Free Trade

If You Like Tariffs, You Should Have Cheered the Clogged Suez Canal

Disruptions to trade are bad for the world, whether you can see them or not.

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Now that the Ever Given has been freed from the sandy banks of the Suez Canal, we can safely return to ignoring the modern miracle of global trade that tends to be noticed only on the rare occasion when it doesn't work as smoothly as we're accustomed.

Before that happens, let's take a moment to appreciate it.

An estimated $9 billion worth of trade flows through the Suez Canal every day, according to Lloyd's List, a London-based shipping journal—an amount considerably larger than the entire annual economic output of dozens of countries. All of it is the result of individuals and businesses engaged in mutually beneficial transactions despite being separated by thousands of miles. Each and every item shipped through the canal is evidence that trade grows the world's economic pie—simply because you can sell more goods when you have access to more customers, whose standards of living are raised by having access to more goods.

The Ever Given running aground was (presumably) an accident. Unfortunately, other disruptions to the global trading system are deliberate acts of sabotage carried out by political leaders who don't cheer for a giant ship being stuck in the Egyptian mud, even though the effect is exactly what they are trying to accomplish in other, less obvious ways.

But whether it's a big boat unexpectedly stuck in the middle of the Suez Canal or billions of dollars of tariffs imposed with little advance warning, surprising disruptions to the flow of global trade generally have the same two consequences. First, they make trade more expensive (and therefore reduce the economic benefits that it bestows). Second, trade keeps on happening anyway.

That's exactly what would have happened if the Ever Given hadn't been quickly dislodged. With more than 300 ships stuck behind the Ever Given, some were already making plans to do the really old-fashioned thing and sail around the tip of Africa. That would have added 6,000 miles and several weeks to the journey from the Indian Ocean to the Atlantic Ocean. The added fuel costs would raise shipping prices by as much as $300,000 for some ships, Bloomberg reported.

In short: Trade wouldn't stop. It would just become more expensive.

Hey, that might sounds familiar. When the U.S. and China raised tariffs against one another in 2018—tariffs that are still in place—it caused similarly weird disruptions in the flow of goods. China effectively cut off purchases of American-grown soybeans, for example, so the soybean trade rerouted itself. South American soybeans suddenly started flowing into China, and American soybeans were exported to Brazil in larger quantities. Trade didn't stop, it just found new routes.

Meanwhile, U.S. tariffs on goods imported from China have spurred some companies to route their purchases through Canada to avoid the higher costs. Others are just stuck paying higher prices. In some cases, the tariffs have contributed to shortages of important items. If there was a massive ship blocking access to all U.S. ports, the results would be pretty much the same.

The big difference is that when a boat gets stuck in the Suez Canal, it's a major crisis that gets fixed as quickly as possible so trade can continue flowing unimpeded. When tariffs cause the same sorts of disruptions, however, America's political class is increasingly in agreement that there is no crisis at all.

Commerce Secretary Gina Raimondo says the Trump administration's tariff policies have been "effective." Biden's trade representative, Katherine Tai, told Congress during her confirmation hearing that tariffs are "a legitimate tool" and that she hopes to "accomplish similar goals" as the Trump administration did on the trade front.

But if former President Donald Trump had deliberately crashed a ship into the Suez Canal, and Biden's advisers were standing around saying they had no immediate plans to remove the ship and, in fact, maybe the right thing to do is smash more ships into more canals around the world…that would rightly be recognized as policy insanity.

Why is it any different now?

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  1. Who says I didn’t?

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    1. At least not with a cargo ship stuck in your Suez Canal anyway.

    2. 10/10, that gave me a laugh.

  2. Getting ships stuck in canals is incompetent.

    Tariffs have been legitimate trade policy since our founding with a 26 year blip of Free Trade insanity that has attempted to cancel and delegitimize any and all debate surrounding it.

