, even those not inherently hostile to free trade, as way of ensuring fairness and leveling the playing field. If other countries' companies are getting an unfair advantage, so should ours!

This is an understandable attitude, but it's still wrong.

There are often powerful domestic incentives for governments to provide corporate subsidies. Anti-dumping duties are unlikely to get them to change their ways. Canada's timber industry and its provincial governments, for example, benefit from their long-standing stumpage fee arrangement, and have stubbornly refused to change it, despite on-again, off-again trade wars stretching back to the mid-80's.

The same can be said for the government largesse Bombardier is accused of receiving. In 2015, the provincial government of Quebec gave the company a $1 billion bailout to keep its flagship manufacturer up and running. Likewise, the British loaned $149 million to Bombardier as a way of keeping manufacturing jobs at its plant in economically-depressed Belfast.

Governments are often happy to bailout flagship industrial companies to protect jobs, and national pride. Last I checked, the United States government was not above doing this, too. So anti-dumping tariffs don't lead to more fairness, they just lead to more tariffs. And it's consumers who end up paying those tariffs, not foreign companies.

The tariffs Trump slapped on Canadian lumber have driven up the cost of new homes in the U.S., and making more expensive the repairs after Hurricanes Harvey and Irma.

And to top it all, the countries doing the subsidizing are not getting a great deal.

"Academic literature is pretty clear that export subsides are not good for the economy," says Veronique de Rugy, a senior researcher at George Mason University's Mercatus Center (and frequent Reason contributor). While a specific industry might benefit from them, they are ultimately a net cost to foreign countries and their taxpayers, she says. "If other countries want to sabotage their economy," de Rugy says, "let them."

If Trump really cared about protecting American jobs, he'd scale back the export subsidies the government currently gives to American exporters, not double down on counter-productive protectionism that leaves everybody poorer.

NEXT: Trump's New Travel Ban: Mean and Senseless

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  1. Fucking the American consumer is not something you want to leave to foreigners when there are perfectly good Americans willing to do the fucking.

  2. Scrolling down I see you’re charging to read Sheldon Richman articles. With that brilliant business model you’ll soon be rolling in so much dough you can shed the Koch-yoke.

    1. Because the pay-to-read ESPN Insider model is working so well for Disney?

    2. Don’t worry. They’ll soon let us read free articles from “foreign correspondents.”

  3. …sooo bombardier sucks a shit ton of money outta the Canadian taxpayer to sell cheap planes to Delta. The US gov’t puts a 220% duty forcing Delta to pay more… Damn rent seeking business’ and gov’ts getting together to fuck the rest of us.

    1. But just think of how much better off Delta is now – they used to own a fleet of 19 million dollar aircraft, they now own a fleet of 61 million dollar aircraft. Pure profit! Delta’s lucky the government’s not taxing them on that windfall wealth.

      1. And don’t laugh, I heard some “economist” on NPR making pretty much that exact argument wrt spending on hurricane recovery, he said that stuff that costs more is more valuable than stuff that costs less so the more stuff costs the better off we all are. And nobody laughed.

        1. Seems like a common, fundamental conceptual error about money and what it means.

        2. the more stuff costs the better off we all are.

          *Now* I understand why the Federal Reserve purposely maintains inflation!

      2. If you think those jets cost $19 million before the tariff, you know nothing about airplane prices.

        Try $80.

  4. That is all well and good as far as it goes. But I think television manufacturers, computer monitor manufacturers, and flat panel display manufacturers in the United States might beg to differ. If they still existed.

    1. Oddly enough, I can buy that shit at Walmart for dirt cheap. How am I worse off for buying a better-quality 50″ flat-screen TV for less than what I paid for a crappy 25″ TV 30 years ago? I’m supposed to still be paying $1000 for a crappy TV just so some guy can have a job producing crappy TV’s? Nobody wants expensive crappy TV’s, why the fuck would you think it’s a good idea to have the government demand that people keep paying somebody to produce expensive crappy TV’s?

      1. Those flat panel displays that you can buy at Walmart where invented and developed in the United States. Taiwan specifically and other Asian companies dumped flat panel displays in the United States at below cost, putting American manufacturers out of business.

        This is the part of that story that you missed.

        1. Oh, and with the support and subsidy of their National governments. It kind of goes against the narrative that protectionism doesn’t work. It doesn’t work, except when it does.

