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Free Minds & Free Markets

Trump’s Economic Ignorance on Tariffs

Another week, another bumbling trade declaration from the president.

Another week, another bumbling trade declaration from President Donald Trump. After a very confrontational G-7 meeting, he threatened to cut all member countries—Canada, France, Germany, Italy, Japan, and the United Kingdom—off from the U.S. market if they don't reduce their tariffs on American exports. He told the press, "It's going to stop, or we'll stop trading with them."

As a reminder, this whole drama started when President Trump imposed stiff steel and aluminum tariffs on everyone, including our closest trading partners, friends, and security allies. Adding insult to injury, he argued that imports from these friendly countries are a security threat to the United States, even though the Department of Defense said they are not.

After a short period during which he seemed willing to grant these allies an exemption from the import taxes, Trump suddenly announced that he would not only go ahead with the imposition of the tariffs but double down by adding tariffs on imported automobiles—also in the name of national security.

According to Trump, these measures are retaliation for the tariffs, quotas, and other trade barriers erected by these countries. But now "the gig is up," he declared. To be sure, most countries do impose trade barriers on imported U.S. goods and services. Yet Uncle Sam imposes tariffs on imported goods from these countries, too, even though our protectionist measures are often smaller. Here's what the president doesn't get: Protectionist policies by other governments are no justification for our government to inflict identical harm on the American people.

In many cases, who do you think is going to shoulder the cost of import taxes on European specialty steel coming to the United States? It'll be the steel-consuming companies in the United States. Here's how this could unfold.

One possibility is that the American company will continue to buy the European steel at an inflated price but, to lessen the blow of the tariff, shift the extra cost onto consumers and workers—including some who will lose their jobs. Alternatively, to regain access to cheaper materials, the company may be forced to stop manufacturing in the United States altogether. That move would obviously throw many U.S. workers out of jobs. Yet another possibility is that the company will simply declare bankruptcy because neither of those options is feasible. If you think this couldn't happen, think again. U.S. companies' responses to steel tariffs were well-documented the most recent time the United States was foolish enough to impose them, in 2002.

The same thing is bound to happen today. If you need more evidence, read the 19,000 exemption requests filed by U.S. steel- and aluminum-consuming companies begging the administration to stop hurting them with these punitive tariffs.

Take the case of InSinkErator, a Wisconsin-based maker of garbage disposers. Thanks to the import tax, the production cost of the U.S.-made garbage disposers increased dramatically overnight. To survive, the company had to raise its products' prices, making them instantly less competitive globally. It's now losing consumers to Chinese companies that export much cheaper garbage disposers to the United States.

Trump's tactic is even more confusing if you consider that when European governments impose import taxes on American goods sold in Europe, the main victims are European consumers. It means that when President Trump imposes tariffs on a large number of American consumers of foreign goods in the name of forcing European governments to lower their tariffs on a handful of U.S. producers, he is really hurting us for the benefit of foreign consumers. It does raise the question of where President Trump's allegiance lies.

Adding a layer of absurdity, the president now argues that if these governments do not lower their tariffs (i.e., do not stop hurting their consumers), he will deprive Americans of the benefits of trading with them altogether. I'm not sure how he could do that, specifically, but I can promise that a massive number of existing U.S. jobs would be needlessly destroyed if he were to act on that threat.

Finally, Trump's tariff temper tantrums are even more baffling because he was the one who pulled out of the Trans-Pacific Partnership, which would have significantly lowered other countries' trade barriers. TPP would have reduced the infamous dairy penalty that the Canadian government inflicts on Canadians who buy American products. But Trump withdrew from the TPP and is now complaining that co-signatory countries didn't change their protectionist behaviors.

The president's ignorance about economics and trade is well-documented. These recent threats are yet more evidence.

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  • Scarecrow Repair & Chippering||

    Oh but Trump has only *said* things as a negotiating tactic, he hasn't actually *done* anything. Judge Trump on his *actions* not his *tweets*.

    Fuck that noise. He did raise tariffs on steel and aluminum. He has roiled markets around the world. The supposed benefits other nations have promised are like Bastiat's window; what is promised in one sector will be taken from other sectors, because dollars out have to equal dollars in, and the only way to increase either is to increase both with lower tariffs, unilateral if not by trade deals. His economic illiteracy is astounding.

    It's been pointed out over and over that threatening to raise your own tariffs if others raise theirs is equivalent threatening to punish your own children if your neighbor punishes his. His negotiating tactics are only signs of his own ignorance; his refusal to lift that ignorance are signs of his own stupidity; and everyone who buys into that claptrap about actions speak louder than words is a damn fool who can't see that his words are actions which ruin economies around the world.

  • JoeBlow123||

    "It's been pointed out over and over that threatening to raise your own tariffs if others raise theirs is equivalent threatening to punish your own children if your neighbor punishes his."

    As you point out, actions speak louder than words. If what you say is true then why is it export heavy countries do everything they can to protect their export industries to include subsidies, import restrictions, environmental laws, currency meddling, etc? Japan, South Korea, EU, America; everyone does it. If unilateral tariff and subsidy abolishing is somehow better and this is so astoundingly obvious then why doesn't everyone do it? Better yet, why doesn't ANYONE do it?

