Free Trade

Trump's Tariffs Didn't Work. Biden's Won't Work Either.

They favor special interests, hurt consumers, and have utterly failed to rein in China.

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The United States is known as the land of the free, but it has become a place where the government decides whom we are allowed to buy from and sell to. For instance, when denied the freedom to trade without paying an expensive import tax, many Americans will find themselves begging our trade overlords for an exemption. This is, I believe, a fair description of the Biden administration's decision to not only maintain ineffective import taxes—also called tariffs—but to re-up the listless exemption process.

After a monthslong review by her agency, United States Trade Representative Katherine Tai recently announced that the tariffs imposed by the Trump administration in order to make the Chinese government change its ways have failed. Yet the administration's prescription seems to be more of the same.

It's a shame. By staying with the tariffs, the administration continues to signal a belief that when it comes to trade, Uncle Sam always knows best. While tariffs are pitched to the public as a way to help domestic workers or boost U.S. competitiveness, they always penalize domestic consumers through fewer choices and higher prices. Many of these consumers are themselves domestic producers trying to secure the goods they need to make and sell fundamentally American products.

Over at the Cato Institute, Scott Lincicome summarized the point well: "The tariffs that the Trump administration imposed on Chinese imports harmed U.S. consumers and manufacturers, deterred investment (mainly due to uncertainty), lowered U.S. GDP growth, and hurt U.S. exporters (especially farmers but also U.S. manufacturers that used Chinese inputs)."

Meanwhile, the tariffs aren't achieving former President Donald Trump's goal to pressure China to give up its central planning. The truth is that the reliance on tariffs—instead of on a real trade agreement's traditional compliance incentives—set it up to fail. As Lincicome explains: "Because the agreement is so one-sided, China—the party making all of the concessions—has very little incentive to comply in order to maintain its agreement benefits (there are none) or encourage U.S. compliance (there's nothing for the U.S. to comply with)."

He adds that "current U.S. policy actually appears to have pushed China to double down on self-sufficiency, distortive industrial policy, and nationalism more generally."

As for the hope that the tariffs would force multinational companies in China to settle back in the United States, this has failed too. Reporting on a new paper published by researchers at the University of Kansas and the University of California, Irvine, Reason Magazine's Eric Boehm wrote this:

"Roughly 11 percent of multinational companies exited China in 2019, the first full year in which tariffs were in place—a significant increase from previous years. But the overall number of multinational firms operating in China actually increased during that same year, as foreign investment continued to flow into China even as the trade war ratcheted up costs."

To the extent that firms left China, it apparently had less to do with the tariffs than with the uncertainty created by the trade war between an erratic president and the Chinese authoritarian government.

Yet, our policy is to continue doing what hasn't worked before. Tai, President Joe Biden, and our trade overlords may hope that we will all swallow this bitter pill because they are allowing American producers to come and plead their cases. It will be little comfort to those who received no mercy during the Trump administration.

Indeed, data from a September 2021 Congressional Research Service report reveal that only a small percentage of applicants were granted exemptions. The process was, and I assume will continue to be, skewed toward special interests. It was also arbitrary, costly and time consuming, as the Government Accountability Office has documented.

When faced with this evidence, most people would back away from using tariffs—but not politicians and trade bureaucrats. It's not just pursuit of a failing policy, it's also doubling down on the idea that American producers must beg for the freedom to continue trading and doing what is best for their businesses and employees.

Are we in the land of the free, or the land of the permission-slip petitioners?

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  1. Who would have thunk two 1980s Democrats would have the same failed economic policies?

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    1. Who would have thought a Republican would have followed it as well? I guess bad policies aren’t the exclusive domain of any one party.

      1. Not a bright one, eh?

        1. No, Trump wasn’t – and isn’t – very bright. He thought China would pay the tariffs.

          1. From what I see in the comments he’s not the only one who thinks that.

      2. Just now figuring that out?

  2. Sensing a theme today. Uneeded mentions of trump.

    1. Biden sucks too.

      I know that as a Trump troll you are not allowed to write that so I will say it for you.