          Just asked South Korea if Samsung has been good for their economy.

          1. You seem to suggest that other countries have benefited from state distortion of the economy, but I haven’t seen any proof of that. How much better off might they have been if the state had allowed the market to determine the most efficient allocation of resources, instead of directing those resources to politically favored industries? Since we can’t really re-run the real world with different variables, that’s impossible to determine for sure, but you seem to be ignoring the very possibility.

            As for Samsung, have you been following the news out of South Korea lately? Kinda makes you wonder how much of their rise was owed to good products (Disclaimer: half the electronic stuff in my house says “Samsung” on the front, so I obviously believe they make good products.), and how much was owed to greasing the right palms.

            Finally, if they used “dumping” to drive competitors out of business, shouldn’t prices now be skyrocketing? That’s what the old fairy tale of “predatory pricing” predicts, but I haven’t seen it happening. For the same price I paid for my current TV several years ago, I could now buy a bigger screen, with more features and better performance.

            1. They make good enough products that are affordable by most people. That’s the American way.

    2. If they still existed.

      Good. The resources and labor they would consume are, no doubt, being put to better use.

      1. EXACTLY. Why are people fighting to keep in this country certain crappy jobs that represent a gross underutilization of our relatively expensive labor pool?

        Evidently, illiterate Malaysian 12 year olds are qualified to assemble iPhones in Foxconn plants. So why should we be begging that fully educated American adults have these jobs?

        1. Government’s support dead industries with tax dollars because they’re politically connected.

          1. governments

      1. Vizio manufactures its products in Mexico and China under agreements with ODM assemblers in those countries.

        Its US employees work in engineering, marketing and distribution, it appears. But then Samsung, Sony et al employ many US workers in marketing and distribution too, not so much in engineering.

        I’m not sure how protectionists want to deal with that kind of arrangement.

    3. Comparative advantage, how does it work?

      1. You mean competive advantage but whatever it’s not like libertarians are always moaning about economic illiteracy.

        1. No, Sam, you seem to be confused:
          http://www.invest opedia.com/terms/c/comparat iveadvantage.asp
          But then, you often are.
          Have you ever posted anything that wasn’t bullshit/

    4. The forgotten party of the story is that American manufacturing still makes the bulk of the machines that are used to make those television parts (the US being the leader in capital production goods), that are then sold at high to foreign industrial firms to produce cheaper electronic and textiles ? most of the things with MADE IN CHINA or MADE IN MEXICO on it was crafted on a machine with MADE IN AMERICA on it. It’s all a matter of comparative advantage and scale within the international marketplace.

  5. Bombardier railcar in Plattsburgh NY pays no corporate tax thanks to Empire State Development. Corporate welfare at it’s finest.

    1. Not robbing someone is not welfare.

      1. It’s certainly cronyism though.

      2. Clearly you’re not up on contemporary language. Failure to take from the disfavored is a handout, while failure to give to the favored is taking.

        More seriously, not robbing may not be welfare, but when the state robs selectively, that’s an obvious distortion of the market. I consider it a moral duty to give up as little as possible to the state, so I don’t really blame people for using every tool at their disposal to minimize their taxes. I do blame government officials who decree that some are more worthy and should therefore pay less, while taking more from others.

    2. Bombardier accountants have base salaries in the millions.

      Normally, I don’t care about that stuff but in this case I do.

      For obvious reasons. The cronyism first among them. My tax dollars are forced out of my hands and given to these guys without my consent. In my opinion, we should let it sink. It’s so poorly run and mismanaged it’s a laughing joke.

  6. Good Lord. Boeing is turning out to be an even bigger cronyist shitbird than Solyndra ever was.

    1. Of course it is. Solyndra was a lightweight johnny-come-lately. Boeing is a huge company that has been suckling at the government teat for decades. Whether it’s defense contracts with their ever-shifting requirements and endless cost overruns, or protections, tax breaks and subsidies (Ex-Im, I’m looking at you.) for their civilian business, Boeing has been playing the crony game for a long time. It shouldn’t be any surprise that they’re really good at it.

  7. That argument is bit rich coming from a company that has received tax breaks from the state of Washington, subsidized sales from the Import-Export Bank, and billions in lucrative contracts from the Department of Defense.

    Tariffs are a dumb idea, but tax breaks aren’t subsidies and defense contracts are sort of necessary for the defense of the nation (to a point.)