    1. Does anybody seriously think Boehm would be defending continuing trade with apartheid S Africa in the 1980’s?

      1. Don’t know, what was his position on trade with Russia or Saudi Arabia in the last couple of years?

      2. Isn’t Boehm like, 15? What would he know about the 80s?

        1. You’re confused. 15 isn’t his age, it’s his IQ.

      3. Brazil’s largest trading partner is China

        1. And? Your comment would seem to suggest that some free trade is more free/equal.

          1. Actually it was meant as a reply to another post.

      4. Boehm has a habit of, what’s the right word, compartmentalizing? He like to behave as though very complex subjects which are directly and totally intertwined are independent, or at least should be treated independently.

        My teenage children did it too, but they eventually grew up. Thank God.

      5. Boehm refuses to even acknowledge anti free market practices by China, so no. He just screams free market without a thought.

        1. Not only that. It’s a dig at Trump voters (even though Biden is keeping the tariffs).

          An analogy: No one wants a cancer diagnosis.

          We had a choice between a 3mm basil cell-republicans (protectionism and tarrifs on a country that disappeared the CEO of their largest corporation, a member of the CCP btw, one of their own) and stage 4 pancreatic cancer- democrats :authoritarian socialism/fascism. We did not have a choice to pick the libertarian “no cancer” option. Reason believes that basil cell is worse than stage 4 Pancreatic.

        2. Exporting externalities to China is one plus.

      6. Are the Canadians committing “crimes against humanity” (besides poutine)?

        1. Nanaimo bars

        2. Bryan Adams.

        3. Nickelback.

  3. If You Like Tariffs, You Should Have Cheered the Clogged Suez Canal”

    Babby’s first article pitch

    1. Perhaps there isn’t a black/white perfect distinction at work here. If there were and tariffs are all bad, free trade all good, then the US should have traded with Nazi Germany right up to 1942. Probably even after because, if getting war materials from a neutral US, Germany would not have declared war.
      What most tariffs are proposed for fall into two categories: 1) Protection of industries to reward voters at risk from competition and 2) attempts to keep competition on a level playing field. Most of the second are sometimes justified, usually because they fight against a country using the first.

      1. There should be some debate about whether industry requires tariffs to spin up, but once stable, those tariffs can be a hurdle to continued growth.

        What frustrates me is the lack of discussion on why American goods are so expensive. And also why American labor is so expensive. And how these economic questions are connected to each other and to trade policy.

        Americans are spoiled. We want a very high standard of living that costs next to nothing while making lots of money. There are trade offs. Right now, we support policies that disguise those trade offs. But they still exist and they are eating at the foundation of our nation’s wealth.

        It will collapse.

        1. Chinese labor is cheaper than American because of a currency they alter the value of at will, and the relative lack of worker safety and health regulations. Yes, the American laborer is also getting fatter, lazier, and less healthy than in previous generations. There was a great documentary called American Factory on Netflix that went into this. The comtrast between American and Chinese workers was stark, on not flattering for Americans.

          Indian, Vietnamese and other labor sources are cheaper because their workers will accept a much lower standard of living (for the time being) in addition to less regulated working conditions.

          In a global economy with relatively cheap and easy shipping, less educated laborers in rich countries can no longer demand a premium for their labor over laborers in poor countries. Rich countries can only compete in manufacturing and other previously labor-intensive fields by leveraging capital into machinery that gives a multiple over labor cost. That means fewer jobs with higher qualifications. So labor is still screwed.

          There simply is no scenario I can see in the future where American labor goes back to getting middle class, home-ownership wages at previous high employment levels. There simply is no new labor intensive industry on the horizon to shift laborers to. Maybe the Martian colonies are what’s needed for capitalism’s growth requirement. (I only partially kid.)

  4. JFC, this is some impressive gymnastics.

    1. What, dont you remember that episode of Schoolhouse Rock where they compared an interstate traffic jam to the Commerce Clause?

