Tariffs

Trump Is Losing His Own Trade War

American businesses and consumers are drowning in a sea of high tariffs.

|

President Donald Trump likes to keep score. Well, here's a score for him: America, zero; while the rest of the world keeps tallying up free trade points. That's right; while American consumers have been waiting for well over a year to see some resolution to the various trade disputes started by Trump, other countries have agreed to lower their tariffs against each other and signed free trade agreements with one another. Meanwhile, American consumers and exporters are drowning in a sea of high tariffs.

Let's recap. For the last year and a half, the president has unilaterally imposed tariffs on, among other things, imports of steel, aluminum, and hundreds of billions of dollars of Chinese products. Many of these tariffs fall on intermediary goods that American and foreign companies use to produce things here in the United States. Despite being told by the administration that no one would dare retaliate against us, everyone has. Canada, Mexico, Japan, India, China, and the European Union have all since then retaliated with their own duties against U.S. exports.

From manufacturers to farmers, the industries in the downstream of U.S. tariffs (and in the crosshairs of the foreign duties) have been hurting. They've been shouldering high production costs and less access to foreign markets, and U.S. manufacturing just fell to a 32-month low. While we were told that this pain was worth it because it would deliver magnificent trade deals, it hasn't. The United States-Mexico-Canada Agreement, or "new NAFTA," is far from becoming the law of the land, leaving companies in limbo. And we're still waiting for a comprehensive deal with China, as well as a reduction to zero of the subsidies and tariffs between the E.U. and the United States.

Rest assured, though, other countries have not let this crisis go to waste. Taking matters into their own hands, other governments have been actively signing free trade agreements with one another. Recently, the EU, Brazil, Argentina, Uruguay, and Paraguay announced a free trade deal that covers 780 million people. This is a big deal because the South American trade bloc had relatively high tariffs against the E.U. The E.U. and Japan have also completed a free trade agreement.

E.U. members updated their trade deal with Mexico as well and just signed a trade agreement with Vietnam to eliminate 99 percent of the tariffs on goods and services between European and Vietnamese markets. Meanwhile, the 12 Trans-Pacific Partnership nations, which includes Japan, have looked to finalize the deal with other potential partners after Trump rejected the deal on his first day in office.

Even protectionist China has been active. It has effectively been dropping its tariffs against U.S. competitors while it raised its duties against U.S. producers. Chad Bown of the Peterson Institute for International Economics calculated that China's tariffs against the United States rose from 8 percent on January 1, 2018, to 20.7 percent on June 1, 2019. Tariffs against all other countries, however, went down from 8 percent to 6.7 percent during that same period. As Bown writes, "Now, there is a 14 percentage point difference between the average Chinese tariff U.S. exporters face versus all other exporters."

None of this is to say that China and other countries aren't hurting as a result of this trade war. A growing number of global firms are shifting production out of China in response to the U.S.-China trade war. The world's top bicycle maker, Giant Manufacturing Co., acknowledged this fact loud and clear by announcing that the era of "Made in China" was over.

Does this fact mean the Trump strategy is working? No. The Trump plan was that companies would leave China and move back to the United States. But that's not what's happening. Instead, they're moving production to other Asian countries, including Vietnam. That is probably why the president is suddenly threatening to impose hefty tariffs against Vietnam. If he does, the Europeans, with their new free trade relationship with Vietnam, will be the winners.

Some of Trump's supporters have argued that the president is actually a free trader who wants lower tariffs all around. Well, if that's the case, he has succeeded in a way. Everyone is getting lower tariffs—everyone except U.S. consumers, that is.

COPYRIGHT 2019 CREATORS.COM

Advertisement

NEXT: Trump's Proposed Tariffs on Tea and Fireworks Are Doubly Awful on Independence Day

Editor's Note: We invite comments and request that they be civil and on-topic. We do not moderate or assume any responsibility for comments, which are owned by the readers who post them. Comments do not represent the views of Reason.com or Reason Foundation. We reserve the right to delete any comment for any reason at any time. Report abuses.

  1. De Rugy just hates Vietnam ’cause they kicked Frog ass back in the 1950s.

    1. It is harsh but cruel to say such things out loud.

  2. I don’t know how people can be so stupid as to think tariffs are a good idea.

    1. Cotton tariffs were a primary cause of our Civil War.

      1. Slavery had nothing to do with it. A mere side effect.

        1. He said A primary cause, numbnuts.

          1. Maybe you need a sense of humor. Or maybe you are so infatuated with Trump that the mere mention of “tariffs” sends your brain into overdrive defending Trump.

            Tariffs are on imports. We imported no cotton. Ergo, cotton tariff receipts were 0.

    2. Idiot Adam Smith favored tariffs to offset local taxes on production:

      “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.”

  3. American businesses and consumers are drowning in a sea of high tariffs.

    If only! In fact, Americans are drowning in debt and don’t save enough. A consumption tax (and that’s what tariffs are) to erase the deficits and pay down the debt would be good public policy. Unfortunately, Trump’s tariffs are utterly insignificant.

  4. Drowning, huh? What with my $150/day gruyere habit, things could get sticky

  5. Juche, with American characteristics.

  6. haven’t noticed any impact

    1. We would be colonizing the moon, Mars, AND the asteroid belt, by now, were it not for stupid trade wars! I have my spacesuit, but cannot travel! THAT is a REAL impact!

    2. Of course not. Distributed payers and targeted recipients along with gradual implementation means no one notices the increased prices all at once.