    I am by no means defending Trump, the guy is clearly an ass and is willing to lie with impunity and watch everything burn to order win, but the deep end of the free trade spectrum argument does not seem to play out in reality.

  • Ship of Theseus||

    Because stupidity is not in rare supply.

  • Iheartskeet||

    ...and because those countries have even deeper seated cronyism that we do. And their citizens pay a price for that.

    At the other end, is Hong Kong. No tarriffs that I know about, and still a free economy. This should be evidence that unilateral free trade works, but its not a lesson many want to hear.

  • Ship of Theseus||

    Agreed.

  • JoeBlow123||

    This is honestly too simplistic. The biggest exporters are some of the countries that most aggressively try to manipulate their currencies and prop up their exporting industries at all cost. Japan and China are very, very aggressive at manipulating their currencies and Germany benefits from a super weak Euro compared to what a German Deutschmark would be valued at. I do not think these are accidents and stating the central bankers and chief economists of Japan, China, the EU, etc. are just doing this because they are on the take screams bogus to me.

  • Ship of Theseus||

    I don't care what it screams to you. Your assertions don't magically become facts because you asserted them.

  • JoeBlow123||

    Mmm, another free trade religious zealot. Great. Thanks for letting me know I can expect zero self reflection from you.

  • loveconstitution1789||

    I am for free trade as the best method of trade. Some people on here have no idea how to get to free trade since we currently have managed trade.

    They think free trade magically happens with socialist regimes.

  • Leo Kovalensky II||

    Unfortunately for your point, managed trade is actually more of a socialist outcome. Central planners deciding allocation of resources through trade agreements is much more socialist than anything.

  • loveconstitution1789||

    Taxes, per se, are not socialististic. If you voluntarily provide revenue to a government for enumerated duties that a government is to preform, that is not Socialism.

    Socialism is the government control of the means of protection and redistribution of wealth. Obamacare is Socialism because its government control of the means of procduction (healthcare).

  • Scarecrow Repair & Chippering||

    That's an awful lot of currency all undervalued. How exactly can you undervalue so much currency at the same time? Something screams at me about this.

  • JoeBlow123||

    I am not sure what you are getting at.

  • Scarecrow Repair & Chippering||

    You are like the climate alarmists who scream about rising ocean levels, ignoring the very idea that ocean levels are relative and maybe, just maybe, there's some land sinking.

    How can so many currencies representing such a huge percentage of world currency all be undervalued? Currencies are all relative to each other.

  • JoeBlow123||

    So I understand this, are you claiming it is not a government goal of Japan and China to make their currency weak relative to the dollar and that Germany is not massive beneficiary of a weak currency relative to their economic might?

  • JoeBlow123||

    One more point to consider for all the unlimited free traders. Free trade, by definition, creates tremendous economic destruction while it (hopefully) opens up labor to be more productive. What happens if this labor fails to become more productive, goes on the government dole, and decides they do not want to move away from their homes to pursue new economic opportunities? If they are voting citizens then they probably become very pissed off and anti-social citizens voting for populists. Does this sound like anything we have seen in recent years?

    There is honestly more to economics in a balanced society. Some of y'all 100% unlimited free traders are almost as bad as communists in making everything a question of economics. I am not suggesting there are easy answers to any of this or to smash tariffs or subsidies on anything, but some of y'all need to grapple with the intersection of free trade economics and politics on society and what we have seen in America thus far.

    And again, I present China. There is a very solid reason the Chinese communists are propping up their export industries from competition. A very obvious one. The CCP derives their legitimacy from their economic success. If they rock the economic boat good may come of it. They will possibly also unleash factory towns dying in droves and releasing hordes of pissed off workers looking to revenge themselves on the CCP. If you are Xi, do you want pissed off unemployed Chinese?

  • Scarecrow Repair & Chippering||

    Free trade, by definition, creates tremendous economic destruction

    So do all market operations -- local competitors, distant competitors, new inventions, new workers, family businesses, earthquakes, floods, hurricanes, tornadoes, new highways, port improvements. And don't forget government, the most destructive of them all.

    Name any change which does not disrupt industry.

  • chemjeff radical individualist||

    If unilateral tariff and subsidy abolishing is somehow better and this is so astoundingly obvious then why doesn't everyone do it? Better yet, why doesn't ANYONE do it?

    Cronyism.

    VW and Mercedes certainly benefit from German auto tariffs. Everyone else, not so much.

    A better analogy might be "Imposing tariffs is like punishing 9 of your 10 children, but not the 1 child that is your favorite. And if the only child you really care about is your 1 favorite child, then who gives a shit if the other 9 are unfairly punished, right?"

  • JoeBlow123||

    The German government and industry are pretty well known for how well they work together to support one another. Seems to have worked pretty well for Germany.

  • some guy||

    Is he ignorant or just playing to his base? Winning elections isn't about making people's lives better. It's about doing hings that people think they want you to do. Some of his base actually will benefit from these tariffs. Most will be hurt, but will the pain be enough to prevent them from voting for him again? Probably not. He didn't get to be President by being stupid. He got there by being an unprincipled, lying populist.