      Yeah, me neither. Maybe Boehm has a substance abuse problem. At least then he can look back in a few years and have an excuse.

  5. >>Trade didn’t stop, it just found new routes.

    the monkeys may steal your shoes but afaik Brazil doesn’t enslave Muslims to make NBA jerseys … so bonus?

    1. The irony is that Boehm hints at supply chain switches based on tariffs which is one of the goals of the Trump tariffs on China in retaliation for their open theft and market manipulation. Boehm’s earlier argument is that markets couldn’t switch and consumers bore all costs.. weird.

    2. +1 never watch professional sports

  6. Commerce Secretary Gina Raimondo says the Trump administration’s tariff policies have been “effective.” Biden’s trade representative, Katherine Tai, told Congress during her confirmation hearing that tariffs are “a legitimate tool” and that she hopes to “accomplish similar goals” as the Trump administration did on the trade front

    Like the rest of the Reasonistas, Boehm is desperately pretending that the USMCA didn’t happen and that he has no idea what Tai is talking about.

  7. Since Diana is really the only one who really leaves, in following her and her exploits there’s often little room to see more of how other Amazons conduct their day-to-day lives.

    https://tvseries.33standard.com/tag/fredrick-leonard/

    1. I prefer to leave that to my imagination.

  8. Did you steal this from a Cafe Hayek post?

  9. Extremely dumb take. Reason writers seem to be getting dumber.

    Tariffs are specific, planned, announced ahead of time, and designed for a specific purpose. Suez Canal blockage was random and not designed for a purpose.

    There’s zero reason to believe that the happenstance of the canal blockage aligns with anyone’s plans. This article is exceptionally dumb.

    1. Actually a really good article. Eric showed that when trade is disrupted in a visible manner there is a high level of concerns. Tariffs disrupt trade in less visible manner, but the results are similar. Trade will find a route and we will all pay for the cost of that new route.

      1. Fuck off White Knight.

      2. So the similarity, according to you, is that someone has a complaint and everything didn’t work out perfectly for everyone.

        World’s smallest violin playing…

  10. We are still trading with all of those countries we have imposed tariffs on. It is just you and I are paying more and some of our producers are harmed.

    Tariffs are not going to change anything. It is a lose lose policy. Now people want to tie it with human rights. What a dumb idea. It doesn’t work.

    What is so difficult about free movement of goods, services and people.

    1. I agree with your response.

      On the issue of human rights I think the problem is consistency. China can see in the world where we look past human rights for our own interest. This makes our indignation over the Uighurs appear hollow.

      1. Fuck off White Knight.

      2. You’re a moron. No wonder you vote democrat.

    2. The producers are also harmed by IP theft, market manipulation, etc.

      Why are we asked to ignore China’s open attacks on free markets in this situation? IP Theft is estimated at a much greater yearly cost than the current tariffs against them. This article even makes the case of supplier shift that can occur, so the goal is to penalize China for breaking free market principles.

      I don’t know why your side continuously ignores reality.

      1. Supplier shift may or may not occur. In the big picture it could cost some Chinese suppliers in the short run but they will find other customers the longer this goes on.

        They do not think in four year cycles. They look way down the road. The economic war has and will not accomplish anything good. Did anyone really think that some tariffs from the upstart barbarians was going to bring them crawling to the table?

      2. It’s their way. If they could confront reality. They wouldn’t be progs.

  11. Wasn’t the clogged Suez canal a result of a woman boat driver?

    1. An elderly Chinese woman. Just kidding!

  12. Is this like a backdoor way of blaming Trump? Boehm still got a bad case of TDS I see. He just can’t quit Trump.

  13. Yea, globalism that relies on a single point of failure totes refutes domestic independence!

    1. And how much domestic independence have we really gained? How many things in the local big box are now domestically made that use to come from China? We did not get independent we just pay more.