      25% tariffs on $300B of imports is $75B tax raise. Spread over 300M people is $250 each. Add in other tariffs accordingly and that’s real money. If it had been an income tax raise, or a sales tax raise by states, people would have been screaming.

      1. Annual budget deficit is more than $3000/person/year, so we’re still $2750/person/year short.

  7. Trump is a protectionist idiot, who thinks that trade is evil. His old-fart geezer-brain can NOT be changed, on this matter!

    1. He is a true isolationist, except when it comes to interfering with the rest of the world. Lots of talk about withdrawing from overseas military adventures, little action. Wants the rest of the world to buy American products, can’t seem to understand that is impossible without us buying just as much of their products.

      Isolationist ignorance.

      1. He is a true isolationist, except when it comes to interfering with the rest of the world.

        Beautifully said.

    2. Trump and his tariff fans think trade is something to win. Or just old fashioned crony capitalists.

    3. America’s consumer spending is vastly too large and Americans and the US government are deeply in debt and idiots like you seriously worry that tariffs might reduce consumer spending.

      1. So tariffs put more tax money in the hands of Government Almighty. Do you have ANY evidence that Government Almighty has EVER refrained from immediately spending all their new money, plus more, when they get more money?

        Consumer spending is bad? Have you personally taken a vow of poverty? Is poverty a good thing?

        Trade wars grease the wheels of shooting wars. If goods and services stop flowing across borders, boots and armies will soon enough replace them in their border-crossing functions!

        1. Have you personally taken a vow of poverty? Is poverty a good thing?

          Poverty is a bad thing, which is precisely why Americans need to save more and spend less. It’s savings that generate wealth and consumption that generates poverty. Savings rates in countries like Sweden and Switzerland are upwards of 15%; in the US, they are below 5%.

          Ideally, savings rate should be the result of the free market. But in the US, it’s tax structure, fiscal policy, and monetary policy that are responsible for the abnormally and dangerously low savings rates, so until the US becomes a fully free market economy, government policy needs to fix what government policy has broken.

        2. Do you have ANY evidence that Government Almighty has EVER refrained from immediately spending all their new money, plus more, when they get more money?

          American voters vote for massive government spending because they think they aren’t paying for it; it’s mostly taxes on the rich, the printing press, and borrowing.

          To fix that kind of irresponsible spending, you need to shift from a highly progressive tax system to a tax system that ensures that most voters understand that when they vote for benefits, they’ll pay for it. You also need to stop the government from (directly or indirectly) printing money and from borrowing. That’s the only way to fix the fiscal and economic problems in the US. It’s not very likely to happen any time soon, but it certainly means that higher consumption taxes are a step in the right direction.

          Hoping that by not raising taxes somehow things will just putter along indefinitely is irrational. If we continue on the current path, the US will be an economic basket case within half a century.

  8. If he does, the Europeans, with their new free trade relationship with Vietnam, will be the winners.

    Can you imagine a world where Parisian fashion designers email their designs to Vietnam and Vietnamese workers in clothing factories produce the clothes for sale throughout France and the rest of the EU?

    The circle is complete, young grasshopper.

    1. Uncle Ho label?

  9. Trump is prepared to tax the American people as much as is necessary to bring the Chinese to their knees.

    Trump will beat his children until your children behave.

    Can’t argue with that kind of logic!

    1. Any administration should tax the American people as much as is necessary to bring the budget deficit to zero and to counteract the numerous perverse incentives that exist for excessive consumer spending.

      What we really should be doing is implement a 20% VAT until the national debt is paid off and consumers start saving enough for retirement. But that’s not politically feasible. Tariffs on the Chinese are at least a step in the right direction.

  10. “Trump Is Losing His Own Trade War”

    GDP zooming along.
    Stock market booming.
    Unemployment at historic lows.

    #Winning

  11. Let’s address the central theme of this…..opinion article: POTUS Trump is losing his own trade war.

    Objectively speaking, that is just nonsense. The economy is humming along, unemployment is quite low, wages are rising for the lowest two socioeconomic quintiles, the stock market is doing quite nicely, inflation is subdued. Somehow, this is not the picture I have in mind for losing.

    OTOH, China’s stock market has fallen by one-third, the banking system is under stress, manufacturing is leaving to other low cost countries (Vietnam, Bangladesh, Indonesia, etc), mass detentions of political ‘subversives’ (like the Ughirs), foreign investment is falling like a stone. This does not look like a picture of winning to me.

    Exactly what would you have us do, faced with a serial cheating, serial lying, serially thieving country that does not respect the agreements they signed? For decades, we did very, very little. Now that is changing. What alternative do opponents offer? I see/read of none. They would just lie back and enjoy China raping our country.

    As much as I don’t like tariffs, enough is enough! If we do not deal with this now while we can and we are strong, we lose the ability to deal with this later when we are weaker. Then it becomes a very different kind of war. That is what history teaches us.

    1. Exactly.

      The only disturbing thing I see about this trade war is the press’ enthusiastic willingness to ignore China’s role in causing it and to ignore the danger posed by a China that becomes a pre-eminent economic force in the world.

      Tariffs are things you want to avoid, but they’re not *just* about wins or losses for economics. They’re sometimes about hobbling a hostile actor who is using their own tariffs to try and harm your economy to put themselves in a better position to confront you militarily, which is what China (quite openly) has been doing.

      Trump’s tariffs are the first step we’ve taken to avoiding an eventual shooting war with the Chinese. And I’ll happily take the trade war over that.

Please to post comments