      They both suck.

    2. Considering he first implemented them, I fail to see how it’s irrelevant. But hey, you do you.

      1. Tarriffs have existed since international trade existed dummy.

  3. The United States is was known as the land of the free,…

  4. Really?
    Isn’t the purpose of tariffs not to change the CCP’s ways but to reduce exports from China to the US by making those exports more expensive – reflecting more of their real price instead of their CCP-subsidized price thereby making alternative suppliers more competitive and causing a movement of producers away from China?
    That they seem to have done.
    Of course there is a cost to both sides.
    There always is in any war.
    The question is who can afford to pay that cost most.
    In this case it looks to be the USA.
    The article is a bit dated, but the principle remains:
    Tariffs do work.
    https://unctad.org/news/trade-war-leaves-both-us-and-china-worse

    1. Count me as someone who isn’t interested in a war with China. Especially when that war is essentially a war between businesses. I don’t want my money taxed via higher prices to be given to some Steel plant. It does not serve my interests, only the interests of some corporate crony and his unionized labor force.

      1. So I should also count you as someone in support of genocide if it means a few bucks in your pocket or are you just indifferent to genocide?

    2. Trump was fairly explicit in it was to counter theft from China. Obama did the same.

    3. If we need tariffs to compete with government subsidized businesses, then shouldn’t we be subsidizing all of our businesses? If China has a superior economy by picking winners and losers, shouldn’t the US do the same thing?

      1. How about stop treating China as a free market actor like a sane person?

      2. If China is taxing its own people in order to make its products cheaper for us, why are we upset! China is indirectly taking money away from its own people and giving it to Americans. That sucks for the Chinese people, but is awesome for us. I feel sorry for the Chinese people, I guess, but there’s nothing we can do to help them. So we might as well enjoy all that sweet money of theirs that China is sending us!

        1. Fuck yeah, gain all the benefits of slavery with none of the consequences.

          Amoral billionaires thank you for your service.

        2. Because that isn’t what is happening. They are stealing IRAD through corporate theft. Making their development cheaper while raising the cost on US companies through increased security costs.

    4. Agree!
      I hate articles that point out the downside but offer no viable alternative except surrender.

      1. Agreed. I dont like tariffs either, but I havent heard of any option other than capitulation to hostile countries who do the same thing to us.

        1. “Hey, that hostile country is forcing its people to pay more for imports, and that’s not fair! We need to be forced to pay more for imports too!”

          1. And the idiocy continues. China’s corporate theft raises costs in america dumbfuck. It does this through increased security costs domestically.

            How ignorant are you?

      2. The promise plan of trade with China was that they would liberalize. In fact, they gone in the opposite direction, but so long as people can buy cheaper than thou shit at Walmart, no one cares.

      3. But there are real alternatives. Address China using free trade and by trade agreements with other nations with common interests. The TTP would better address concerns with China than any tariff.

    5. Tariffs work for the special interest groups (like steel producers) they favor while harming the majority who are not part of that group. If protectionism as a whole worked socialist nations like the Soviet Union would have had vibrant economies.

      1. So you’re saying protectionism doesn’t work for the EU? News to me.

    6. If they balance the trade budget against products produced by slave labor all the jobs will come back to the United States and they don’t want you to know that but the reason they will come back to the United States is because they have no choice they have no other market to sell to most of the world is very low wages and it’s getting worse

  5. Why does Dr. DeRugy persist in viewing tariffs as economic tools? They are not. Tariffs are tools of diplomacy. There is a world of difference.

    Why does a simple guy like me have to ‘splain it to an elitist PhD?

    1. Because they don’t think corporate theft, monetary manipulation, etc are costs. They have a freshman level view of economics. All theory, not real world application.

    2. Tariff taxes protect the rich they’re supposed to protect the working man but they don’t want to protect the working man they want to protect the rich that’s why they’ll never put tariff taxes on goods made by slaves

  6. The tariffs were meant to curry favor with blue collar voters in swing states in the Midwest. If we want to break support for the tariffs, we might concentrate our efforts on persuading swing voters. And, right now, it looks like China is reeling–maybe from the tariffs, some might say incorrectly.

