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Trade Hearing Highlights Staggering Number of Losers From Trump’s Tariff Plan

Trump wants tariffs on 1,300 Chinese-made goods. Dozens of American businessmen and women are in Washington this week to explain why that's an awful idea.

Photo by Eric BoehmPhoto by Eric BoehmA proposed tariff on ovens used for baking biscuits and proofing bread, Brian Smith tries to explain, would place "little if any pressure" on China to change its trade practices. All it will do, the CFO of Washington State-based LBC Bakery Equipment says, is make it more expensive to buy and maintain the ovens—and will increase the price of everything that comes out of them.

Smith is the 89th person to address The Office of the United States Trade Representative's special committee on tariffs this week. Nearly all of them deliver the same message: If the United States goes forward with plans to place tariffs on hundreds of Chinese-made goods, the committee is told over and over and over, it will be American businesses and consumers who bear the brunt of the damage. Smith gets five minutes to say his piece, just like the dozens of business owners who went before him and the dozens more scheduled to come after.

This week's hearings are something out of a version of Atlas Shrugged penned by Franz Kafka. It's a glimpse into a world where business success depends on currying favor with the government—at least enough of it to avoid the president's trade hammer—and where doing so requires pleading your case in a pallid courtroom within a boring office building on E Street SW. Do the sleepy-eyed bureaucrats listening know that you are any different from the 88 people who already spoke? Ding, your time is up. Next, please. And so on down the line.

The procedure is a reflection of just how many number people have come to D.C. this week to speak against the tariff proposal—or, as is often the case, to ask for exemptions for specific items. Three days are hearings are scheduled. The sheer volume of the opposition almost gets lost within the rote, monotonous process.

No cameras are allowed inside Courtroom A and streaming of the hearing is forbidden. The Office of the U.S. Trade Representative promises that a transcript will be made available, eventually. Even if video was provided—as it should be, since this isn't a court of law but supposedly an open, democratic process—it's not the sort of thing that would pull down record ratings on C-SPAN. But it is something that people should watch, because it's hard to imagine how anyone who identifies as a small-c conservative or small-l liberal would not be disturbed by it. If not by the process, then by the underlying policy, which is not acurately described as either conservative or liberal but rather as centrally planned economics wrapped in jingoism.

This exercise in democracy is happening because President Donald Trump called for imposing a 25 percent import tax on roughly 1,300 Chinese goods, and laying those tariffs requires approval from the U.S. Office of the Trade Representative's interagency Section 301 committee, which includes one official from all the major departments and agencies in the federal government. Allegedly, those tariffs will bully China into being a better trading partner, or at least will convince its government to stop stealing American intellectual property. How a 25 percent tariff on bakery ovens or wrenches will prevent China from coping our notes about microchips and AI remains unclear.

"Our products are hardly new technology or subject to fears about intellectual property theft," says John Constantine, president of Apex Tool Group, a North Carolina company that sells wrenches, ratchets, and other hand tools.

Ratchets have been around for more than a hundred years. Wrenches for longer than that. Both are simply variants on one of the oldest tools in the history of mankind. Constantine's company has nothing to gain from the imposition of tariffs designed to stop the theft of uniquely American intellectual property. There is no tariff plan that allows him to win, only variations on how badly he will lose. His company must be sacrificed to appease an angry president who does not understand trade.

Still, they try. Michael Kersey, owner and president of the American Lawn Mower Company, talks about how tariffs could produce a shortage of the parts his business needs to make various consumer products. In the event of a bad winter, a shortage of snowblowers could be a particularly serious problem for the independently living elderly, he stresses, as if a shortage of any product is not significant unless it can be shown to negatively affect a protected class of people. Such thinking is necessary, of course, only when government is involved.

John Hoff, president of Global Point Technology, an upstate New York company that designs and sources manufacturing components, says his company pays more than $40,000 in import taxes every year. Trump's proposal would increase that amount to more than $1.3 million. "Imposing these tariffs would not be punishing a Chinese company," he says. "It would be punishing a U.S. company." There are at least 14 items—each with it's own eight-digit code, as all U.S. imports have—on Trump's list that Huff says his company regularly purchases from China. Given the time constraints, he only has time to talk about two of them: numbers 84799040 and 32906180—or was it 32906810?

