Trump's Case for Tariffs Is Unraveling

Automakers, motorcycle manufacturers, the stock market, and even the White House's own analyses are telling Trump to change course.



It's been an enlightening economic experiment, but the Trump administration's plan to use tariffs to reshape global trade is now unraveling before our eyes.

Each day seems to bring fresh evidence of exactly how wrong the president was to declare trade wars "good and easy to win." Unfortunately, each day also brings evidence that the White House is determined to stay the course, consequences be damned.

The big news Friday was that several major automobile manufacturers told the administration that planned tariffs on imported cars and car parts would wreck their operations in the United States. That follows a week's worth of news that a wide range of industries—from motorcycles to steel railings, from tires to nails—were shifting jobs overseas or postponing expansions because of the tariffs. The stock market continues to reflect the uncertainty imposed by Trump's trade policy, and even the White House's own assessment shows that economic growth will slow as the tariffs hit.

Over the weekend, in defiance of the mounting evidence, Trump insisted that "it's going to all work out." On Monday, Commerce Secretary Wilbur Ross said the administration will not stop the trade wars, even if the stock market tanks. "There's no bright line level of the stock market that's going to change policy," he told CNBC.

The big question is how much more damage will be done—to the American economy and to the mechanisms of global trade—before the president retreats from these misguided policies.

The automotive tariffs might be the turning point. Trump has instructed the Commerce Department to conduct a formal investigation into whether tariffs could be applied to imported cars on the grounds that they are national security threat. (No, it doesn't make any sense.)

"The domestic manufacture of automobiles has no apparent correlation with U.S. national security," BMW writes in its comments to the Commerce Department. In other comments submitted to the department, automakers say tariffs will increase the price of their cars, potentially by thousands of dollars, and will force industry-wide supply chain adjustments that could see American automaking jobs cut or moved overseas.

Trump announced those proposed auto tariffs last month in response to European tariffs targeting such American goods as motorcycles, whiskey, and blue jeans. Those tariffs, in turn, were the European Union's response to Trump's 25 percent import duties on steel and 10 percent tariffs on aluminum.

That tit-for-tat escalation of the conflict between America and Europe has already claimed some victims. Harley-Davidson, the Wisconsin-based motorcycle brand that also builds bikes in Missouri and Pennsylvania, announced last week that it would shift some manufacturing to Europe to avoid the E.U. tariffs. Building motorcycles in the U.S. and shipping them to Europe would leave consumers paying $2,200 more per bike, the company said in a statement to the Securities and Exchange Commission, and would cost the company about $100 million annually.

Polaris, a Minnesota-based company, could soon follow Harley-Davidson's lead. A spokeswoman told the Associated Press on Friday that Polaris is considering shifting production of its Indian Motorcycle brand from Iowa to Poland.

Harley-Davidson and Polaris could not be more explicit about the reasons for shifting jobs overseas. Neither could any of the car companies that submitted comments last week to the Department of Commerce.

As with the tariffs on steel and aluminum (and another set of tariffs targeting $50 billion in Chinese imports), Trump's proposed tariffs on cars would needlessly harm American workers while aiming to punish close allies and key trading partners.

Whether Trump is aware of that remains unclear.

Last week, while giving a speech in South Carolina, Trump said he wanted to erect trade barriers so carmakers like BMW would have to "build them here" instead of shipping cars from Germany. But BMW does indeed build them here—the company's largest manufacturing facility in the world is in Spartanburg, South Carolina, less than 100 miles from where Trump was speaking at the time. The plant employs more than 9,000 people and produces more than 40,000 vehicles every year.

But ignorance can only account for so much of the White House's bullheaded approach. The consequences of tariffs are well-known.

Trump's tariffs could grow the steel, iron, and aluminum industries by about 33,400 jobs, according to an analysis by the Trade Partnership, a pro-trade think tank. But the tariffs are projected to wipe out more than 179,000 other jobs. That's a net job loss of about 146,000—five jobs gone for every job gained.

A separate study released in March by the Coalition for a Prosperous America, a protectionist think tank that favors tariffs, also found that Trump's steel and aluminum levies would cost American jobs. The U.S. manufacturing sector is projected to lose 10,000 jobs and the construction industry is projected to lose 7,500 jobs, according to the group's analysis. The White House's own report on the tariffs, released in early June, also showed—surprise, surprise!—that they would raise prices and slow economic growth.

All of which should be cause for some second thoughts. But for someone who promised to "drain the swamp" and do things differently, President Trump's response to the slow-motion failure of his trade agenda is a classic move straight out of the Washington playbook: If a government policy isn't working, you declare that just means it hasn't been tried hard enough.

Ross today downplayed tariffs' potential to cost thousands of American jobs and tank the stock market. Those consequences are nothing more than "hiccups," he said.

