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4 Bad Arguments for Trump’s New Tariffs

When it comes to trade, the president believes a lot of nonsense.

Win McNamee/UPI/NewscomWin McNamee/UPI/NewscomLast week, President Trump's announced sweeping tariffs on all steel and aluminum imports into the United States: 25 percent on American buyers of imported steel-mill products and 10 percent on American buyers of imported aluminum-mill products. Trump has favored strong tariffs for years, and some of his most prominent economic advisors are supplying him with arguments in service of his policy.

Those arguments are all wrong. Here are the facts about some of the favorite arguments made by protectionists. For the sake of simplification, I will mostly focus on the steel tariffs.

Argument 1: Trump's tariffs are necessary because our domestic industry has been decimated.

Last Thursday, the president said we needed tariffs because "they've destroyed the steel industry." The next morning, Trump tweeted, "We must protect our country and our workers. Our steel industry is in bad shape. IF YOU DON'T HAVE STEEL, YOU DON'T HAVE A COUNTRY!"

Steel is indeed an important metal. As David Burritt, one of steel moguls attending the White House meeting wrote in The Wall Street Journal a week ago, "Steel touches every American life in some way every day. Infrastructure, building construction, appliances, vehicles, energy pipelines and more require steel." As we will see later, that's an argument against tariffs, not for them.

But everything else the president said is nonsense. The choice isn't between producing 100 percent of our steel (and having a country) or producing no steel (and presumably losing our country). We also have the option to import steel with zero threat to our country.

The domestic steel industry is not vanishing—far from it. 70 percent of the steel bought for use in the United States is produced here in the USA. Also, American steel production hasn't changed much over the past decades. In fact, since 2010 it's actually increased.

Argument 2: We have to impose tariffs because foreign governments subsidize their industries.

That's rich coming from a country that imposes some 150 duties and tariffs on steel imports. It is also hypocritical from a country that claims to believe that cronyism is unethical and economically damaging. Precisely because cronyism truly is unhealthy and unfair, the appropriate response to cronyism abroad is not more cronyism at home.

When a country, any country, subsidizes its domestic industries, it actually hurts consumers in their own consumers as well as the non-subsidized companies. In short, there's no such thing as a free subsidy.

When a government imposes an import tax on foreign steel, for example, the main effect is an increase of the price of steel. The result is higher costs for all steel-consuming industries, as well as their customers. There are 140,000 workers in the steel-producing industry and at least 5.4 million workers, and perhaps as many as 12 million, in steel-consuming industries.

The consequence of higher steel prices is thousands of jobs lost in these latter industries in the name of protecting a few workers in the former—and, of course, higher prices and shoddier quality products for millions of consumers.

This is exactly what happened in 2002 when the Bush administration imposed some steel tariffs on a few countries' imports. Those taxes protected the steel industry from a few, specific competitors and allowed them to jack up the price of domestic steel, without a positive impact on steel employment.

Those in steel-consuming industries, however, weren't so lucky. By one estimate, 200,000 people lost their jobs in downstream industries in following years. That's more workers than in the entire steel industry.

According to a 2003 U.S. International Trade Commission report, other consequences of these 2002 tariffs were difficulties obtaining steel in the quality and quantity desired, a shift to using parts finished overseas, and the relocation of U.S steel-consuming facilities to other countries. These results sound like the opposite of what Mr. Trump wants to achieve.

Finally, when foreign governments subsidize their industries, U.S. consumers reap the benefits: they pay less for imports. The bottom line is that crony shenanigans abroad shouldn't be answered with crony shenanigans here, especially given that these will mostly hurt our economy. It is counterproductive.

Argument 3: We should impose tariffs for national security reasons.

Adding insult to injury, the Trump administration is invoking a rarely used "Section 232" of a 1962 U.S. trade regulation that allows for import restrictions in order to protect national security. That's total nonsense.

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  • Tony||

    You forget Argument 0: Trump is a genuous and can do know rong.

  • Old Mexican - Mostly Harmless||

    "know rong"...

