Donald Trump

Learning the Lessons of Protectionism the Hard Way

Trump's tariffs keep harming American businesses and consumers.

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Protectionism begets protectionism. The latest example of this sad state of affairs comes to us via the U.S. International Trade Commission. It ruled in January that American producers of line pipe are being hurt by imports of large-diameter line pipe from China and India, among other places. The remedy will likely be higher duties.

Some background: Back in March 2018, President Donald Trump cited national security concerns to impose steel tariffs on our trading partners. At the time, trade experts warned that these duties (imposed under Section 232 of the Trade Expansion Act of 1962) would inevitably make the lives of American manufacturers more difficult. Trump's 25 percent tariffs would significantly raise the price of imported steel used by American firms. Experts also predicted that manufacturers using domestic steel would pay a higher price. These predictions have proved correct.

Unfortunately for U.S. producers, the higher costs are difficult to avoid. For starters, the type of steel that they want to import may not be produced in the United States, meaning that those producers must continue importing metal at the higher, tariffed prices. Yet even if substitutes for imported steel are produced in the United States, the quality might be inadequate, or the prices may already be higher. Moreover, although the Department of Commerce has put in place a process for requesting exemptions from the tariffs, this process has proved to be a nightmare.

As my colleagues Christine McDaniel and Danielle Parks have documented, the steel industry—which stands to benefit massively from the tariffs—has objected to the exemptions. More often than not, the steel lobby has asserted that the exemptions sought by steel-using American firms aren't necessary because U.S. steel producers could start producing more such steel domestically. That claim is highly dubious. The burdensome nature of the exemption request process itself combined with the lack of recourse for firms that are denied exemptions rarely yields positive results for steel-using American producers. Then they're left paying higher prices for an important input.

In the end, the steel tariffs have made the production of American-made products more expensive. This makes those American producers who use steel less competitive on global markets.

Enter American producers of line pipe. As it happens, the raw materials these producers use in their domestic production of large-diameter welded line pipe and structural pipe are subjected to Section 232 tariffs (25 percent on steel imports from Canada, China, Greece, and India, 50 percent on imports from Turkey, and quotas on imports from Korea). As expected, the line pipe producers' production costs rose. And now these producers have gone before the USITC to argue that they are being injured by dumping—selling in the United States at prices below "fair value"—carried out by Chinese and Indian manufacturers of allegedly subsidized line pipe.

Three of the five USITC commissioners agreed. This ruling will trigger countervailing and anti-dumping duties from the Department of Commerce, and as a result, everything will end up being more expensive.

The question is, When and where does this cascading protectionism stop? Of course, the steel tariffs have affected products other than large-diameter line pipe. All American producers that use steel as inputs are negatively affected by the administration's import taxes. Inevitably, then, the USITC will see a surge of American manufacturers coming to ask for protection from foreign competitors for their products when, in fact, they need only protection from the Trump administration's trade hawks, who have made input more expensive.

No one knows when the steel tariffs will be lifted. In fact, while the president has argued that he is using these tariffs as leverage to renegotiate free-trade agreements with other nations, he hasn't lifted these once agreements have been reached. That was the case with South Korea's FTA, as well as with the modernized version of NAFTA. To no one's surprise, countries have retaliated against these tariffs with tariffs of their own against U.S. exports. Everyone is worse off.

As I said, protectionism begets protectionism. Too bad we have to witness this spiral over and over again. When will they learn?

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  2. Yah, nice and all, but Trump ain’t playin’ the liberty game, he’s playin’ the negotiatin’ game, and he’s such an expert at negotiatin’ that he don’t have to know squat about trade and stuff. When you are such a supreme out-psycher like Trump and his 36DD chest games, then it don’t matter what game the other feller is playin’, cuz Trump he be settin’ the rules and winnin’ the only game that matters, see, negotiatin’, and this economical trade game stuff just can’t compete, it ain’t even in the same squadron, if you take my drift.