    1. When tax breaks are handed out selectively, they have a distorting effect on the market, even you prefer not to call them subsidies. And our defense contracts have long since passed the point of necessity. Instead, much of our defense budget is little more than a back-door (and wildly inefficient) jobs program. Defense contractors have become experts at “political engineering”. Instead of setting themselves up for maximum efficiency, they deliberately spread out their operations. Every congressional district where they employ two people is a guaranteed vote for more funding, since no congresscritter is likely to cross a company that provides “good-paying jobs” for his constituents. Whether those jobs produce anything of value isn’t something many people are eager to discuss.

  8. So the aviation unions must be happy.

    1. They’re all wearing Bombardier jackets.

    2. *sniff*sniff*

      Yep, I’m smelling unions and corporate cronyism.

      Unlike the subsidy slugfest with Airbus that has dragged on for 14 years with no discernible impact so far, Boeing is looking for a quick and decisive knockdown as its increasingly heated dispute with Canadian plane maker Bombardier reaches a crucial decision point on Monday.

      Just five months after Boeing began the case, a U.S. Department of Commerce preliminary ruling is expected to impose punitive tariffs on imports of the new CSeries commercial airliners built by Montreal-based Bombardier.

      1. I can see Rufus’ point (below), but how do you choose a good-guy between Boeing and Bombardier?
        I guess it might be possible to construct some equation which could find that the (distributed capital) cost to the flying consumer is offset by the tariff income, but WIH get the gov’t involved if it’s a wash?

  9. Fuck Bombardier.

    That company is one gigantic popsicle of cronyism where the execs make sure their own lot is taken care of.They’ve been nothing but lousy parasitical wards of the state.

    I know it’s the game played in this industry, but Boeing is right; there own bs notwithstanding. Giving money for the C-Series was highly controversial. Bombardier is intricately tied with the Federal and Provincial governments. And it usually comes with the usual faux-nationalist dumbo mumbo jumbo jargon of ‘Made in Canada (Quebec’s pride and joy!) and jobs to justify the billions of tax dollars they’ve received since the 1960s.

    What they don’t tell you is the divisions they cut with layoffs each time they chase clients for a new product.

    Fuck Bombardier. It should have been out of business years and years ago.

    1. I’m not too upset with this. Businesses that get government subsidies should get slapped with steep tariffs, while those who do not receive government subsidies should not. Make sucking at the government teat toxic. Unfortunately, Donald Trump probably doesn’t have any intention of implementing the latter part of that equation.

      1. Whoops, should have been a stand alone comment, not a reply to Rufus. Oh well.

        1. Your comment seems to work where it is, though.

  10. Like many blogs, vlogs, and paperistic ruminations the times of long rains are coming whereupon the NYT and Guardians and old tomes such as Gillespie’s tight ancient toy might run the 50’s comic book hell…. you will ALL feel it- I promise you along with ALL the fucking pretend nation sports…
    I would offer Reason my love but I can’t on a long oak dreamy ship board because it never did understand the philosophy of personal protection and the math expanded unto property..
    You know our girl Rose ate a goddamn block of Ice Cream and it killed her … Your FUCKING block of wet knees is going to end the Reason hype….

  11. Rose ate butter and wrote about fucking chain breakers
    Rose ate cream and likely ejaculated on punching the FUCK out of freedom haters
    Rose ate ice cream, butter, and all the gods and decades later Agile still loves her
    Agile will always love Rose Wilder Lane, fucking Mises and Fucking Rothbard
    NEVER John Maynard Keynes that sell out dragon wretch

  12. You may hate Trump, but other countries play the same games. Bombardier gets special breaks in Canada, if they want special breaks in America, they will have no choice but to build them here. Why do you think Toyota, Honda, Mercedes, etc, have manufacturing plants in America? They are saving in shipping costs, but they’re also building goodwill. Tennessee has given Volkswagen a lot of special breaks. Tennesseans like it because it creates jobs, VW likes it because the cost of living is really cheap in TN, so people can live well on much lower salaries. It may violate the principles of capitalism, but it helps the politicians get reelected.

    1. “…It may violate the principles of capitalism,…”
      Which is not the point. It violates the proven laws of trade in that *any* limit on trade harms both participants.

      “…but it helps the politicians get reelected…”
      Which ‘value’ is a value to them and a negative to the population in general.