  • loveconstitution1789||

    Trump's strategy is to play hardball to get other countries to lower their trade restrictions. That is the reason.

    Trump is messing with Chinese trade to get them to help in controlling North Korea.

  • MSimon||

    One knowledgeable comment out of the 20 I have read so far.

  • Leo Kovalensky II||

    Meanwhile propping up Chinese industries that produce finished goods vs American consumers of aluminum and steel who have to pay these tariffs.

    It may be his reason, but it's blowing up in his face. Either that or he's going to have to put tariffs on finished goods as well. It's going to be a hard sell to say that you can't have national security without a robust national garbage disposal industry.

  • loveconstitution1789||

    It's a gamble sure. If it works, costs for many goods will be lower. If it fails, Trump can blame other countries for their socialist ways. It's a win-win-win for Trump.

  • n6532l||

    Those learned people who pass Ms Rugy's tariff test have created the mess we find ourselves in today. If she studied history she would find the the USA has done better at creating prosperity for its citizens during those times we had the highest tariffs in the world than with the current free trade regime.

    The only way the USA does not win a trade war is to let ignorant economist intimidate us into not fighting the current trade war which has been going on since 1967. The reaction to Trump's tariff has been to hit those states that supported Trump. They are trying to intimidate him into backing off. Given that we have a trade deficit with them that is about all they can do. It will not work.

    With one exception every tariff increase has resulted in more jobs and more prosperity for Americans. Free traders ignore all the tariffs that resulted in good things and talk only about the Smoot-Hawley which fits their preconceived notion about how tariffs are supposed to work. They also ignore that Milton Friedman received a Nobel prize for convincing them that the Great Depression was caused by monetary policy not trade policy.

  • Scarecrow Repair & Chippering||

    the USA has done better at creating prosperity for its citizens during those times we had the highest tariffs in the world than with the current free trade regime


    Utter bullshit. Several studies have shown that when tariffs protected specific industries, those industries performed worse than industries without protective tariffs.

    Common sense would tell you the same thing, if you believe din markets and competition. Any industry which has to rely on corrupt crony tactics (which is how they get tariffs) is too damned lazy to innovate and weed out inefficiencies.

    Consider the Jones act, which is not a tariff, but does the same thing: it requires ships be US made, owned, and crewed if they want to carry cargo or passengers between two US ports. The US merchant marine industry is one of the most expensive inefficient in the world. Transportation costs between Hawaii and the mainland are twice what they are elsewhere. And it's all for the same reason: they are shielded from competition and so can be as inefficient and crony-ridden as they want.

    Basic economics, bud. You are full of shit, not wisdom or common sense.

  • MikeP2||

    "basic economics, bud"

    And there you go ahead and demonstrate your own ignorance.

    Nothing here is "basic economics", but extremely complex systems that the best economists in the world can profoundly disagree on what outcomes result from various actions.
    Nothing is simplistic, nothing is as one-sided as you proclaim.
    Free-trade zealotry is no more wise than protectionist zealotry and it just makes you look silly.

  • Scarecrow Repair & Chippering||

    No one says the Great Depression was caused by trade policy. That's your strawman, and pretty weak sauce too. What is claimed is that the tariffs wars triggered by Smoots-Hawley exacerbated the depression and helped spread it world wide. (As an aside, I bet you don't know that no Canadian banks failed during the Great Depression, because they didn't cripple their banks like we did.)

    Do you even know what comparative advantage is?

    Imagine if one US state had financial problems; suppose Chicago or Illinois declared bankruptcy, for instance. Now imagine if suddenly Illinois put huge tariffs on imports from other states, blocked financial transfers from out of state, and otherwise isolated itself from the rest of the US. That's be a fine pickle you've got yourself into.

    That's exactly what Smoots-Hawley did, and that's exactly what tariffs do now. How dumb do you have to be to think that making something yourself, inefficiently, is better than making more of something else efficiently so you can buy that other product from others people?

    Do you make your own shoes? Probably not, because it would be way too inefficient -- slow, expensive, shoddy. You can work for an hour or two and buy better shoes made by somebody else. That's comparative advantage, and tariffs are like every other government market intrusion -- they disrupt price signals, ruin market efficiencies, and prevent voluntary trades because Big Brother knows better than you what is good for you.

  • loveconstitution1789||

    States are barred from import and export taxes, so your analogy is lacking between states and the USA vs the World.

  • Scarecrow Repair & Chippering||

    Free traders ignore all the tariffs that resulted in good things


    More bullshit. Economists know that every action has seen and unseen parts. The seen is the increased pay and employment for those protected by tariffs. The unseen vastly outnumber those lucky few -- they are all the consumers paying more, all the other workers and industries which lose customers because consumers have less money left over to buy their products, and ultimately all the protected industries themselves who can afford to get lazy and inefficient due to the lack of competition, and who will also find fewer buyers for their products because they have become more expensive?

    I dare you to acknowledge that. I dare you to acknowledge the cold hard truth that inefficiency slows down markets, raises costs without benefits, and is the road to ruin.

    You haven't got a leg to stand on.