    1. Same goes for North Korea. Drumpf down!

      1. The “Master Negotiator” is a complete fraud having got just one piece of legislation through in two years. And that was a corporate tax cut which to Republicans is as easy as Oprah scarfing down a slice of cheesecake is.

        1. Speaking of fraud… we all know that you are avoiding your ban and still have not paid your bet.

          1. You weren’t around when I donated Reason $20 you little cocksucker. Of course you have that wrong too. Just like Trump your only defense are the lies you repeat.

            1. You got outed by Reason staff you little pedo.

            2. You got outed by Reason staff you little pedo.

              1. Outed by the squirrels too.

              2. Liar. You are a true Trumptard.

                1. Poor screech/buttplugger/moneyball

    2. Learnin’ economics is for pussies.

  3. Protectionism begets protectionism begets protectionism begets begets, just how retarded is Trump?
    https://youtu.be/PJ1i0HuBXPg

  4. When will protectionism logically be able to stop?

    When the wages of everyone in the world are regulated equally and when we discard greedy market based economies that inflate prices based on need and availability.

    You asked.

    1. Whatever you say Captain Kirk.

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  6. As far as I am concerned, Trump has until June 2019 to make his strategy work to lower trade restrictions overall.

    Trump offered our trading partners free trade and they refused.

    Our trading partners refused to discuss lowering trade restrictions with Trump. They all caved within months.

    I hope Trump can pull it off.

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      1. Funny that you mention unicorns.

        I saw one being used to build that border wall. Hahaha.

        700 miles of border obstacles and counting.

        1. 0 miles of border obstacles. The presence of a structure does not equate to an obstacle.

  7. And now these producers have gone before the USITC to argue that they are being injured by dumping?selling in the United States at prices below “fair value”?carried out by Chinese and Indian manufacturers of allegedly subsidized line pipe.

    If that is true, it means American producers are not even bothering with alleging the economic fantasy that dumping means selling under cost. They’re using a different lie now –the conceit that they know what a fair price looks like– but at least it’s a less dishonest lie.

    As I said, protectionism begets protectionism. Too bad we have to witness this spiral over and over again. When will they learn?

    But according to Trumpistas, the president is a quiet economic genius who plays 55th dimensional chess or something and so we should take him at his word that he is both a free market guy who also likes tariffs, at the very same time. He’s also not a racist, Trumpistas argue, because he hired a token black woman. See? Who are you to ever question the great leader of the Grand Ol’ Party?

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  10. Per usual, still no comment on the tradeoffs between higher input costs and increased spending within the US economy…if you’re going to do an economic analysis, you can’t just stop at “prices increase.” No shit sherlock, tariffs are price controls. This isn’t even intro to micro.

    1. Exactly.

      Pay no mind to the fact that many billions of additional dollars stay within the USA, in the pockets of American citizens, to be spent back into the economy instead of being owned by foreign businesses.

      It’s fine and well to point out downsides, but there ARE positives too. I personally am NOT of the mind that all trade is 100% guaranteed to be a net benefit to a country JUST CUZ. There is this thing called math, that can actually show mathematically how many potential imports can result in a net decrease in GDP, wages, net worth, etc in a nation under some circumstances.

      1. personally am NOT of the mind that all trade is 100% guaranteed to be a net benefit to a country JUST CUZ.

        1. So you’re saying every state, county, municipality, and household should impose tariffs for trading outside those zones?

          If not – then what is the difference? Why is it important to be ‘collective’ when trading across a national border but not a state border? Why is the commerce clause a good thing *inside* the US – but an international version a bad idea?

          1. I thought it would seem self evident, but the reason we collectivize at the national level is because we’re all on the same team. The borders of the US define a set of shared values and we’re entering a phase of history where economic warfare has supplanted actual warfare. State infighting isn’t necessary because it is understood in the very idea of a nation that we look out for our own. I know it’s not a very libertarian thing to be a tribalist, but that’s why. It’s the same reason a libertarian state would need a highly un-libertarian government tasked with excluding outsiders who want to dismantle libertarian policies.

