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Free Minds & Free Markets

The Winningest Losers in Trump's Trade War

The president’s agenda hurts American consumers and businesses.

We were told that if Donald Trump were to get elected, we'd be winning so much that we would become bored with winning. To be fair, some good developments have taken place under this president. A fast-growing economy, a palpable business optimism, a much-needed lower corporate tax rate, and fewer regulations come to mind.

However, when it comes to trade policy, America doesn't look like a winner. What are being sold to us as big victories are actually aches and pains for many American businesses and consumers. Let's recap:

In January of this year, the Trump administration imposed tariffs on imported solar panels and washing machines. Americans now get to pay a good 16 percent more for washers and dryers, and both China and South Korea filed complaints against the United States before the World Trade Organization.

In March, the Trump administration announced that our national security required imposing metal tariffs on our NATO allies and a few other countries. The steel and aluminum industries considered this a big victory for themselves—other American interests and downstream metal-consuming industries, not so much.

The American firms that use those metals to produce their outputs face much higher input prices due to the import tax and have seen their costs spike. Even those that only source metal from within the United States report higher costs and a more difficult business environment. Far from being winners, these firms are domestic losers in the ongoing trade disputes. As a result, they've filed over 34,000 separate requests to be exempt from the tariffs that are destroying their businesses. Yet very few have been heard, and even fewer have found relief.

Almost every country targeted by the administration has since retaliated with tariffs against U.S. exporters. American companies, like Harley-Davidson, have been caught in the crosshairs. That didn't seem to convince the administration that, contrary to its claim, trade wars are neither good nor easy to win. So it went ahead with imposing several more rounds of tariffs on China, which didn't waste any time before retaliating with its own tariffs.

American farmers, like soybean exporters who faced 25 percent tariffs in China, found themselves losing in the global trade dispute. They made their distress known by requesting and receiving some subsidies as compensation for export fallout. But these government handouts won't be enough if the fight continues.

In what the administration claims to be its biggest win so far, the United States, Mexico, and Canada finally reached a deal on NAFTA 2.0. However, as the Cato Institute's Dan Ikenson explains in detail, the new United States-Mexico-Canada Agreement (USMCA, as it's now called) is the best trade deal ever negotiated—except for all of the others. For example, it makes very little progress on tariffs since there wasn't really much room for improvement, with the exception of U.S. dairy exports to Canada.

The revised auto section of the deal is awful, too. It will increase Americans' cost of buying cars, reduce the U.S. automobile industry's competitiveness, and increase the offshoring of some sectors of the auto industry. These ill effects are on top of the hit these companies already took due to the steel and aluminum import taxes. Automakers will probably support USMCA because a deal is better than no deal, but not many outside of the West Wing are happy about this.

In theory, the goal for all of this trade disruption was to negotiate lower tariffs. In reality, it hasn't worked. Global tariffs have gone up. That's a bummer for the small and midsize companies that moved production back to the United States from China before the trade dispute started. Over 50 percent of the U.S. tariffs on Chinese imports are on intermediate goods, parts and materials used to make finished U.S. products. This reality means that production costs have increased for these firms dramatically.

Making matters worse, these companies now have to compete with foreign imports of final goods whose costs haven't been raised by tariffs and hence are cheaper but of equal quality. In the end, these small U.S. firms have to raise their prices, fire workers, and/or postpone plans to expand U.S. production. Some companies are actually moving some of their businesses back abroad.

The bottom line is that when it comes to trade, this type of winning sure looks a lot like losing.

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  • Woody Chip Hurrrrr?||

    It's amazing how many so-called libertarians are willing to forget what self-ownership means what they get their own strongman running their lives instead of the she-devil they had expected.

    Self-ownership and voluntary deals, but oh no, they say, we didn't have voluntary deals before, we had managed trade, so this nice shiny new strongman is going to beat us up until other countries are so horrified that they cave in and we get better managed trade, Never mind that my trades are none of their business and they surely don't get to pass on control of my business to their strongman. They just say that it never was my business, it always was the collective's business, so individualism and self-ownership be damned, ha ha, now my strongman is in control, not that she-devil, so nyah nyah, ha ha, who's the dummy who ever thought he controlled his own business?

    Buncha fucking statist assholes. Fuck off, slavers.

  • Butler T. Reynolds||

    What?

  • Mcgoo95||

    I think this is an attempt to let AI write comments.