    Those riny kwbboards, right? I jate thwm.

  • Tony||

    Just John.

  • Sevo||

    "Not sure why, though."
    Stupidity needs no explanation; Tony exists and that's all that needs be said.

  • David Emami||

    The national security angle is pointless anyway, due to how long it takes to build most modern military equipment. These aren't the days of cranking out a Liberty Ship in 40 days. Manufacturing time for ships and aircraft is typically a year or more. If we got into a conflict with someone in our weight class (i.e. China, or maybe Russia), the lethality of modern weapons and the economic impact would exhaust both sides well before any replacement equipment started to roll off the assembly lines.

  • loveconstitution1789||

    Liberty ships could be cranked out in 40 days. These are transport ships, not fighting ships though.

    Probably why the US mothball fleet exists. Allow combat ships to be put back into service within a few weeks.

    You do have a point but the idea of strategic reserves is not the worst government plan. It would take months or years to get manufacturing up and running to produce materiale for war. It took that long when WWII got started.

  • NotAnotherSkippy||

    Strategic reserves serve an economic purpose. David's right that modern warfare is lethal enough that the days of attrition between major powers are gone or fading very quickly. If I can devastate yoir infrastructure within weeks or maybe a few months there's no way that production can ramp fast enough to make a difference. Basically you win or lose in about the first week.

  • loveconstitution1789||

    You have a point except that only Russia and maybe Great Britain have enough nuclear firepower to cripple the USA. The flip side is all countries could be crippled by the USA's firepower.

    Furthermore, warring nations tend to have multiple enemies which would require more effort than an initial month of combat ability.

  • NotAnotherSkippy||

    Substitute China for the UK. Now you're arguing for other nations. Well, maybe. But the eurotards demonstrated in libya that they can't even project power across their own lake without the help of the US. It's debatable whether Germany could hold out against even the current feeble force that Russia has. The polish speedbump is probably their only hope.

    Regardless, we're talking about the US here. Any war short of a complete nuclear exchange we're going to win today. And we'll do it quickly. There's no current scenario where we do a repeat of WWII.

  • David Emami||

    I think we're talking about different things. I agree that a strategic reserve is a good thing, but the national security rationale for the tariff (unless I misunderstand the argument) is "we need domestic steel so we can build weapons if we go to war." That's what I'm saying is pointless.

  • loveconstitution1789||

    The USA was for tariffs before it was for income tax.

  • Ship of Theseus||

    Do you even understand why this is a non sequitur?

  • Nardz||

    All the politicians and all the media speaking out in unison... yea, nothing to worry about there.
    Maybe we could use threats of tariffs and leverage our economic strength to negotiate better deals (since every other country imposes tariffs on American products).
    But fuck that! Let's just act like a bunch of hysterical reactionaries and broadcast to the entire world how we're little bitches scared of a "trade war". Yep, I'm sure that will really bolster "free" trade...

  • Old Mexican - Mostly Harmless||

    Re: nardz,

    Maybe we could use threats of tariffs and leverage our economic strength to negotiate better deals


    Listen, you gawd-damned Communist: there's no "we". Trade is between individual humans of will, not between "countries". Trump is playing with MY fucking money. If YOU want to feel patriotic and buy Murican, go right ahead --with YOUR money. My trade deals are NONE of your or the president's business.

    Moron.

  • Jerryskids||

    Damn, you need to save a copy of that comment and repost it every few threads. There's a big difference between "Make America Great Again" and "Make Americans Great Again" and Trump favors the collective over the individual just like the rest of them.

  • TLBD||

    He could, but then he'd be called out for its ridiculousness.

  • loveconstitution1789||

    among nuts.

  • TLBD||

    So Old Mexican is saying we should scrap all trade deals because they're playing with his money?

    That's an interesting stance around here.

  • Nardz||

    Old Mexican,
    Fuck your money. Trump is the President of the United States of America, not Mexico.
    You want your money protected, take it up with Nieto.