  13. Ideally, I’d say that if a foreign company isn’t subsidized by their govt, it should be free to compete with U. S. companies on a level playing field, but if the foreign government wants to subsidize a company, that company should face trade barriers before bringing its subsidized self into the U. S. market – this policy would require making clear to the rest of the world that we’d only step in if they start a trade war, not just if the other company makes better products.

    1. And that we’d be open to a *real* free-trade treaty, a printout of which wouldn’t require a forklift to carry and which doesn’t subject U. S. sovereignty to the decisions of international civil servants. Just some good-faith free trade principles, and either side could denounce the treaty if the other side is cheating.

  14. If a foreign country is subsidizing an industry so that they can export a product at prices lower than its value, you don’t bitch about how unfair it is, you buy the fucking product and profit at their expense. And then briefly feel bad for the taxpayers over there.

    1. You misspelled “giggle at their misfortune”.

      1. ^+1, to two stacked comments.

  15. “Stop right there! Or I’ll kill my beloved wife and daughter! I swear I’ll do it!”
    “Just give up! We have snipers trained on our own spouses and children even as we speak! There’s no way out of this!”
    “Oh yeah!?! You think I won’t do it? YOU THINK I WON’T DO IT!?!”
    “PUT IT DOWN NOW!”
    “Fuck y-”
    [BLAM, BLAM BLAM BLAM, BLAM]

  16. One of you cucks expressed amusement at my contention Judge Roy Moore will prove to be more “libertarian-leaning” than the neocon national security centrist Senator Jeff Flake (R-Swamp):

    But Moore has indicated that he could choose a different path. He has already shown early signs of aligning with conservative senators who have defied party leadership.

    Moore spoke with GOP Sens. Mike Lee of Utah, Ted Cruz of Texas and Rand Paul of Kentucky on Tuesday night after he won the runoff.

    Yokeltarian Moment, bitchez!

    1. SIV|9.30.17 @ 12:29AM|#
      “One of you cucks…”

      Fuck off, SIV. The shelf-life of your abysmal stupidity is long ago out of date.
      Just fuck off.

      1. I just want to know if he says cucks ironically or not. I keep asking.

        1. Who knows, but it’s somewhat annoying, don’t you think?

        2. Given that he and Domestic Dissident are the ones who crack jokes about hoping Shikha joins her murdered friend in India, I’m gonna fire blind and guess “no”.

          1. Bullshit. I’ve praised Shikha for her verbal intelligence,good looks and superior trolling abilities. I go out of my way to comment positive reinforcement when the lovely Ms Dalmia drops the shtick and actually posts something insightful, well-reasoned and/or soundly grounded in libertarian principles. I count myself as a fan.

            As for her late communist friend? Good riddance

            1. You were doing so well, and then you just have to add that last sentence and remind everyone what you are.

            2. SIV|9.30.17 @ 10:24PM|#
              “Bullshit
              Yes, you are full of it.
              Fuck off, you pathetic excuse for humanity. Quit embarrassing yourself.
              Just fuck off.

    2. I for one am comforted that the guy who would like to outlaw gays and abortion but can’t is going to ally with the other 2 or 3 libertarian-leaning senators to champion free market healthcare reform that won’t pass, strike a blow against federal debt that will continue to accumulate apace and cut wasteful spending out of bills that will then be immediately put back in.

      Oh, did I say “comforted”? I meant “yawning”.

      1. SIV expresses himself such that if he said it was a nice day outside I’d get my umbrella even if it *was* a nice day, just to be contrary.

        Still, it would certainly be nice if Moore could vote with the non-sellout wing of the Republicans (assuming he wins the general).

        Moore never struck me as a go-along-to-get-along guy, which is probably bad news for Turtle Head.

  17. Canada must “play by the our rules”

  18. This one seems a little petty, but I do have to agree that in extreme circumstances you sometimes have to fight fire with fire. When other countries (China mainly) are using subsidies and market manipulation very intentionally to try to cripple your economy, destroy industries, and weaken your position as a nation one shouldn’t just shrug and let it slide.

    My preferred way to do this stuff would be to threaten tariffs if they didn’t cease subsidizing/manipulating/duties, and essentially use our muscle to “force” REAL free trade, or else no deal… Problem is we can’t do that from any moral high ground ourselves anymore for a lot of industries.

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