"There obviously is going to be some pulling and tugging as we try to deal with very serious problems," he told CNBC. "So there will be some hiccups along the way."

In other circumstances, there might be something admirable about Trump's determination to continue full speed ahead even as the warning lights are flashing. But the thing about a "damn the torpedoes" approach is that sometimes the torpedoes actually hit you.

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  1. Trump is like that old dude yelling at the television set. But then he gets into office and realizes that it’s not as easy as he imagined so he just waves his cane around even harder. Until his kids puts him in a home.

  2. Change course before July 6 or change course on July 6.

    The latter makes sense.

    The former is hopelessly naive.

    1. None of this whole thing makes sense.

  3. I don’t understand nth-dimensional chess well enough to see this playing out in any way other than the Donald doubling down

    1. At the end of this we’ll probably get to hear him announce “king me” to the world.

    2. Self delusion is a key Trump trait.

      https://en.chessbase.com/post/ trump-kramnik-botvinnik-junge-benko
      “…A Kramnik?Kamsky World Championship Candidates match was held in the Trump Tower. Trump gave a reception for the guests, in the company of his secretary and a beautiful model. I was also introduced as “Chess Grandmaster Pal Benko”. Mr. Trump turned to his secretary and asked: “Don’t you think I could also be a GM if I put in one or two year on chess?”

      I couldn’t believe it. I said: “You need to be born again for that. I have never known anyone who started with chess after the age of 20 and became a grandmaster.” Presumably he had no idea of the serious fight for titles in chess…”

    3. He’s playing one-dimensional tic-tac-toe.

  4. Harley Davidson is ignoring Trumps warnings against producing motorcycles in Europe for the European market to avoid EU tariffs.

    Is it a shock that Harley is ignoring business advice from a career criminal who defrauded contractors, vendors, investors, and customers and who bankrupted multiple companies?

    1. Harley-Davidson was moving its operations overseas long before Trump announced his tariffs. Even Snopes, no friend of Trump, rates stories about Harley moving their operations overseas in response to tariffs as “mostly false”.

      Harley is looking around for an excuse to mask the fact they want to move out of the US in order take advantage of cheap overseas labor. That excuse won’t play well with their customer base, so they’re blaming this on Trump and his tariffs.

      Reason, of course, is all too happy to play along.

      1. It isn’t Snopes that is “no friend of Trump”, it is truth and accuracy. They can only rate the things he says.

      2. Is European labor cheap?

  5. It takes a umique brand of cockiness to threaten a foreign company for not building cars here from a podium 100 miles away from their plant. Either that, or a real moron.

    Eric keep up the good work. Keep showing all the damage “winning” is doing to American businesses. Add Polaris (and the iconic Indian Motorcycle) to the list.

  6. I will hurt my people if you don’t stop hurting your people because I know that whatever hurt I cause to my children will hurt your children too.

    So fucking stupid. What really bugs me is all the idiots saying Trump is playing nth dimensional chess and the rest of us are just too damned dumb to understand his genius. And yet they otherwise proclaim principles over principals, small government, liberty, and everything Trump does not stand for..

    #TrumpFuhror FTW

    1. It’s even worse. Now the argument is that in order to have more economic freedom for citizens of other countries (for China and Europe to lower their tariffs) we need less economic freedom here (our own tariffs).

      Unfortunately TDS seems to afflict people in both directions.

    2. “I will hurt my people if you don’t stop hurting your people because I know that whatever hurt I cause to my children will hurt your children too”
      Reminds me of an old (allegedly Russian) joke:
      Jeannie appears before a man and says she will grant him one wish, but whatever he wishes for she will give his neighbor double. The man thinks for a moment and then replies: make me blind in one eye.

  7. Trump’s tariffs could grow the steel, iron, and aluminum industries by about 33,400 jobs, according to an analysis by the Trade Partnership, a pro-trade think tank. But the tariffs are projected to wipe out more than 179,000 other jobs. That’s a net job loss of about 146,000?five jobs gone for every job gained.

    But, but, but, I am assured that in the end the tariffs will force other countries to stop taxing their citizens as much for American goods and we’ll both still have all those steel-making jobs and the other ones will come back, right? And then the economy will grow faster after that period of recession than it would have otherwise. And that the ROI on the new level of growth to break even with the damage caused earlier will be less than a generation!!!!

    I am assured of this. Just lie back and think of all the steel-workers you’re taking a hard dicking up the ass for. Think of how appreciative they’ll be that they get to keep their high-paid, unionized jobs as you shell out an extra grand for your car.