  • Sevo||

    "Maybe we could use threats of tariffs and leverage our economic strength to negotiate better deals"
    What "better deals"? You mean maybe talk the Chinese government out of making stuff cheaper for me?
    Get lost.

  • vek||

    You people are so dense... In order to make people cave into a demand in negotiations, they have to BELIEVE you will follow through. If you say "I'll walk from this fucking deal if it's not STELLAR for me, I don't give a fuck!" but they don't believe you, then it's meaningless. You might as well not say it at all... BUT if they DO believe you, if they think you're crazy enough to actually do it, a lot of the time they'll cave to your demands.

    I've read Trumps books, long before he ever got into politics. This is a tactic he WROTE ABOUT USING in his own fucking books. He says straight up that he'll just throw out a ton of deals, give people harsh terms, and only do the deals where they accept those terms. The rest he walks on them and tells them to get fucked.

    I think other countries believe he really will walk on NAFTA, do something crazy with China, etc. That is exactly why they are 1,000% more likely to agree to terms that are better for the USA than if some puss bag like Obama were saying the same thing. If he can bluff his way into getting other countries to lower their tariffs on US produced goods, I don't see the problem.

  • Rev. Arthur L. Kirkland||

    Trying to reason with the half-educated, intolerant, gullible, downscale yahoos who support Pres. Trump and his dopey lurch toward protectionism?

    I admire the optimism, but you might as well yell at a lamp.

    Although some new-fangled lamps respond usefully to verbal command, or even to clapping, so . . . .

  • Sevo||

    "Trying to reason with the half-educated, intolerant, gullible, downscale yahoos who support Pres. Trump and his dopey lurch toward protectionism?"

    Yeah, two years ago the imbecilic left would have been thrilled if Obo had pulled this, right imbecilic lefty?

  • Mark22||

    It's just imbeciles like you criticising other imbeciles

  • vek||

    Hey man, can you please just move to Communist Canada or something and leave the rest of us actual Americans alone? We really don't need your kind around here anymore. Progressive idiots have ruined this country enough already, and if they keep pushing harder I'm afraid we're going to end up with another civil war on our hands. If you just want a bunch of progressive communist bullshit, they already have that in Canada, Europe etc. So save yourself AND us a lot of trouble and just move there now!

  • BYODB||

    It's amusing to watch Trumpists support tariff's but perhaps even more amusing is watching Bernie supporters trash talk tariff's. Both sides are full-bore retarded when it comes to this issue, but Trump told everyone long before today that this was exactly his plan. Getting panties in wads now indicates you weren't paying attention, brosif.

  • loveconstitution1789||

    Not only did Trump say he would use tariffs but I thought he said that he was threatening tariffs on steel and aluminum as a negotiating tactic for NAFTA.

    He might get a good amendment to NAFTA and not impose tariffs at all.

    I am not against tariffs since we have managed trade not free trade. I do not thing they work well, so outside of scaring other nations into renegotiating trade deals, probably should not be used.

    Since the USA is one of the most important trading partners in the World for countries, the threat of tariffs might just bring other countries to an agreement on trade that is more free and better for the USA.

  • NotAnotherSkippy||

    That's different.

    Also, I wish ppl would stop quoting the 200k job losses from the Bush 2 tariffs. I read the paper. It's quite weak. (Hint: using a whole 2 years of data in your regression and ending up with such a small coefficient should be you a tad nervous about your claims. Hell, even their pompous appeal to "regression" left something to be desired).

  • creech||

    It is impossible to measure the "jobs lost." How do you account for, say, the four burger flippers who lost their jobs because 1,000 families had to pay more for a refrigerator and couldn't take the kids out as often? Most of the "job gains" are seen and trumpeted but the loses and un-created jobs are invisible.

  • NotAnotherSkippy||

    I'm not disputing that it was a net negative. I just think that quantitative statements like "200k jobs lost" have pretty thin support, just like "6 million jobs created or saved."

  • vek||

    Also, looking at some of the graphs alone (I didn't read the whole thing) there was ALREADY a downward trend in those industries, which basically just continued exactly as before.