            Contradictions are not necessarily bad.

          2. Here’s the thing:

            We don’t live in a borderless, utopian world, run by a 1 world government.

            You and I are economically tied more closely together with people that live in the USA, further still to those in our state, in our county, and in our city. Via taxes and buying what each other produces, we are connected in ways that a Chinese guy is not tied to us.

            This is simply reality. Now people can work in industries that are more or less globalized than others, but lots of business IS still local/regional. So yeah, keeping money local DOES help out your locality to a point.

            If you can buy something for 1% more that is made in your city in the USA, vs in China, the US economy AND you local economy will in fact be wealthier overall for it. If the locally made thing costs 10,000% more, you would be FAR better off importing it.

            1. Everybody likes to make it out like we’re slashing costs of products by 90% by importing… But the reality is many things ARE only nominal 5%, 10%, 20% savings. Mathematically when you hand that capital over to a foreign national to save say 10%, the cost savings CANNOT POSSIBLY make up for the 90% of the product cost now being owned by a foreign national. The net worth of the US and US citizens is lower for it. Even if they reinvest it here, the net worth is STILL lower than it would have been, as that Chinese person owns the asset, not a US citizen.

              It’s just math. I’m not opposed to trade, I just think people who like to pretend EVERY transaction ACTUALLY improves the national economy are incapable of doing basic math… There are imports that are great for the economy, when we save a lot, and trades that are not great for the economy, when we save very small percentages. It’s as simple as that. In a completely amoral world where shaving 5% off your costs is done without batting an eye, even if it means reducing your nations economic well being, there is a LOT of importing of products that don’t really do much/any good for the economy overall.

              1. And I guess to directly answer the thing about interstate tariffs… Yeah, it’s mostly just that we’re arbitrarily setting a line of what is or isn’t acceptable for reasons other than economics.

                We’re all on the same team as the guy above said. All our taxes go to those dicks in DC, so we all play together for the most part… EXCEPT, really we don’t.

                Look at all the games states play against each other, incentives, taxes, pork, special deals, etc. Why? Because IT DOES matter for the local economic health. Getting 10,000 jobs in your state vs another DOES help your state.

                I actually agree that 100% free trade is best FOR THE WORLD OVERALL, but also contend that in any given situation a given trade might not be good for a NATION overall.

                It is in fact 100% accurate to say that a state that runs a massive trade deficit with all its trading partners WILL in fact be poorer. There are things besides manufactured goods of course, but if a state had a higher outflow in ALL categories, it would effectively be getting sucked dry every day that went by until its citizens had no net worth, because they were producing less than they were consuming.

                Same applied to nations. If we ever have 100 colonized planets, the same would apply on a planetary level. It’s basic math.

              2. Your “math” is zero-sum, and an economy isn’t.

                1. It’s not zero sum genius. I actually account for the savings being able to be reinvested.

                  If you save 10% by importing, and the other 90% is now owned by a foreigner… Explain to me how saaay $100,000 can POSSIBLY be invested to replace the $900,000 in lost net worth???

                  IT CANNOT. However if you save 80% by importing, it is quite easy to invest $800,000 to replace the $200,000 that the foreigner now owns. Hence, some trades are very beneficial, and others are not.

      2. The other thing is I’m not even convinced either way. I majored in economics, did a lot of econometics, and work in finance so I’m just very data driven. All I know is that tariffs do create a result that some people may consider desirable (obviously, or else nobody would have ever implemented tariffs in the first place). I have found no economic research or literature that explores the possibility that the deadweight loss caused by tariffs may be offset (or improved upon) by additional domestic spending from people working in protected industries. Mainly, I’m interested in where they spend. I regularly note that the Chinese steel company we buy from for a better price doesn’t turn around and send their workers here to frequent local businesses. There are a lot of factors that could be included in data analysis. I am primarily concerned with work opportunities for lower skilled and less experienced workers that are critical to economic mobility. All the boomers who succeeded started in factories; where are our factories to start at? There’s always going to be an underclass that needs these types of opportunities.