  • JB Say||

    ORANGE MAN BAD

  • vek||

    As I've said before, I am okay with the concept of arm twisting to get foreign barriers lowered. But the way Trump is doing it is pretty sloppy. Probably mostly since he's doing it by executive fiat versus passing laws in congress, so he's limited in his actions.

    The best way to do it would be:

    Don't put tariffs on raw materials or intermediate goods. Just finished products.

    Slap high as fuck tariffs on, with a future implementation date. Say 6 months or a year. I'm talking like 100% or 200%.

    The fact is we have China over a barrel. They can be put into a depression INSTANTLY if we wanted to. We, on the other hand, can simply import cheap goods from Vietnam, or Indonesia, India, Mexico, etc.

    We have them by the balls. People who are too dumb to grasp this fact are, errr, dumb.

    So in short, just set a future date where it goes nuclear immediately. China would be forced to come to the table, knowing such tariffs would probably cut their exports to here by well over 50%... Which would put them in a depression, and probably start a literal revolution. They'd have no choice but to open their markets in whatever way we demand. PERIOD.

    I think Trump is trying the "slowly ratchet it up" approach, which is far more disruptive, because it allows time for tit for tat BS... When if we went straight nuclear, they'd have to cave right off.

  • Woody Chip Hurrrrr?||

    Fuck off, slaver. What don't you understand about self-ownership and trades being voluntary?

  • Jerry B.||

    Trades are only voluntary if both sides agree to them. If government on either side imposes tariffs or quotas, voluntary goes out the window. Retaliatory tariffs to get reductions in tariffs overall seems better than doing nothing.

    Also doubt that self-ownership is a big thing for the Chinese government.

  • sarcasmic||

    So governments decide if my doing business with someone in China is voluntary or not?

  • Shirley Knott||

    Except that retaliatory tariffs rarely, effectively never, lead to reductions in tariffs.
    Globally, tariffs are up, not down.
    Unilateral free trade is the only moral, and economically sound, option.
    We cannot control what other governments do, we can only control our own.

  • sarcasmic||

    You don't get it Shirley. When other governments tax citizens who purchase imports, the only fair thing to do is tax your own citizens who purchase imports. And if another government raises those taxes, the fair thing to do is raise your own taxes. That's how taxes get lowered. Don't you know anything?

  • vek||

    Unilateral free trade is great for, I dunno... Iceland. Because nobody gives a fuck about Iceland.

    You are under the mistaken impression that we're some useless, piece of shit backwater country with no influence. We are not. We're the largest economy on earth, and far and away the biggest imported of goods on earth.

    We are literally the only country on earth with the power to break a country like China. The EU as a single block might be able to also, but no single nation.

    You guys simply do not have a clue how the real world works.

    Either you want to have real free trade both ways... Or you want the status quo, which is not in our favor, and hurts our economy, and hence YOUR own income and prosperity. When American businesses do better, everybody in the US does better from them and their employees spending their money around.

    China will never lower barriers without pressure. We're the only ones that have the juice to break them... Therefore we should. If we were some pissant country without the power to do this, I would not be suggesting we try. But we're the USA. We could put China in a depression TOMORROW. Literally.

    So why should we not hold their feet to the fire and get them to lower their unfair barriers?

  • Shirley Knott||

    Utter nonsense. Historically and economically uninformed, collectivist nonsense.
    Tariffs are self-inflicted harm. There is simply no avoiding this brute fact.
    Trade is not between nations but between persons.

  • Bob Meyer||

    Trump is prepared to increase taxes on the American people as much as is necessary to make China yell "Uncle".

    This makes about as much sense as a father who wants to deal with a bully by saying "I will beat my son until you stop bullying him".

    Bush and Obama were economic ignoramuses but Trump is a one man economic suicide squad. While his tax cuts and deregulation were great, mixing cyanide in with the penicillin doesn't bode well for the health of the patient.

  • M.L.||

    Have you ever negotiated a business deal? That's what trade agreements are like.

    Both sides have an economic interest in getting the deal done. But among the negotiations and the tactics and the scheming, one side will often royally fuck over the other side. And if not, they will at least gain an advantage and the upper hand.

    The upper hand goes to the side that demonstrates willingness to walk away from the deal, and thereby give up its economic interest in the deal. And that's assuming one side isn't just totally incompetent at advancing their own interests, which also happens. The U.S. has been weak in both respects - pure incompetence at advancing their own interests, and a total lack of any spine or willingness to be tough in negotiations.