    People should understand what’s happening in China and why. Right now, it isn’t even pandemic related, so much as it’s about Emperor Xi embracing central planning again, purposely popping the Chinese real estate bubble, and Xi inflicting environmental controls on power production in a really severe way.

    During the Cold War, not wanting to be like the Russians was a mighty push for American support against socialism at home. Explaining communism as a boycott of goods made by American workers even made people like George Meany, long time head of the AFL-CIO, something of a free trader for a while. We can probably rally that same blue collar, rust belt demographic in favor of free trade best–when we show how free trade undermines the Chinese government.

    Emperor Xi has launched an all out war against Chinese consumer tech companies that tried to go public in the United States because Emperor Xi fears the influence of American investors. Xi also fears export markets dictating terms to Chinese companies that compete with his own orders. Xi is trying to remake China into an insular economy that isn’t so dependent on exports anymore–because he fears the influence of American and European consumers on Chinese companies. We’re actually helping him accomplish this with tariffs!

    The blue collar swing voters of Michigan, Ohio, western Pennsylvania, and Wisconsin will probably never get on board the free trade express if it’s sold in terms of free trade’s impact on American consumers. These voters have a union mentality, and they see costs to American consumers as a zero sum game set against their own incomes and job opportunities–a game that China won.

    Crying about the impact on consumers probably won’t work with them. Pointing out how trade undermines the Chinese government might bring enough of them to tolerate the free trade side, and we don’t need all of them. Just a critical mass.

    1. https://www.weforum.org/agenda/2015/11/where-are-chinas-ghost-cities

      In a breathless rush to boost growth and development, some urban areas have built vast, unused real estate projects — China’s infamous “ghost cities.” These eerie, shining developments are complete except for one thing: people to live in them.

    2. Wisconsin has quite the political history of socialism and progressivism. Filthy krauts and swedes…. The only way to appeal to the middle class union trash is corporatism with union heavy industries. Thats how trump took kenosha and racine after 50+ years of one party rule.

    3. Reminds me of word salad. Import taxes are supposed to balance the trade budget like it’s supposed to be. if you’re dumb enough to not allow tariff taxes on goods coming from slave labor countries then you deserve to be a communist dictatorship

  7. At some point the robots will replace the Chinese labor. Shipping shit from the other side of the planet can’t be the most efficient way.

    1. Everything you post demonstrates an embrace of ignorance. Please stick to asinine responses.

    2. Yes sooner or later as wages continue to fall and the rich get more powerful they won’t need free trade in order to use slave labor it will all be in the United States

  8. We have gone from Never-Trump to Never-Gonna-Let-Trump-Go.

  9. You’re not wrong. Not only are they dumb and ineffective (harmful rather) but they’re also illegal- what is the national security reason for the tariffs?

    Same argument leveled against Trump can be made against Biden. Do the right thing and end them already.

  10. In what way have they failed? They have hurt China economically and they have acted as a tax on consumption.

    1. Consuming stuff is good. Taxing consumption discourages it. Therefore, taxing it is bad.

      Hurting people is bad. The Chinese economy is made out of people. Therefore, all else being equal, hurting the Chinese economy is bad.

      The only appropriate reason for the US government to implement tariffs is to raise money to fund the production of public goods. Controlling how much people consume is not an appropriate reason. Neither is harming the innocent citizens of a country that we are not at war with.

      1. As-if those who trade internationally shouldn’t have to fund the National Government more-so than domestic-traders who generally (should at least) only work within State Governments.

      2. And allowing blatant corporate theft also has bad effects on markets. Is this not even a consideration any more?

      3. After much reflection, I’ve concluded that consumption and consumerism is bad. Production is good. Production produces wealth. The productive side of the economic coin (vs. the consumptive side) seems to prosper historically, is more virtuous, and inherently avoids financialization without top-down rules. One guy’s opinion.

      4. Consuming stuff is good. Taxing consumption discourages it. Therefore, taxing it is bad. Hurting people is bad. The Chinese economy is made out of people. Therefore, all else being equal, hurting the Chinese economy is bad.