        1. Yup. This is essentially it.

          When you lose $1 million in productivity to save $100,000 on costs, you’re not JUST losing that $1 million… You’re losing, depending on whose estimates you want to use, somewhere between $2-10 million in economic activity as those people spend it around in the economy.

          One of the main theories behind why the stimulus didn’t work very well during the Great Recession was because half the money was just shipped straight overseas since we don’t manufacture many consumer goods anymore! In the past the money almost ALL remained in the US and swirled around creating lots of activity. If it all ends up in the hands of Chinese business owners who don’t spend much/any of it back into the domestic economy, except perhaps to purchase bonds or US stocks/real estate, it doesn’t have the same economic effect.

          This stuff is FAR more complex than many people like to admit. And a REAL doing of the math would in fact state that some imports definitely enrich the country, while others do not.

        2. I definitely get the things you mention.

          I just cannot find what the long term losses are on international US trade because of trade restrictions.

          I think tariffs trying to ‘fix’ the market based on perceived imbalances do immeasurable damage to the US economy.

          Tariffs to play hardball negotiation with trading partners to get them to lower their trade restrictions will have short term losses but long term gains.

          1. So, the other major component ignored is wages.

            If you sub out a moderate wage job like making pants, but 100% of the employees move onto doing aerospace manufacturing, which pays better… That is again a good thing.

            However if you lose pants making at $15 an hour, and only 50% of the employees find ANY new work at all, and the average new wage is $9 an hour… That’s a big loss.

            In short, aside from capital flows, you need to maintain comparable or higher employment post trade for it to be a net positive. I think MUCH trade would meet this exact criteria… But we also have probably hundreds of billions a year in trade that doesn’t.

            I do not argue that absolute free trade isn’t best for THE WORLD OVERALL… I argue that it might not be BEST for a given country in a given situation at all times. Those are different things. Free trade absolutely does make the world overall wealthier and more productive… But people care about THEIR families income more than the guy across the street, same deal with nations.

      3. Do you have a citation for this math of which you speak? And perhaps an explanation for why no economists are aware of it?

        1. There are economists who are aware of it. They just aren’t as special as the Keynesian ones who write our economic policy.

          There are plenty of economists who question whether the Smoot Hawley Tarriff directly caused the great depression and challenge Ricardo’s comparative advantage based on his assumption that capital is not mobile. Capital is mobile and affects the Comparative Advantage theory.

          You just don’t hear about them, because you are casually sourcing economic news from The Economist or are not actively seeking out alternative arguments.

    1. I’ll believe it when it happens. I hope you’re right.

    2. I’m gonna LOL if he actually gets some major concessions from China. It will be amusing to watch so many people eat their words.

      The truth is, we could break China 100% if we wanted to. Just set a date in the future where 100% tariffs will kick in. Then have them rise by 10% a quarter every quarter after that.

      They will be shitting their pants SO hard worrying about going into an instant depression, that they would cave to almost any demand we made on them. If the date was set far enough out, say 12 or 18 months, US companies would actually have plenty of time to line up alternative suppliers in India, Vietnam, etc too… So the US economy wouldn’t suffer hardly at all.

      But even Trump doesn’t have the balls to go full tilt. But some small gains would be nice anyway.

      1. Because the rest of the world is not a thing? Because they don’t do business with Europe?

        1. No, just because MATH. We’re far and away their largest market. They’re already selling to all those other places, so even if they continued to do so, we’re supporting many, many MILLIONS of Chinese jobs that would go poof.

          If we pulled out on them overnight, there is NO market that can come close to replacing us, which puts them in an instant massive recession/depression. Alternatively, we can import cheap goods from tons of places, so we wouldn’t even feel it much.