  • Sevo||

    Shirley Knott|10.18.18 @ 9:37AM|#
    "Utter nonsense. Historically and economically uninformed, collectivist nonsense.
    Tariffs are self-inflicted harm. There is simply no avoiding this brute fact.
    Trade is not between nations but between persons."

    Thread winner.

  • sarcasmic||

    When American businesses do better, everybody in the US does better from them and their employees spending their money around.

    That all depends. What if that businesses' products could be made more cheaply overseas? Are Americans better off because they pay more for domestically produced products? Wouldn't we be better off if the resources used to make those products domestically were used to produce something where we have a comparative advantage?

    That's why unilateral free trade is better than protectionism. It has a two-fold effect. It saves consumers money while freeing resources to be used more efficiently. And this happens regardless of what kind of tariffs other governments impose on their own people.

    Adam Smith showed this in 1776. It's not like it's old news.

  • M.L.||

  • sarcasmic||

    Talk about cherry picking. That guy's ladder must be UUGE!

  • M.L.||

    I'm sorry Adam Smith just devastated your viewpoints.

  • vek||

    M.L. gets it. Like it or not, it is a negotiation. You people delude yourselves by basically suggesting we go into a negotiation with all the advantages, and then don't press our advantage to get a better deal in our favor... For no particular reason. There are only a handful of tools available to a nation to ensure the other side gives us solid market access. We could actually bomb them, use our market access as a carrot, political influence by trash talking them, etc. But still a limited set. Tariffs/access to our market are the #1 thing we have to offer though... And if you give that away, you've just thrown away your best shot at getting what is in your own interests.

    It's like Google going into a deal with a start up, and then letting the start up with 500 grand in the bank work them over for billions... When they could have negotiated a fair and reasonable deal where perhaps they only paid 100 million for the start ups technology they wanted to license.

    Shirley: Sure, tariffs are bad news bears. That's why I want actual free trade. The valid argument for absolute free trade comes from an individual perspective. But you know what else doesn't make a lot of sense... Except for all those times it does? WAR. The real kind. The reason it makes sense to use tariffs is not because tariffs themselves are good, but because the objective of gaining better market access for our own enterprises is worthwhile in the long run.

  • vek||

    sarcasmic: I'm not saying tariffs forever. You people always ignore this. I want no tariffs. But you are simply incorrect in thinking short term arm twisting never yields results. Embargos, tariffs, etc have very frequently got results in the past. We are the US, not Somalia. We have the juice to twist arms hard enough to actually get what we want... Most other nations don't. But we do.

    Adam Smith, in that lovely link, shows he had the common sense to accept essentially the EXACT same exceptions to his own rules I am laying out. If you CAN force open a foreign market, it is worth it to do so!

    You people are the ones who are so short sighted you think that a horribly shitty status quo is the BEST POSSIBLE OUTCOME... When it clearly is not. It is simply a matter of will, because WE DO have the upper hand. Western leaders decided to sell our own nations out because they figured it would be good for big business, and our economies could take the hit.

    It has been good for big business, the problem is our economies have never found better uses for millions of workers as is REQUIRED for it to be an actual net win. Saving 20% on an imported item is not enough to make up for the loss of 80% of that income going overseas. Some items are awesome to import, others are not. Problem is we import too much stuff where the savings are minimal.

    Your thinking is far too dogmatic, and completely ignores objective reality, and many mathematical facts that directly contradict your dogmatism.

  • vek||

    The thing that all of you retards miss is that it is a strategy to get EXACTLY what you and I actually want. Actual free trade.

    The seem to not understand the concept of forcing somebodies hand. We GAVE AWAY market access to the USA, without demanding other nations reciprocate. We didn't need to do that. We could have blown the Chinese market open 20 years ago. But we didn't out of stupidity.

    I don't think a mistake in the past means we need to live with it forever.

    We have to apply pressure. They're never going to lower barriers without it. So I'm okay with temporary annoyances for a long term improvement. As I said, I don't think he's doing it well. I think it will take the threat of the "nuclear" option to break them. But they would break. They have no choice economically. Then things are better than they've ever been.

    You people seem to not realize that you will NEVER get the free trade you want by us simply being a door mat.