You cant help but feel for Hoff, Smith, and the rest as they are shuffled through the process. It's not necessarily because some of them might be put out of business by the stroke of a presidential pen. There's that too, of course, but what really sticks with you is the way they're forced to humiliate themselves.

These are people who have built and run companies, large and small, that survive because they provide some necessary value to someone—directly to consumers in many cases, but often to other businesses along the supply chain. They employ people, sometimes hundreds and sometimes just a dozen or so, who are able to put food on their tables every night thanks, in some small way, to a global supply chain. Yet here they are, paraded one by one in front of a small microphone under pale florescent light to prostrate themselves before a bunch of unelected officials and beg for the survival of their businesses and their employees' livelihoods.

"We have no ability to compete with a 25 percent tariff on our supplies." "It will run us right out of business." "It's a competitive market; margins are small."

The humiliations don't end there, because of course there must be a periodic question and answer session, to give the impression that the committee is listening to what's being said.

What other foreign sources could you consider using as suppliers, committee members ask easily more than a dozen times. Have you thought about ways to change your supply chain to avoid the tariffs? If it were only that simple, come the replies. Hoff's company in upstate New York owns part of a factory in China. Moving it would be prohibitively expensive. Nearly the entire world's supply of component parts for microscopes come from China, explains Ernest Tai, president and CEO of LW Scientific, an Atlanta-based medical device manufacturer. "We would not be able to move our sourcing out of China, period," he says. Costs would be higher elsewhere. Investments have been made. One after another, the businessmen and women show that, yes, they have considered those options and, no, they are not sufficient.

"Is your company in a position to source products from other countries?"

Rather than demonstrating enlightenment, though, the questions merely confirm how right Friedrich Hayek was when he diagnosed The Knowledge Problem. No government official can know as much about a business as the people who run it, but that wont stop them from meddling. Or, as is the case today, from asking pedantic questions.

What will all this accomplish? Probably nothing.

Take, for example, what Jason Oxman, president of the Electronic Transactions Association, tells the committee about cash registers—another of the hundreds of items on Trump's tariff list. There are more than 55 million Chinese-made cash registers and payment devices shipped around the world every year, but only 10 percent of them are imported into the United States. The proposed tariffs would force American businesses to pay higher prices for new cash registers (and in the midst of the ongoing upgrade of registers to accept chip cards and mobile payments) but the loss of a small portion of U.S. sales would hardly put a dent in Chinese manufacturers, and they would easily make up the difference in other markets.

Trump's tariff plan might start a trade war between the U.S. and China. It might draw the European Union into the conflict too. It might cost hundreds of thousands of American jobs and drive up prices for just about everything Americans buy. For now, though, it's already imposing unseen costs on American businesses, large and small, and forcing business leaders to play politics just so they can get back to doing what's actually important.

"Believe me," Constantine says, in response to another repetitive question from the committee about how tariffs would affect his bottom line, "I've had to learn more about this than I ever wanted to know."

Photo Credit: Photo by Eric Boehm

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  • Fist of Etiquette||

    Trade Hearing Highlights Staggering Number of Losers From Trump's Tariff Plan

    Yeah, about 1.3 billion losers. Take that, China!

  • sarcasmic||

    Fuck yeah! Let's punish Americans who buy stuff from China! That will show China who is boss!

  • loveconstitution1789||

    Oh look, its working to get China and North Korea to discuss the tensions in that region.

    Let me know when you want to discuss China's current tariffs and trade restrictions on the USA and when any tariffs become permanent. We can discuss this further.

    Until then....yawn.

  • sarcasmic||

    Let me know when you want to discuss China's current tariffs and trade restrictions on the USA

    You mean China's government punishing Chinese people who want to buy stuff from the USA?

    Trade restrictions are always on the citizens of the country imposing the restrictions. Protectionism is essentially a government putting an embargo on its own people. When done to another country it's an act of war. When a government does it to its own people it's an act of benevolence. Go figure.

  • loveconstitution1789||

    As I said, China's tariffs and trade restrictions on American companies and products.