          People seem to refuse to want to accept the reality that in almost all situations one side or another has the upper hand. China has too much to lose, hence they would end up caving to demands, as long as they were semi reasonable demands. Their only retaliation would be trying to tank the dollar by selling our debt (which they wouldn’t have as much of to hold over us if we had dealt with the trade issue years ago when we should have, I might add), but that would arguably hurt them as much as us too as they’d be selling at a huge loss if they flooded the market… Soooooo… They’d just change some of their protectionist policies and we’d all call it a day.

          The truth is the US economy would have lost TONS of manufacturing jobs even if we had fair and reasonable trade deals… But we’ve lost a lot more than we would have because so much of our trade is one sided. This kind of stuff just can’t go on indefinitely. China will still be doing GREAT without protectionist measures, so they have little to worry about.

          1. That’s actually a good point with regards to the seemingly unrelated issue of Chinese foreign policy. Ever wonder why they are irrationally aggressive and expansionary? There really is no other way they gain leverage against us. It is no mere coincidence that they primarily agitate our allies, nor is it a coincidence that they’re taking a gamble in Africa.

            1. Yeah in a way. They’re a paper tiger. The US alone could crush them overnight economically. If Europe, Japan, South Korea, and some other countries joined in… They’d be done. They don’t have enough domestic consumption yet to keep their economy afloat, and they’re drowning in debt worse than most of the west is.

              So, I guess trying to act tough is a way they might feel gives them some sort of leverage. “We’ll do all this mean stuff if you ever step up to us!” Of course it’s still just a bluff, and we can call them on it anytime we want.

              1. “Yeah in a way. They’re a paper tiger. The US alone could crush them overnight economically. If Europe, Japan, South Korea, and some other countries joined in… They’d be done. They don’t have enough domestic consumption yet to keep their economy afloat, and they’re drowning in debt worse than most of the west is.”

                China also has national debt >10x less than us and ~50x less per capita. Might want to factor that in to your fantasy economic world. To think we can’t be hurt and can effectively deal fatal blow to a growing economy as large as China is foolishly stupid.

                1. Nobody said “fatal blow,” just that we could put them into a severe depression.

                  Their entire economy is EXPORT supported. If the USA, and maybe a couple European countries, or Japan, etc decided to embargo them, or slap massive tariffs on them as punishment for something… They’d be fucked. Far more than the USA/Europe/Japan would be.

                  And actually, their debt is VERY large. IIRC they have more “corporate” debt than most anybody else, keeping in mind most of this is state owned corporations. If the income stopped, they’d fall apart. Their real estate debt is horrendous too.

                  As I said, importing countries can choose from MANY low wage nations to buy from… China is more limited in who can soak up their exports. If they didn’t have a revolution as a result of the depression they’d recover eventually, but IT WOULD HURT. This is why, realistically, if a coalition of 1st world nations decided to put the screws to them, they’d cave before we ever had to take action. All they need is to hear a credible threat.

                  1. If their exports were knick-knacks or other useless items, I’d agree. Their top exports are integrated circuits, computers, office machines and broadcasts/internet equipment. In other words, things we rely on/need every day. Many of their businesses are integrated with ours in direct and indirect ways. Any war, economic or otherwise, is not a drop in the bucket and will be disastrous for all involved, in my estimation. Hopefully, it’s an argument we never find the answer to.

                    1. A lot of electronics come from Taiwan but they are labeled as “China”.

                    2. A lot of electronics come from Taiwan but they are labeled as “China”.

                      I work in this industry. I have never once seen this. Why would anybody label something made in Taiwan as made in China? That would be perceived-value-subtracting.

                      Parts made in Taiwan are proudly advertised as such.

                    3. I believe he means many of the components are actually made in Taiwan, Japan, Korea, the USA, Europe, etc… And final assembly is done in China.