      1. HO2 White Knight. Now fuck off.

      2. The markets didn’t change over the course of 2 years!!! abandon all hope!!

      3. A year ago we were selling rice to China. Think about that.

        Oh wait, you won’t. You’re stupid.

    2. What single point of failure?

  14. If you are in favor of the death penalty, you should be cheering for Ted Bundy. Because targeted tariffs are just like a random bottleneck in the supply system and raising the price of a good has no effect on the demand for that good.

    1. Depends on how elastic the demand curve for that product is.

      Targeted tariffs are unforced errors and in that way different. That is the point. Either way it hurts us in the pocketbook but nobody votes in favor of shipping accidents.

      1. Wrong. He said “no effect.” When price has no effect on demand it is, by definition, perfectly inelastic.

  15. The added fuel costs would raise shipping prices by as much as $300,000 for some ships

    So the cost per ton of cargo is increased by $1.50. Not a strikingly huge amount.

    1. Not a strikingly huge amount.

      Sounds like you need your windows broken. If fixing them employs even one glazier we all win. Except you.

      1. Don’t be dense.

        1. Or transparent.

  16. What really confounds the libertarians here is why didn’t Biden reverse the tariffs. See they got what they wanted on the border which is mass migration, but they didn’t get anything else out of the deal. And for pimping democrats this time around they helped give us a worse situation with more rights denied and bigger slower stupider government.

    We told you Trump was the least worst choice of two candidates that could actually get an electoral vote.

    1. Don’t blame libertarians for Trumps loss. There are only a handful of us who voted for Jo Jorgensen. If she were not on the ballot I probably would not have voted at all.

      Biden has taken the wrong approach on the border. The immigration system itself is broken. You need to reform that first.

    2. To be fair there was also the issue of addressing the pandemic, something President Biden has shown to be more than competent at handling.

      1. Biden has competently handled his pudding cup, with Doctor Jill’s help of course. Name something he has done…

        1. His administration has;

          – overseen greater than 1 million vaccinations
          – pass major legislation
          – nominated 11 court judges
          – will be releasing plan for infrastructure upgrades
          – provided a consistent message on issues of concern

          I would note the President has given numerous talks, and interviewed. He also gave a press conference and unlike the former President, President Biden seem to know his subject. Guess all this is why he approval rating is 20 points higher than the former President.

          1. My bad, over 100 million vaccinations.

            1. If Trump hadn’t been distracted by a futile impeachment, I think that he probably would have reacted differently to a potential (at that time) pandemic.

  17. I never paid much attention to container ships, but this incident got my interest and I found out a few things:

    1. There are websites that can track most commercial ships in near-real time (intervals of 10-20 seconds). Just happened to catch the Ever Given as it got underway after being unstuck and straightened out.

    2. The “golden” class of container ships, to which the Ever Given belongs, are BFSs (big effin’ ships!). The Ever Given is just a hair under 400m long (62-66m longer than the current US aircraft carrier classes) and when fully loaded displaces more weight than ALL four of the Iowa class battleships put together. But is still a lightweight compared to some bulk carriers and oil tankers.

    3. How much commerce and how much oil travels the Suez canal every day.

    4. I always thought the canal was a single channel, but in 2015 a bypass was completed that gave the middle part two parallel channels.

    1. 1. There are websites that can track most commercial ships in near-real time (intervals of 10-20 seconds).

      Marinetraffic.com is a good one. I’ve followed ships coming out of Philly and Camden around the globe.

    2. 400m long (62-66m longer than the current US aircraft carrier classes)

      English motherfucker, do you speak it?!

      1. Obviously they speak English English. Or some other European country’s English. I live in Taiwan and am able to use the metric system, and convert it to the Imperial measurements in Mandarin. People in the US are bewildered, except for grams, kilograms, and milligrams. Why is that?

  18. Geez that was some mental gymnastics. Free trade! Open borders! Drugs for all! Orange Man bad! Step boat is stuck help me!

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