  • loveconstitution1789||

    You are right, that government regulation slows down markets.

    The USA has managed trade, not free trade.

    Trump's strategy is to threaten trading partner's access to easy US markets to get them to lower their trade restrictions. If its temporary and works, then I think its worth the trouble. It should not be permanent and should be removed if it does not work within "x" period of time.

  • Scarecrow Repair & Chippering||

    Trump has no strategy. There's your very first mistake. Everything else is just mistaken icing on that mistaken cake.

    People keep on latching on to the idea that a madman couldn't be elected, so he must be some really deep strategist, one hell of a dealer, the best negotiater of all time. They forget he has no wall, he couldn't keep out of Syria, and he did impose real tariffs and screw real Americans out of real jobs. They just blather about 3D chess which they themselves can't even recognize.

    Pathetic!

    Sad!

  • Leo Kovalensky II||

    I'm sure Trump has a strategy in his mind. Reason would be doing a better service to their readers if they continue to point out issues with the strategy. Tariffs are bad in general, but they are much worse when you impose far-reaching tariffs on raw materials like steel and aluminum. One need only look back at GW Bush's short-lived experiment with steel tariffs.

    There must be many other InSinkErator stories out there to counteract the BS we get from Trump and his crony steelworkers union friends. Good on Reason to point this out. Keep the examples coming!

  • loveconstitution1789||

    You underestimate Trump and that is your first mistake.

    Advocate that tariffs are bad and leave the TDS out of it.

  • Scarecrow Repair & Chippering||

    In short, fuck off, slaver. Keep your government hands off my voluntary trade deals, stop ruining my markets, learn more history than a few sound bites, and teach yourself some basic simple economics.

  • buybuydandavis||

    "muh markets"

  • Ship of Theseus||

    LOL @ ^this asshole.

  • buybuydandavis||

    Another week, another bumbling trade declaration from Reason.

    After ranting against Trump, Veronique grants his fundamental factual premise:
    "To be sure, most countries do impose trade barriers on imported U.S. goods and services. Yet Uncle Sam imposes tariffs on imported goods from these countries, too, even though our protectionist measures are often smaller."

    They protect their markets against us more than we protect ours against them. After all the ranting, it's "Yeah, Trump's right about the facts, but..."

    "Here's what the president doesn't get: Protectionist policies by other governments are no justification for our government to inflict identical harm on the American people."

    Except this is hardly limited to Trump. This is what the entire world "doesn't get". Except the geniuses at Reason. In the eyes of Reason.

    But trade, and trade policy, are iterated games. Move. Counter move. The geniuses of Reason think only to analyze *one* move, not the iterated game.

    They're in *disagreement* with almost the entire world about that single move. But they can't be wrong. Everyone is stupid but them.

    Now if Trump imposes tariffs, and that prompts negotiations for our trading partners to *lower* their tariffs, so that trade barriers end up *lower* all around, which is Trump's stated goal, who was right about the best move in the iterated game, Trump or Reason?

    Don't you *claim* to be for "Free Markets"?

    Clown Magazine

  • Hackmaschine Mutter||

    Friedman also believed that deficits would be corrected by free markets as floating currency rates rise or fall with time to encourage or discourage imports in favor of the exports, reversing again in favor of imports as the currency gains strength.

  • buybuydandavis||

    And how did that prediction work out?

  • Jerryskids||

    Now do the one where deficits don't matter since Trump's budget proposals increased the deficit. How can bloated government budgets with shitloads of borrowing and spending be bad when everybody does it? Or maybe we shouldn't be allowed to talk about it since, you know, most countries in the world repress anti-government speech to one extent or another. If everybody's doing it, how can it be wrong?

  • chemjeff radical individualist||

    Yeah sure, the whole "he's playing 99th dimensional underwater chess as a master negotiator" crap.

    Look, the one issue on which Trump has been remarkably consistent is trade protectionism. He has been advocating for tariffs and protectionist trade policies ever since the 1980's. There is no other issue on which Trump has been as clear and as consistent as he has been on trade. So no I don't for one minute believe that he is really some free trader at heart just using tariffs as leverage for negotiating with others to lower theirs. He genuinely believes in tariffs because in his mind tariffs make America strong.

  • buybuydandavis||

    "You have higher trade barriers than we do, so we're upping ours. We'll be happy to bring ours down in *reciprocal* fashion when you bring yours down."

    This isn't 99dim chess, it's checkers, but still too complicated for Reason writers to grasp.

  • Old Mexican - Mostly Harmless||

    Re: buybuydavis,

    --- They protect their markets against us more than we protect ours against them. ---

    No, the governments over there *tax* their citizens more for daring to import stuff from abroad than what this government does against the citizens over HERE - until NOW, that is.

    Those governments aren't protecting "their" markets. They're merely protecting certain industries and their owners from competition.

    You want to see this as if you're watching a football game with a team to root for. That's as far as your economic bumbling allows you: to only see what you want to see and not the unseen. What you don't want to see is how this new taxation (or tariffs) affect other industries and consumers who may not even be directly related to the business that this government purports to protect.

  • buybuydandavis||

    You object to how I phrase things and mind read my desires.

