With Bombardier Tariffs, Trump Continues His Protectionist Mania
Anti-dumping tariffs don't lead to more fairness, they just lead to more tariffs.
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.