        I can’t tell whether you are trying to be funny or whether you are trying to be serious.

        If you are serious and the majority of Americans think like you do, you deserve to live in poverty and misery.

  11. If tariffs do not work to benefit a country, why then do so many other countries use them against US imports?

    1. The same reason that the US uses them: Because the people in charge of the government are idiots, and so are the people who voted for them.

      1. Because the people in charge of the government are idiots, and so are the people who voted for them.

        Idiots like you vote for these politicians, which is why we have Social Security, Medicare, stimulus bills, quantitative easing, and massive government debt. Idiots like you vote for crony capitalism and bankruptcy, and you are getting what you voted for, good and hard.

    2. Exactly my smart friend. It seems like the author had a rich man stand behind him and con the working man into believing that tariff taxes on goods made by slaves is bad? You would have to be pretty stupid to not believe that it’s always to protect the rich. if they put tariff taxes on goods made by slaves the jobs would come back now obviously

  12. No Taxation without Representation!

    Fuck any tyrant who taxes by Executive Order!

  13. “when denied the freedom to trade without paying an expensive import tax”

    Article I, Section 8, Clause I
    The Congress shall have Power to lay and collect … Imposts.

    The Authority couldn’t be more apparently there than it already is.
    It’s only common-sense; The USA does not have the ability to enforce Justice in other nations. Their only defense is by restricting interaction.

    1. And never-mind the last article Reason wrote said 11% of foreign manufacturing had left China. China has been the “safe haven” of USA law for actual USA corporations.

      Just because a criminal can ‘legally’ hide in China doesn’t mean the criminal isn’t committing a crime. Remember all those fraudulent retirement investments oversea crooks were selling and just walking away from. The USA cannot punish foreign crimes on foreign soils.

    2. Exactly. what the article is not saying because it was written by a corporate puppet pretending to be a liberal. is that if they put import taxes on goods coming from slave labor countries. then the jobs would come back. because there’s no profit margin when you can’t sell to the United States no more because of high import taxes. they don’t want to protect the American working man ,they want that slave labor

  14. The championship wrestling two-party fiasco is alive and well. Both parties are controlled by multinational corporations that demand no import taxes on goods coming from slave labor countries. They put import taxes on goods that protect the rich and their American businesses. The rich man does not want and will not allow tariff taxes on any goods made by slave labor in communist China and don’t forget all of the so-called liberals supported the slave labor transpacific partnership deal that really screws over the American working man

  15. I’m all for free-trade; but why we’d pass up free-trade domestically and give it to foreign countries instead is beyond me.

  16. Re: “Trump’s Tariffs Didn’t Work. Biden’s Won’t Work Either.
    They favor special interests, hurt consumers, and have utterly failed to rein in China.” …
    ____

    Before China might be successfully compelled to do anything it doesn’t want to, the compelling source must at least possess a consumer base thus trade import/export bargaining chip compatible with China’s nearly 1.5 billion consumers. Even then, China’s edge may be its restrictive control over its own business sector thus market. (Military threats likely wouldn’t intimidate Chinese officials; if anything, foreign sabre rattling would just make China more obstinate. The only other thing that might have an effect on them is the economic via the international market place.)

    Individual countries likely can’t do it alone. Perhaps some securely allied nations, including Canada, combining their resources could go without the usual China trade/investment tether they’d prefer to sever, instead trading necessary goods and services between themselves and other interested non-allied, non-China-bound nation economies.

    Then, again, maybe such an alliance has already been covertly discussed but rejected due to Chinese government strategists knowing how to ‘divide and conquer’ potential alliance nations by using door-wedge economic/political leverage custom-made for each nation. Or could it be that every country typically placing its own economic and big business bottom-line interests foremost may always be its, and therefore collectively our, Achilles’ Heel to be exploited by huge-market nations like China?

  17. Worldwide free trade is impractical for many reasons, as we are currently learning to our regret. Moderate tariffs are a good way to favor domestic production of goods, which is what we ought to do.

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