    "That's as far as your economic bumbling allows you: to only see what you want to see and not the unseen."

    Projection. When has the "One Way No Trade Barrier Has No Downsides!" crowd ever accounted for your unemployed neighbor, the taxes he doesn't pay, and the dole he goes on, or the loss in freedom from enriching the Dictator for Life of China and letting him purchase US assets?

  • Shirley Knott||

    A few (mostly unrelated) things to point out.
    To the claim that 'no one has done unilateral free trade,' consider a Great Britain and the Corn Laws. Along with the vast improvements that directly followed.
    To the points of 'why is it done if it's harmful, consider public choice theory, concentrated benefits vs diffused costs (cronyism), and the bureaucratic gorilla of K Street and its ilk.
    Note too the likelihood that all the benefits accrued to specific industries from tariffs are spent on lobbying for the continuation of those tariffs. At the least it bears a family resemblance to the growth of a DC presence & lobbying efforts by companies once they reach a certain size. Reason has, in years past, noted this wrt Amazon and Google, among others.

  • Jerryskids||

    Just think if Obama had done this - would anybody here be arguing that this is some sort of 7-D Wizard Chess strategery? No, we'd all see it for what it is, a blatant vote-buying scheme aimed at the steel-worker's unions. So is Trump more of a politician than a businessman? He made his money in NYC real estate and we all know you're not getting anywhere in any big city without scratching a bunch of backs, greasing a lot of palms, trading a lot of horses - Trump's been involved in politics his whole life. It might be better to analyze his "ignorance" of economics simply from a political point of view, robbing Peter to pay Paul ensures Paul's going to keep voting for you and if Peter's dumb enough to buy a slick sales pitch from a con man that he's better off getting robbed, well, in politics, that's the art of the deal.

  • Shirley Knott||

    IOW, public choice theory.
    Combine it with the iron law of bureaucracy and, well, just look around.

  • loveconstitution1789||

    It can be vote buying, a strategy for pushing other countries to lower trade restrictions, and "x" the D chess.

  • eyeroller||

    How can the PRESIDENT possibly be making these tariff decisions all by himself?

    Because the scaredy-cat Congress keeps dumping powers on the presidency so they won't ever get blamed for anything.

    Well, surely the American people will rise up and demand that Congress stop delegating all this power! Right? Right?

  • Ship of Theseus||

    The American people only care about WHO they give all the power to, not that they have too much.

  • Shirley Knott||

    Because until each and every one of them is doing better than average, the government doesn't have enough power.

  • Iheartskeet||

    I'm always surprised by the amount of anti-free-trade commentary on this supposedly libertarian website. Then I took a gander at the comments on David Harsanyi's excellent June 12 article on trade over at The Federalist.

    Holy. Fucking. Shit.

    Reason's commenters, even those I disagree with, are infinity better than the collection of crazy people over there. I guess conspiracy-minded wackos have to post somewhere.

  • Old Mexican - Mostly Harmless||

    That's why I stopped commenting on Townhall dot com a long time ago.

  • Iheartskeet||

    Slate and The Nation are no picnics either, but I was expecting that. I naively thought the Federalist would be better.

  • Leo Kovalensky II||

    It's TDS all the way down! Even some "libertarians" are delusionally falling for his trade BS.

  • buybuydandavis||

    When was the last time that you heard "Free Market" Reason come out against corporate limited liability?

  • Old Mexican - Mostly Harmless||

    --- Trump's Economic Ignorance on Tariffs ---

    Trump's? He's not alone.

    TRUMPISTAS' Economic Ignorance On Almost Everything:

    * The Importance Of Division Of Labor
    * Comparative Advantage
    * Not To Lump Labor As One Single Blob
    * Specialization
    * The Mutual Benefit Of Trade
    * The Fact That Individuals Act, Not "Countries".

    Etc. Etc.

    Their level of economic incompetence is striking as it is frightening. It explains their downright hostility towards Markets, Competition and Immigration. They justify their ignorant musings on economics by alluding to paranoid hallucinations and by an organismic fallacy - the notion that concepts like "countries" have rights that supercede individuals' rights.

  • Iheartskeet||

    I'd say it goes well beyond Trump supporters, indeed until recently, democrats and left-wing types had similar takes. Caesar Chavez having is farm workers beat the shit out of immigrants at the border is exhibit A.

    I'd say the above trade beliefs are what most any "Joe on the street" who hasn't read economics believes. Trade, more than most other issues, is susceptible to weak but glib arguments. Or sure seems that way.

  • loveconstitution1789||

    Finally, Trump's tariff temper tantrums are even more baffling because he was the one who pulled out of the Trans-Pacific Partnership, which would have significantly lowered other countries' trade barriers.

    If Trumps actions are "baffling" then you should not be writing about economic issues.

    You might not agree with Trump's strategy but its not baffling. Its an economic threat to get other countries to lower their trade restrictions.

    Since the USA does not have free trade, Trump wants to manage our trade to lower restrictions with other countries. These other countries will never lower their trade restrictions without the threat of losing the biggest and best market in the world- the USA.