    That also happened to be RIGHT when we were losing a ton of manufacturing to China, and incidentally manufacturing uses a lot of steel in many industries... They obviously weren't going to import US steel to China to make shit, so steel jobs didn't go up, but those other jobs would have left either way.

    I think the bulk of that is unrelated correlation, not causation, based off of a few points like the above.

  • Mark22||

    The arguments against tariffs are evidently as stupid and superficial as the arguments for tariffs.

  • PollyZ||

    All of these rational argument I think miss the point. The point is purely political. There is a special election in Pennsylvania in a few days. Trump is playing to that. He is also playing to that handful of Rust Belt voters that elected him so they will do so again...

  • rocks||

    I worked in Korea for a major Korean chaebol. Korea has structured trade to completely block imports to protect their national firms, while at the same time they are provided full open access to the US. And it is done through arrangements that allow them to claim an open market, when it is the complete opposite. From cars to phone to anything else, there are regulatory burdens placed that effectively 100% block imports.

    The end result of this is the US is at a complete disadvantage and yes it is do to unfair trade policies.

    Trump is not starting a trade war, he is demanding equal access. If other markets are closed to the US, then we should be closed to them. Otherwise the end state is most people in the US end up on the government dole and the complete erosion of the middle class, which is decidedly anti-libertarian.

    You can rail against this all you want, but I worked for very senior levels of management for firms in Korea and was fully exposed to the games that are setup. And it is not just Korea, it is all of them. The US tried opening itself up and was completely taken advantage off.

    BTW, the period post civil war period from 1870-1910 was an amazing period of growth and prosperity in the US with a massively expanding middle class. Guess what, we had strong import tariffs during that time period, which were significantly tighter than what we had in the post revolutionary period where a very sizable portion of the GDP was international trade.

  • Enemy of the State||

    Countries don't trade, business and individuals trade. If some other country wants to cheat its citizens out of superior, cheaper US goods and services, that's a problem for that country's citizens. If your business can't get access to customers in other countries, you have no right to demand our government prevent me from buying what I care to from whomever I care to. My property is not yours to command...

  • Leo Kovalensky II||

    ^ This guy gets it

  • vek||

    Which is the problem with communal aspects of reality... But they exist, and you're stuck with them whether you or I like it or not.

    You're paying for welfare (and the much loved SS disability plan!) for all the people who lost their jobs, or are making dramatically less money because of this trade. It's a messy business in this commune-ized world we live in. I really do believe we're coming out worse in many respects with SOME (but definitely not all) of our trade than when we manufactured more things here once you factor in the indirect costs of welfare, necessitating a higher tax burden on some to cover general government spending (fewer workers = the ones left have to cover more), and on and on.

    I've said it a million times: I think you can argue trade as a moral right, and that is the best argument IMO... But in the real world, where many costs/benefits are socialized, I think certain types of trade have done us more financial harm than good AS A COUNTRY, and likewise have screwed a high percentage of individuals as well. The guy who lost his job is screwed, but so is the guy who thinks he's winning because his taxes had to go up to cover that other guy who is no longer a net payer, but a huge net receiver of government largess. The costs are hidden though, hence people still think they're getting a better deal than they are.

  • vek||

    People should be able to buy what they like, but most people really don't care. They care about the aggregate numbers, and on that basis I think one can show math that is not super favorable to some trade scenarios. Many products where we're only saving 20% or something on manufacturing overseas almost guaranteedly lower total US GDP, employment figures, taxes paid, etc. The small savings does not offset the negative repercussions, because in the real world, unlike the theory of Adam Smith, people not only become unproductive (unemployed), but actually become a net drain through the welfare state. This is not accounted for in Smith's theory, or anybody elses that I've ever seen for that matter. In the modern world it's a glaring hole.