                      To McGoos post above, YES we are so intertangled now that there will be some pain… But we could in fact specifically exempt areas where they have a near monopoly and we need their goods. Say exempt a few electronics categories, or put modest tariffs on them like 10-25%… Enough to encourage assembly to move to more friendly nations, but not enough to completely bork us in the short term. While doing full tilt 100%+ tariffs on all the things we can readily get elsewhere now, like clothes or shoes.

                      The problem is we simply have the upper hand for now. In 30 years this won’t be the case probably… Which is why we need to get them to start competing on a level playing field while we still can. The Chinese are NOT shy about throwing their weight around, so we’ll have a hard time dealing with them when their economy is actually as large as ours or bigger.

        2. The USA is the best market in the world for many reasons.

          There is a reason that Trump’s tariffs at relatively low rates have convinced all our major trading partners to talk about lowering trade restrictions.

          1. I don’t have the numbers, but I would not be surprised if Trump’s tariffs have already cost us more than those concessions will be worth.

            1. Hey, at least it reduced the budget deficit a bit! LOL Gotta look for the upsides…

    3. So, tariffs were increased by 33% under Trump – but because the Chines might reduce that by 25% we’re supposed to call being right back where we started with a win? That we’re supposed to ignore all the damage the tariffs caused in the interim?

      1. Uhhh, nobody knows what will be negotiated, but some of the stuff that the Chinese are openly discussing accepting could be major changes. They’re talking about removing forced technology transfers, requiring foreign businesses partner with Chinese firms, other non tariff stuff, AND reducing tariffs.

        We have yet to see what will happen… But it may end up being a lot of good stuff. Or not. Time will tell.

        1. Politicians should follow the physicians’ creed, “First do no harm”.

          1. I’d be game for that… But then 99% of the laws politicians pass couldn’t be passed anymore. WHICH WOULD BE AWESOME! But it ain’t gonna happen.

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  12. Totally ignorant, naive and willfully foolish.

    “There may be good policy in retaliations of this kind, when there is a probability that they will procure the repeal of the high duties or prohibitions complained of. The recovery of a great foreign market will generally more than compensate the transitory inconveniency of paying dearer during a short time for some sorts of goods. To judge whether such retaliations are likely to produce such an effect, does not, perhaps, belong so much to the science of a legislator, whose deliberations ought to be governed by general principles, which are always the same, as to the skill of that insidious and crafty animal vulgarly called a statesman or politician, whose councils are directed by the momentary fluctuations of affairs.”

    — Adam Smith

    1. Still looking for evidence of that skill in the nincompoop in the White House. He may surprise me yet, but I doubt it. For one thing, we are not talking about the recovery of some lost “great market”, in which there is a pent up demand for our prooducts.

  13. “It will generally be advantageous to lay some burden upon foreign industry for the encouragement of domestic industry, when some tax is imposed at home upon the produce of the latter. In this case, it seems reasonable that an equal tax should be imposed upon the like produce of the former. This would not give the monopoly of the borne market to domestic industry, nor turn towards a particular employment a greater share of the stock and labour of the country, than what would naturally go to it. It would only hinder any part of what would naturally go to it from being turned away by the tax into a less natural direction, and would leave the competition between foreign and domestic industry, after the tax, as nearly as possible upon the same footing as before it.”

    — Adam Smith

    1. Common sense is a bitch!

      I’ve said about a lot of this stuff: Short term gain is sweet… But one cannot ignore long term consequences either.

      I think a lot of the offshoring of jobs has been good in the short term, but will ultimately do more harm to our economy and competitiveness in the long term. Note that China is directly beginning to out advance us on some new tech already… If we had been making this stuff in the USA/Europe etc, they never would have built up the expertise to be competing with us this quickly. Is shaving costs 10% in the short term worth losing 80% market share 30 years sooner a worthwhile tradeoff? Maybe, maybe not.

  14. “It will generally be advantageous to lay some burden upon foreign industry, for the encouragement of domestic industry, when some particular sort of industry is necessary for the defence of the country. The defense of Great Britain, for example, depends very much upon the number of its sailors and shipping. Defense is of much more importance than opulence.”