  • Shirley Knott||

    Screw their trade restrictions. Remove our own and we become better off. Regardless.
    We have no more business, no more right, to meddle in their internal (and here, self-damaging) policies than they have to meddle in ours.
    Would they be better off if they dropped their tariffs? Of course. But bringing light to the savages should have been disproven by the 19th century.

  • loveconstitution1789||

    "Remove our own and we become better off. Regardless."

    This is not true.

    You are saying that not being able to sell in foreign countries without massive trade restrictions makes Americans better off. Not true.

    Free trade is the best but the USA does not have free trade. We have managed trade. Other countries have even more managed trade than we do.

    You pay more for foreign goods right now because of trade restrictions of other countries. If other countries lower their trade restrictions then you will pay less. That makes Americans better off.

    Lower trade restrictions for every trading partner of the USA makes it better for Americans.

  • Shirley Knott||

    "That is not true."
    Citations and rational arguments needed.
    US tariffs make goods and services more expensive for Americans.
    How is that a good thing? How does that enrich us?
    It isn't and it doesn't.

    Demonstrate, ideally with a concrete example, but at least with a logically coherent and consistent argument, that foreign tariffs on American goods raise the price For foreign goods sold in the US.

    Foreign tariffs on US goods change the structure of comparative advantage, but they cannot remove it, only shift it. Note well that tariffs favoring industry A must, inherently, disfavor some other industry B. Plus the damages of the transfer or transaction costs required by the imposition of tariffs.
    If we remove the damage caused by our own tariffs, we improve our ability to find advantages on which we can trade. Regardless of the economic damage other countries impose on their citizens.

  • loveconstitution1789||

    Sorry if you cannot use common sense.

    Getting other countries to lower trade restrictions will probably no happen spontaneously. Trump wants to use his don't give a fuck about other countries attitude to push other countries to lower their trade restrictions.

    Freedom isn't free.

  • Iheartskeet||

    Incorrect. It is true.

    We all agree that lower trade barriers everywhere are best. No one is arguing against that.

    When one side decides to tax their citizens, it makes no sense for us to follow suit. All it does is raise prices for our own people. It doesn't enable our firms to sell more in foreign countries, and protecting firms here has all kinds of unpredictable downsides, as we've seen with steel tarriffs. Protecting one harms another and its no guarantee that jobs are saved or that there is any economic upside, other than creating a market for lobbyists and cronyism.

    Meanwhile, other countries have ALL KINDS of things that inhibit purchases of US goods. Simply having higher taxes and less disposable income is a big one...how many of these do we propose fixing until its an even playing field ? Perhaps not you, but for many on this topic, there is no end in sight, and we never get to "free trade".

    I get why the "its not fair to our companies !" attitude has traction, but its an emotional response, and not a practical one.

    All that said, it pains me to no end to defend this from a social benefit standpoint...my stronger feeling is that it simply is my decision to make where I buy from. You may not like that, but I don't see how its any of your business.

  • Sir Chips Alot||

    So, by your logic, every country should simply errect tariffs on American products. Say 500% on cars. All US car makers will go out of business as they can only sell in the USA while everyone else dumps their cars here. Repeat with Steel. And keep repeating until the USA is dead.

    Sounds like a winning strategy for America.

  • Iheartskeet||

    If other every other country put 500% tariffs on US goods, correct, I'd say soldier own with no US tariffs.

    Here's why:
    First, you are making a lot of leaps as to what the effect on the US will be. Dumping will hurt some companies, but benefit others (if raw materials). Moreover, we'd all get a "raise" via cheap foreign goods. It would amount to a vast wealth transfer TO the US. In short, you don't really know how it would play out. I don't know the net effect either, but I highly doubt it would mean our "death". The 500% tarriff will likewise ripple through their OWN supply chains, raising costs, perhaps even as they attempt to dump. I'll further leave it to others to discuss exchange rates and the like.

    Second, meanwhile, service businesses based in the US might also benefit from cheap gear in ways hard to predict. Services generally aren't subject to tarriffs etc. and most US employment is in services. I suppose one day they could tarriff THAT too, but it would only compound their issues. Again, this is an area where the outcome is unknown.

  • Iheartskeet||

    Third, you are free to show your displeasure by buying American, and ignoring foreign goods. As other countries will discover also, it gets dicey figuring out whats domestic made versus foreign made.

    There is no doubt such a high tariff enacted everywhere would be economically traumatic, for the US and the rest of the world. I don't see how matching it helps. I wish he weren't doing it, but I do wish Donald Trump luck with his bullying to get tariffs lowered everywhere. What I don't see is an exit strategy. He's proposing high tariffs, but what if they other countries don't back down ? This has the potential to lead to a bad outcome...not as bad as 500% tariffs everywhere, but bad.

  • loveconstitution1789||

    Fantastic point that an exit strategy is not readily apparent.

    Trump does have an uncanny ability to backtrack on policy and let the media blame him for being "stupid" or whatever. Trump takes the heat while America returns to status quo with regard to tariffs.

    The fact that many trading partners and their media enablers are freaking out is very telling. They clearly want trade with the USA and will negotiate on trade restrictions.