    Many people see this obvious disconnect between what the fancy economists say versus the picture on the ground, and say "I don't give a shit about no principles!" I don't entirely blame them honestly. I have some leanings that direction too. Until we abolish some of the other distortions it's almost like you have to "play the game" to not get completely fucked. If somebody pulls a gun on you in what is supposed to be a knife fight, should you not whip out a gun?

  • Enemy of the State||

    Oh and by the way, America massively grew in that period because of the industrial revolution, massive immigration and westward expansion, not tariffs which continually changed every 3-5 years...

  • Enemy of the State||

    I love any business that sells me what I want when I want it at the price I want to pay. No matter which country it's located in. No 3rd party has any fucking right to interfere in that voluntwry, peaceful exchange...

  • Headache||

    No 3rd party - Except the shipping company?

  • Headache||

    Can we not bring China into this, please?

    Chinese over production affects the market price. Higher wage and environmental regulated nations are then put at a disadvantage.

  • Headache||

    That's rich coming from a country that imposes some 150 duties and tariffs on steel imports.

    So, tariffs are already in place. So, it is only Trump (increased) Tariffs Reason is against.

  • Jake Z.||

    Did anybody edit this? "hurts consumers in their own consumers"? "We have to impose tariffs because foreign governments subsidize their industries.That's rich coming from a country that imposes some 150 duties and tariffs on steel imports.? What? Did you mean to say it's rich because we subsidize our own industries? Yeesh.

  • Get To Da Chippah||

    Also, American steel production hasn't changed much over the past decades. In fact, since 2010 it's actually increased.

    Veronique,

    For the first sentence, the table you linked to shows that current production is well below that of the 1970s. For the second sentence, there was this huge drop in production in '08 that the country was recovering from, so saying 'Oh, production has risen since 2010,' seems like a bit of cherry picking on your part.

    You're better than that.

  • vek||

    Long and the short of it is that people are overselling both the benefits and the costs on this shit. It won't be a big deal either way. It's not 500% tariffs he's doing here.

    I am not fond of tariffs, but as a negotiating tactic, which is ALL this most likely is, I'm not opposed to threatening other countries that have fucked up deals with us. We should have NEVER signed off on lowering our barriers before they lowered theirs in the first place. That's the fault of sell out/incompetent politicians in the past, but we should also not let a bad status quo continue forever either. Sooner or later we're going to need to made a credible threat to countries like China, Korea, etc that have trade barriers to our products, otherwise they'll just hose us forever. Even if he has to actually implement some minor tariffs to prove he is serious short term pain, that will be pretty minimal, for long term gain is not a bad thing.

    You people are so hysterical it's ridiculous. It's like you know nothing about how any negotiations work or something. I've negotiated hundreds of business deals in my career so far (and I'm still pretty young), and sometimes you have to prove you're willing to walk away so the other side will agree to your demands. They usually come running back begging to sign on the dotted line on your terms if you do walk. If we REALLY threatened China, they'd be BEGGING to sign off on our terms after 1 month of their exports slowing down by high double digit percentages.

  • madam margaret||

    sorry… china is a dictatorship of 1 billion people working for one man that dumps products at false price… to not war when war is waged against you is wrong… maybe other tactics exist in this than tariffs, so let's discuss those

  • Cantard||

    The Problem with Trade Tarrifs illustrated:
    I- International Trade
    D - Domestic Trade

    Widgets:
    I- $4
    D- $5

    I want people to buy local, so I place tariffs on international widgets.

    I- $10
    D- $9

    Whoops! What happened there? It's like as soon as domestic producers saw their price competition vanish they raised their prices to the most efficient competitive price. Hooray for domestic producers, boo for domestic consumers. But wait...what is going on over there?

    Widgots
    I-$5
    D-$4

    Widgots with new retaliatory tariffs:
    I-$9
    D-$10

    Wha? I seems like my international trade partners don't like being jerked around and have placed tariffs on my Widgots as a result! Because I wanted to price out a foreign competitor my people now have to pay more for everything so they have less to spend on goods and services, resulting in economic contraction. How could I have ever won this?

    Narrator: The only way to win a trade war is not to be in one.

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