    So do you ACTUALLY want free trade... Or do you want to maintain a shitty status quo that is slanted against your own nations interests? YOU personally will benefit from other Americans prosperity if we get China to lower barriers too.

  • Shirley Knott||

    It's not working.
    It never has.
    What works is unilateral free trade.

  • sarcasmic||

    Break a few eggs, make a few omelets, and ignore the pain while the power of good intentions makes everything better. Yeah. Sure.

  • Woody Chip Hurrrrr?||

    The fairness of my trades is none of your business nor the government's. What is it about individualism and self-ownership that you do not understand, and why do you waltz around the concepts so much?

  • Butler T. Reynolds||

    Nah. Trump has never enunciated his support for or the benefits of free trade. It's all a game to him. He points to trade deficits and thinks the US is losing. He's not very bright on this matter. Makes you wonder about his econ degree from Wharton.

  • JB Say||

    As long as it doesn't disappear my job I want cheap stuff now!! Now, dammit!!

  • vek||

    Put me in charge of trade policy, with absolute control. I will have China's trade barriers dropped in 1 week.

    You people are simply fools, and cowards. Why would you not want China to adopt free trade? It makes no sense.

    How do you not realize that if we genuinely threatened to cut off their imports, say a 100% embargo, that they would cave INSTANTLY. They would. They'd have to, or they'd have a revolution on their hands from 20 million people losing their jobs overnight. Leverage, we have it.

    I understand individualism and self ownership... However that was NOT what got us in this shitty position in the first place. That was poorly negotiated trade deals. When they could have been actual free trade agreements.

    You guys are simply too weak kneed to actually deal with anything in the real world. You're probably all a bunch of cowardly employees who have never had to take a risk in your lives. I own businesses. I have these things called testicles. I have had my ups and downs, but I'm not a coward like the lot of you clearly are. I guess that's why people like me run the world, and people like you simply cower in fear of taking a bold action to get results. Whatever.

  • buybuydandavis||

    "The seem to not understand the concept of forcing somebodies hand."

    The Left seems conceptually incapable of game theory. Sad to see it spread to Reason.

  • Benitacanova||

    Another day, another Orange Man Bad article at Reason.

  • buybuydandavis||

    "Orange Man Bad" is such a great meme. It so perfectly encapsulates.

  • sarcasmic||

    To be fair, some good developments have taken place under this president. A fast-growing economy, a palpable business optimism, a much-needed lower corporate tax rate, and fewer regulations come to mind.

    But, but, but anyone who criticizes anything about Trump hates everything about Trump! She cannot possibly see those things as good developments because she hates everything about Trump! She has TDS! She's deranged! Something means everything because she'd deranged! She's the deranged one! Aaauuughhhhh!

  • Jerryskids||

    If nothing else, I've gotten terribly bored with Trump talking about winning, even if it is the most amazingly phenomenal, epically fantastic, by far the greatest, yugely historic, most bestest in the history of the world bloviating about how great he is. The man sure does love him some Trump.

  • Kivlor||

    Trade Wars are bad, mmmkay?

    But we totes need a Trade War with the Saudis because they hurt journalists.

    Ah, Reason, where we go to forget the Logos.

  • buybuydandavis||

    "Logic is a social construct of the white supremacist cisheteropatriarchy used to oppress marginalized peoples"

  • M.L.||

    The rise of Communist China, and their unfair trade practices, must be countered. And it must be countered very strongly.

    Brain dead, delusional libertarians believe that individuals are like their own nation-state. They believe that markets exist in the Hobbesian state of nature, when in fact markets are only enabled by good and moral people who believe in liberty, and are a construct delicately incubated by enforcement of criminal and civil laws by such good and moral people in a trusting community.

    Libertarians will be whistling past the graveyard until they wake up one day in a communist dystopia.

  • sarcasmic||

    I find it hypocritical that conservatives decry central planning at home, but at the same time claim that Chinese central planning has turned the country into an economic powerhouse. Which is false, of course. Reforms that have allowed free enterprise and private ownership are what have caused China to rise economically. Trade with them will only encourage more freedom, not the other way around.

  • M.L.||

    I don't claim that central planning has turned China into an economic powerhouse, and I doubt anyone claims that. I agree that the reforms you mention have enabled and contributed to China's economic rise (I will not say "caused" because the causes are multifaceted).