  • Sir Chips Alot||

    So, by your logic, every country should simply errect tariffs on American products. Say 500% on cars. All US car makers will go out of business as they can only sell in the USA while everyone else dumps their cars here. Repeat with Steel. And keep repeating until the USA is dead.

    Sounds like a winning strategy for America.

  • loveconstitution1789||

    These socialist countries want easy access to our awesome markets but we don't get good access to their markets.

    They have no reason to change. Trump wants to try something different by standing up to them.

    Furthermore, the USA will never have free trade unless other countries drop their trade restrictions. Free trade is not a one-way street.

  • Old Mexican - Mostly Harmless||

    --- If Trumps actions are "baffling" then you should not be writing about economic issues. ---

    They're baffling in the sense that they seem no better than putting to action the stupid economic opinions from some drunken moron at a bar. The level of damage these tariffs contribute is something that needs to be said, even if the justification behind their imposition is baffling.

    --- Since the USA does not have free trade, Trump wants to manage our trade [...] ---

    I am sure you aren't obviating the Calculation Problem and the impossibility of one single person to know enough to manage MY FUCKING TRADE, or yours, just because your lovable Big Orange Man In The Sky is in the W. H. I am sure you're obviating it because you know no better, and not because you're a partisan hack and a hypocrite.

    Next thing, you're going to say that only Trump can make socialism work. Oh, and make the trains run on time.

  • vek||

    The funny thing about what Trump is doing is that the only reason it may not work is because it's not extreme enough.

    For instance if he told China in 90 days we're going to slap 25% tariffs on every item coming in from China. Then 90 days later it will be 50%, then 75%, then 100% etc. Their entire economy would go into a depression after the first 90 days probably, we'd still be able to import most things from other countries, but they can't replace us.

    If they didn't cave before the 25% tariffs went into effect, they would come running to us begging to allow them to drop all trade barriers for us selling into China after round one or two. DONE.

    The world would be a far better place afterwards, even though there would obviously be short term disruption. Problem is nobody, not even Trump, has the balls to do something like this anymore. A president like Andrew Jackson or something would have had the balls, but nobody seems to anymore. Short term pain for long term gain can be a worthwhile thing... I don't know why everybody freaks out so hard about having ANY pain at all ever if it helps you in the long run.

  • Old Mexican - Mostly Harmless||

    ---The world would be a far better place afterwards---

    Just like after 1930.

    Trumpista moron.

  • vek||

    Saying this to a guy that voted for Gay Jay!

    It is a fact that short term pain is often, almost always, needed for future improvements. See post below.

  • H. Farnham||

    "Short term pain for long term gain can be a worthwhile thing"

    I wonder if Stalin said something similar about the Ukrainian famine.

  • loveconstitution1789||

    To be fair, Stalin was starving the Ukrainians to get them to toe the Communist line.

    Trump is shaking up managed markets to push them to move toward more free trade.

  • H. Farnham||

    Yes, I was using hyperbole to illustrate a point. Personally, I'm not in favor of someone wielding so much power to disrupt the lives of individuals in the name of a societal benefit.

  • loveconstitution1789||

    I'm not either but socialist policies have gotten us to this point. It's status quo, rock the boat a bit, or surrender.

    I'm in favor of rocking the boat a bit and see who falls out of the boat first. I suspect the Europeans will have their drunk asses in the water first on this issue. The Chinese already Have a foot and hand in the water because the TOP MEN never provided them with oars.

  • vek||

    You're trying to make a point... The problem is your point is wrong. You can't really be THAT autistic can you?

    Also, loveconstitution is right. There's a difference between doing something outright evil (mass murder) to achieve an even more evil goal, and doing something that would be of far less consequence (maybe a small recession) to achieve a positive goal.

    The concept of accepting costs now for future improvements is unassailable. In fact that's what underpins capitalism! I own a business. I hate spending money, AKA investing, in things now because spending money sucks... But if I didn't I would have no future growth. Anybody who lives in the real world and wears big boy pants understands this.

    Let me also say that THIS EXACT ASSUMPTION also underpins the entire concept of free trade. Free traders say we must accept short term destruction of entire industries, millions of people losing their jobs and having their lives ruined, so that at some point in the future the economy will re-arrange itself in a better way. I understand, and pretty much accept this principle.

    Yet somehow the EXACT SAME PRINCIPLE doesn't apply to being harsh in negotiating tactics in order to achieve better trade conditions in the future?

  • vek||

    "Personally, I'm not in favor of someone wielding so much power to disrupt the lives of individuals in the name of a societal benefit." So what you're saying is that the government shouldn't have the ability to LOWER tariffs either because it would disrupt peoples lives in the name of societal benefit, IE free trade making the country better off overall? Ooops didn't think that one through did you???

    Follow the train of logic my friend! Fact is everybody has to make choices that are painful in the short term, but will serve them long term all the time. How EXTREME those measures are matters, as does how good the end results will be. Stalin = BAD and not worth it. Potentially having a short term recession to greatly increase future economic growth is a totally different equation.

    Too many autistic libertarians get caught up in this idea that you can never bend/break a lesser principle to achieve your goals 10,000 fold. This is why they never get anything done and the world we live in is shit. In the real world trade offs, pros and cons, etc exist. If you can temporarily bend a principle to achieve a massive win, it can be worth it. This is reality. The left gets this, which is why they've been steadily winning for a century or so at this point.