    — Adam Smith

  15. Wonder what the line on tariffs will be when the Green New Deal sets tariffs on foreign goods not made in zero emissions factories.

  16. “Experts also predicted that manufacturers using domestic steel would pay a higher price.”

    It often goes the other way. I recently needed to order magnetic shielding material, and the lack of US producers meant that the most economical type for low frequencies (high-purity iron) is not available here and has to be ordered from China, the UK or Japan. Even silicon steel is only available in very large quantities from suppliers with no presence in most states. If you need it for prototyping or laboratory shielding, or for a run of small motors, you’re SOL. If you need it in a hurry, you’ll pay double (forced substitution of a higher-grade material plus expedited shipping). That makes a 25% tariff look pretty tame.

    Also, aside from industries that were >90% outsourced before Trump took office (bicycle manufacture*), or propped up by government largesse (road/bridge construction and projects backed by TIF), or consolidated and controlled by foreign state-backed conglomerates (household appliances), what examples have the Reason editors actually put forward?

    *Outsourcing is so uniform in the bicycle industry that even Rust Belt stalwarts like Kurt Manufacturing (parent of Kurt Kinetic) stopped trying to make bike parts here a decade ago. Trek bikes have been made overseas for at least as long (unless you buy a top-end Madone for $3,000-10,000). Ditto for SRAM. Ditto for QBP’s house brands (Surly, Salsa, etc.). Park Tool is one of the only exceptions that I can think of.

    1. How does any of this represent it “working the other way”?

      1. The official purpose of the tariffs on raw steel and aluminum is to retain some domestic capacity to make those products. Reason’s staff pointed out that the cost of buying them could rise, but the cost of rush orders will drop by a larger proportion.

  17. Damn that Trump. He invents tariffs and now every country on the face of the earth imposes them too. All in just two years.

  18. VdR:
    “Sevo’s law: When a third party sticks its nose in a transaction between two parties choosing to make that transaction, at least one, and likely both lose.
    Everywhere and always; no exceptions. If it were otherwise true, no one would make a transaction without that interference; the government is always willing to ‘help’. Which would mean there would never be a black market; ha and ha.”
    There is not doubt that interference causes distortion, but, here you’re ignoring the condition that one distortion is greater than the other.
    So far, the market (rather than you, or others who offer predictions) tells us that Trump’s distortion is causing less harm than the alternative.

  19. I don’t understand why the president is granted the power to impose taxes.

  20. Maybe the best thing the government could do is to end the uncertainty: announce that tariffs are permanent, that industry should make the necessary adjustments & guide itself accordingly. Good for some, bad for others: that’s life in the big city.

    Basic finance: government needs revenue, whether you call that taxes, fees or tariffs, etc. US permanent income taxes were enacted about 100 years ago. Before, the government mainly financed itself with tariffs and duties. Over the years we got more taxes and less tariffs and duties.

    So now it’s back to the future. The government is lowering corporate income taxes and financing that with temporary higher tariffs. We’ll see about “temporary,” given that we’re still paying temporary income tax enacted to finance WW I.

    Sure, there are losers and winners, as with any government policy shift. The economy eventually adapts. Tariffs distort the economy and trade, sometimes grossly, but so do taxes. Bad vs. Bad.

    Let’s be clear-eyed: naturally, new administrations adjust revenue collection to benefit a different set of friends. That’s part of how and why they get elected. Some administrations make bigger tweaks than others.

    So, given that government needs revenue by hook or by crook, what’s the long-term fundamental problem exactly? That one mechanism is better than another for certain groups? Or maybe a little worse overall? Nobody knows for sure.

    Just remember, *somebody* has to pay for the corp income tax cut.

  21. While I’m against protectionism, I have to say that the historical assertions about steel border on fake news. Yup, labor costs were high. By then the steel companies had already sabotaged themselves. Long before the strike American steel companies had given up on capital investment in favor of the quarterly earnings report.

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