    1. You just don’t understand because of your TDS. You’re already taking a dick up the ass, and have been for years because the economic systems in other countries aren’t perfect. So Trump, by strapping on a bigger, spiked metal dildo that squirts lemon juice, is gonna force those other countries to adopt perfect free market trade policies. Because no ones had the balls, the love of a once great America, and the 32nd dimensional cheese skills to be willing to wreck the economy just to to kinda make a point. That’s the ass fucking you should be happily laying back and taking proudly.

      1. Chess* skills. Although I’m sure he has cheese skills like you would not believe, trust me, the greatest cheese skills ever.

      2. Wait, wait, wait. Wait.

        I’m told that we need the tariffs to ‘protect’ me from *underpriced goods* – because these countries are ‘flooding’ the US market.

        So, it doesn’t sound to me like I’ve been taking anything up the ass for years. Sounds like I’ve been getting a pretty good deal.

  8. The real ignorance is that of people who lump toys made by Mattel (which might have a few grams of steel) and eight-lane bridges into the overarching category of “steel producing industries,” and imply on that basis that *all* jobs in all of those sub-industried are under dire threat.

    Or the people who point to threatened job losses in botique industries (Harley and Indian) as evidence of a long-term net loss, even though the industries that now have an incentive to shift production back employ far more people.

    Or the people who think that it’s politically possible to have a global economy and a small military. (Reality check: When half-trilloin-dollar US companies have make-or-break foreign interests, those interests will be enforced militarily. Don’t like it? Then you need to elect 51 senators like Rand, and you need to keep all of them honest once they have power. Good luck.)

    1. What industries have an incentive to shift production back? Steel producing companies? They certainly don’t outnumber steel using companies – even if you leave out those that use very little steel and only compare to those that build 8 lane bridges and suchlike.

      1. Depends on whether an auto tariff goes into effect. A lot of US cars are made in Canada, and that’s still fairly labor-intensive work (as Tesla has found out the hard way). Labor costs are similar in both countries, so it wouldn’t take much to shift the balance in the long term. But manufactueres have enough invested in factories and labor development outside of the US that they’re unlikely to move quickly even if they could be sure that the administration and the next one would keep the tariffs in place.

        The choice of steel seems to have more to do with (a) the failure of Trump’s import-tax plan and (b) his desire to win in Minnesota’s 8th district.

    2. Given the examples, I obviously meant “steel _consuming_ industries.”

  9. Let’s face it: Trump is a fucking retard.

    1. With brilliant insight and phrasing like that, don’t you think you would be more appreciated over at Vox or something? They feed off that sort of thing. Not so much here.

      1. How would you know?

  10. At first I gave him the benefit of the doubt and was hoping this tariff business was just a negotiating tool. But his advisors are Wilbur Ross who will defend the steel industry even if it kills every other US industry that uses steel and Peter Navarro that refuses to admit any negative consequences.
    He got Germany to propose lowering the auto tariffs one small win. Still doesn’t seem to get at the theft of intellectual property by China which to me is a bigger issue that the rest of this combined.

  11. Tariffs might raise the cost of imported products.

  12. With all due respect, Trump is just the latest in a long line of presidents with a minimal or misguided understanding of economics. Everybody’s ready to yell back at Trump because of his tariffs, and that’s good. But why wasn’t anybody complaining about Obama’s tariffs? Or Dubya Bush’s tariffs? Or Clinton’s tariffs? I keep hoping people will actually learn something beneficial from the Trump presidency, but he just seems to be an excuse to double down on political partisanship and the tribal mindset.

  13. It seems you have a typo: BMW produces over 400,000 vehicles per year at its Spartanburg plant, not 40,000 as stated in the article. That certainly doesn’t help Trump’s case at all.

  14. The only people who can afford a Harley Davidsonson in Europe are the rich ,who are gonna buy them anyway. The socialist and communist countries subsidize all of their companies so it’s impossible to for US companies to compete anyway. I say we quit buying anything from them. We can make it here. I’m tired of hearing about “free trade” when it comes to doing business with these countries. We shouldn’t support sosialism let alone communism

  15. Maybe some are failing to really think this through. If you give a person a great deal and later you want to renegotiate, where’s the incentive for the person who’s been benefiting to come to the table?…. Yeah, right – there is none. So you need to reach out and get his attention,..provide incentive. At first he’s going to be mad (“you’re going against our deal”, blah, blah, blah,) so,…well, I’ll show you; I’ll impose tarrifs on you – how do you like that?” After a short time, the one who’s benefited realizes that he can’t compete with my economy and therefore will eventually come to the table to renegotiate…. for fair trade. It’s a simple human nature quiz. Stop with the overthinking and just look at the motivation. Trump’s a professional. He knows what he’s doing,.Stop griping about his methods. Wait for the final outcome before you start Monday morning quarterbacking. He knows more than you…. that’s why we hired him.

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