  • Alan Vanneman||

    Nice piece, but the president (probably) said "the jig is up." In the very old days, a "jig" could mean a hustle or scam, and the phrase "the jig is up" meant "the scam has been discovered". The phrase persisted as a catch phrase even after "jig" was no longer used to mean a scam and was common when geezers like el presidente and myself were kids. The more you know, eh?

  • Cynical Asshole||

    *pops popcorn*

    This will be good. And by "good" I mean "tedious and stupid."

  • MoreFreedom||

    "Here's what the president doesn't get: Protectionist policies by other governments are no justification for our government to inflict identical harm on the American people."

    Perhaps de Rugy doesn't get what Trump really supports. She fails to mention, that Trump suggested the G7 to eliminate tariffs entirely for the G7 countries, and the G7 politicians rejected it. Trump has also said he's a free trade guy. Further, the tariffs Trump has put in place, came with an offer to negotiate to get the tariffs removed. Did Trump blame foreigners for the lousy economy to get elected so he could do something about the economy, knowing the real problem with the economy is the size and power of government over commerce?

    Might Trump be working hard to end managed trade and eliminate protectionist tariffs? De Rugy points out this benefits foreigners more than US citizens, but it also significantly increases freedom and free markets for the world which is a great thing overall, and does (marginally) help US citizens as well. Trump seems to be using the size of the US economy as leverage to get foreign politicians to reduce their tariffs, and he believes it will hurt them more than it hurts us (a question de Rugy doesn't address).

    Other than de Rugy's assumptions and beliefs about what Trump believes, I agree with her. US tariffs hurt US citizens because it's a tax on Americans who do business with foreigners.

  • Tony||

    Trump wants to kill tariffs by implementing new tariffs. Fucking 8-D chess at least. Because he seems like a real smart person and great negotiator.

    Has he given all our Pacific territories to North Korea in exchange for a little nut tickle yet?

  • loveconstitution1789||

    More Tony nonsense and underestimating Trump.

  • buybuydandavis||

    "I don't understand bargaining"

  • Feanor||

    the idea tariffs never work is refuted by the historical record.

    And it is the case that the trade imbalance is in significant part to the actions of foreign state's own tariffs and currency manipulation.

    That context is lacking, over and over, in Reason's analysis.


    Sad. :0(

  • vek||

    Autists all the way. When theory diverges from observed results, you're supposed to tweak the theory... Extreme purists libertarians refuse to change their theories of how the world works, even when reality clearly refutes the theory.

    Free trade theory would work in a vacuum that was setup exactly the way it was in the original writings in the 17002/1800s. It largely DID exist back then. But that world doesn't exist anymore. We have fiat currencies, welfare states, unemployment exists (back then it basically didn't because anybody who couldn't find better employment worked the land), etc etc etc. Therefore the theory needs additional tweaking, but they refuse to accept MAYBE it doesn't hold quite as true as they would like. So they're simply wrong about a lot of things. Silly autistic people.

  • No Yards Penalty||

    Good to see Federalist hillbillies represent ''Retarded Economics" on this thread.

  • librich||

    All good libertarians would like to see an end to all government interference in trade, so whenever America squawks about a trade agreement, Reason squawks back. That's predictable and well-intentioned. Unfortunately, it misses the fact that governments other than our own are misbehaving. I've had direct experience with two situations where foreign governments helped their industries destroy American businesses. Both situations were atrocities, and our government did nothing in either case. As a board member, I watched great technology go by the wayside, employees lose their jobs and investors lose their investments. I am not a Trump fan, but a lot of the problems his people are fighting are real problems. Reason should moderate its dogma and view the specific industries and situations with a sharper lens before crying foul.

  • MikeP2||

    ^^^

    Yes, I've seen the same in industry. It wasn't 'creative destruction', it wasn't efficiency, cost-of-business, margin, or anything controllable within the companies, but rather blatant central government (china) funding of what were essentially state-run industries for the sole intent of creating domestic production through destruction of foreign (US) production and imports.

    Free-trade zealots will claim China only hurt themselves, but this zealotry ignores the impact of capital and the loss of that capital. Factories and personnel-skill-sets are enormous investments that are paid for over decades by companies. It's not about cost-to-produce and efficiencies, but the capital investments necessary to keep an industry competitive. This is what tariffs and subsidies both target and protect. Allowing a foreign state to destroy your capital investments is the height of stupidity from a national economic and security standpoint, because for many industries, it is next to impossible to restart once its gone....the cost and investment is too high, without putting state funds right back into it. This is particularly true in the commodity world. Once a steel mill or aluminum smelter shutters, it will never come back in a 'free' market. There simply isn't enough margin to provide the payback and no investors will tolerate a 30 year return on their investment.

  • LifeStrategies||

    So how come Fox news has just reported an all time high 0.8% increase in retail sales this month along with yet another high in consumer confidence.

    Hmmm, do his policies really hurt the consumer and American business as much as the panic-mongers at Reason continue to allege?

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