    However, China remains a communist nation. Furthermore, its recent moves have been a dramatic trend toward more authoritarianism, not less. The pre-2018 status quo will not encourage more freedom and reform, and is likely to enable the opposite. On the other hand, an aggressive medium-term strategy to achieve better trade terms (in other words: further reform in China) can succeed.

  • sarcasmic||

    Define better trade terms. Because it seems to me that that means giving Americans access to cheap goods while also protecting American companies. As in "You get rid of your tariffs, but I'm keeping mine."

    And who is arguing that the status quo was good and wonderful? That's a straw man. Saying "Trump's trade war is bad" does not equate to "I fucking love the status quo! It makes me hard!" No. Saying something is making things worse does not imply that what it made worse was optimal.

  • M.L.||

    Well, you said that "trade" would unequivocally encourage more freedom and reform in China. I said that is not necessarily the case; the status quo seems likely to do the opposite.

    Now, is Trump's trade war the perfect strategy? Along with tariffs, he made his campaign of bluster the foundation of his candidacy from day one, yet he has also executed some surprising charm offensives. It appears that it could work. I'd like to hear a better idea or more importantly see it executed.

  • vek||

    The thing that drives me MADE about people like you is this:

    How do you EVER expect to get true free trade? Do you have ANY ideas?

    Because most nations WILL NOT EVER stop protecting their economies, without some form of coercion. In other words, a pure libertarian approach will results in free trade NEVER existing. Ever.

    As a nation, we only have a couple options for expanding free trade. We could threaten to nuke countries. That's a GREAT idea. It would probably work if they thought we were serious. OR we could simply require countries to open up to US goods with zero tariffs if they wanted easy access to our markets.

    Since we're the largest buyers of damn near everything in the world, I suspect many nations would do so. We gave away the best bargaining chip we had to get actual free trade. I don't get how you people can't comprehend the concept of using our muscle to achieve a good end results. It's mind boggling. Your naivete is really something to behold. It's like you're all 5 year olds with zero life experience or something.

  • vek||

    To use an example to illustrate your BRILLIANT libertarian strategy, it's something like this:

    Founding fathers in 1776: The British are out of control. We've got to declare independence if we ever want freedom.

    Libertarians: But that will make things EVEN WORSE! War is shitty, and a waste of money. We'll get that freedom SOMEHOW in the future...

    Founders: Uhhh, how? They're not playing ball. We've tried. We have to go to war.

    L: But that's even worse than it is now!

    F: For a time it will be... But then the fruits of that labor will become far better than anything we could ever have under the King. It'll suck, but it'll be worth it!

    L: Noooooo!

    F: Fine, we'll give you your way and keep trying to negotiate something with them...

    Fast Forward to alternate 2018: British America, part of the commonwealth. Queen Elizabeth on our money, no gun rights, no freedom of speech, socialized medicine, double the taxes., etc.

    You're literally making that argument. That because there is a possibility something might not succeed, even though it absolutely would if we took it far enough, we shouldn't even try, and things will magically work out "somehow." Nonsense, and cowardice.

  • JB Say||

    I think we've run that experiment. Check your results.

  • buybuydandavis||

    "Trade with them will only encourage more freedom, not the other way around."

    Chinese Emperor for Life Xi endorses this message.

  • Juice||

    I had never heard of the Universal Postal Union. Is the US pulling out of it a big deal or meh?

  • buybuydandavis||

    " To be fair, some good developments have taken place under this president. A fast-growing economy, a palpable business optimism, a much-needed lower corporate tax rate, and fewer regulations come to mind."

    Naturally, Reason doesn't mention lower unemployment rates and greater take home pay for the human widgets employed by the ruling class as good developments, because widget lives don't matter, they are only costs to those who do.

    GDP booming, and all Reason can do is say "Look! The changes have made this person worse off in this way." Article after article after article. Every Boehm article.

    Honest grown ups knew there were tradeoffs to changes compared to the status quo - they look at the balance of the changes. Reason is always only looking at one side of the ledger.

  • macsnafu||

    I am so tired of people defending Trump's tariff policies. But it does illustrate an interesting facet of politics. Trump's alleged idea was that you have higher tariffs, and then 'negotiate' with countries for lower tariffs.
    Freedom is a tool for negotiation for politicians, and to "allow" more freedom, you first have to have less freedom.
    This is also clear in our immigration policies.
    Freedom should be non-negotiable. Dump the politicians who obstruct freedom.

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