    "Trade restrictions are always on the citizens of the country imposing the restrictions. "
    Think about what you said. Its not true.

  • sarcasmic||

    Trade restrictions generally come in the form of a tax that is paid by the consumer. Tariffs on Chinese goods are not paid by Chinese. They're paid by Americans. Trade restrictions punish consumers.

  • loveconstitution1789||

    Trade restrictions also come in the form of now allowing certain products in or out of a country. There is not costs at all because the certain products can never be exported or imported.

    As I said, what you said was not true.

  • sarcasmic||

    You're moving the goalposts. Even so, not allowing products to be imported or exported creates opportunity cost. Consumers are punished when they can't buy something that is banned for import. Yes consumers aren't punished when things can't be exported, but only a lawyer would come up with something as dishonest as that when the context is clearly tariffs.

  • loveconstitution1789||

    You are wrong based on what you said.

    Protectionism is a broad term. Long term restrictions and short term restrictions are very different and can result in some positive long term trading partnerships. Sometimes they don't get protectionist countries to talk.

    I still think free trade is the best. The USA does not have free trade. We have managed trade. Your complaining about how its managed. I am saying that managing it to potentially resolve North Korea and getting a better trade deal with China is probably worth it.

  • aajax||

    We don't need a trade deal to have free trade. Just stop taxing imports. If other countries want to screw their people, that's not a reason to screw ourselves.

  • aajax||

    We don't need a trade deal to have free trade. Just stop taxing imports. If other countries want to screw their people, that's not a reason to screw ourselves.

  • gormadoc||

    "any tariffs"

    You mean besides the steel, washing machine, and solar panels? In addition to pre-existing tariffs, of course.

  • loveconstitution1789||

    Yup. All these tariffs on products:
    Federal tariff schedule

    Like I said, when they become permanent let me know.

  • gormadoc||

    Maybe those people should have worked in more politically-connected industries. Sucks to suck.

  • Ken Shultz||

    I don't like Trump using trade in a game of brinkmanship with China over North Korea, but I don't think we can talk about this intelligently without taking that perspective into consideration.

    The major decisions seem to get put off until sometimes after North Korean summit in June, either that or they end up becoming like a an empty concession to China (see the recent ZTE saga for evidence--they were just a bargaining chip).

    Because I don't like what Trump is doing with trade to pressure China into leveraging its influence with Kim doesn't mean that isn't what Trump is doing or that it won't work. And talking about the impact on trade--when this could all be over a month from now after the summit--without taking that into consideration is to fall for Trump's head fakes.

    Finding and using leverage--this is the way commercial real estate deals and all negotiations are done . . . unless you're a necon like Bush (they supposedly don't negotiate with tyrants) or an idiot like Barack Obama, who gave Iran the farm in exchange for magic beans that don't work.

  • Rhywun||

    The major decisions seem to get put off until sometimes after North Korean summit in June

    I guess we can expect to see this article reworded a couple dozen more times by then.

  • gormadoc||

    I don't buy the argument. Trump was talking about "punishing" China long before any hint of NK entered his "policy" goals. These talks seem more due to Kim's lack of his father's idealism, SK's volatile political situation, the Olympics, and the fact that Trump is less likely than Obama to demand NK kowtow.

    Tariffs may have something to do it, given Kim being a better leader than his father, but that isn't their goal or the biggest factor.

  • Iheartskeet||

    If its true that the tarriffs are negotiating leverage, it seems like he will have boxed himself into a corner. Suppose the NK brinkmanship works, we have a peace treaty, no NK nukes, inspections yada yada...then I suppose Trump will be obligated to...what...eliminate the tarriffs ? I certainly hope it turns out like that (and he'd sure as hell deserve a Nobel Prize for it), but its hard to see his base being ok with it.

  • loveconstitution1789||

    If a temporary trade war gets peace in Korea, then I am not 100% against using this tactic.

    If it doesn't work soon, eliminate tariffs and try something else.

    With North Korea, our options for avoiding them nuking the USA are narrowing.

  • Iheartskeet||

    Well, thats the thing...Trumps policy I guess is
    1) If it works then we eliminate tarriffs (a world of awesomeness, but a mostly unhappy base)
    2) If it doesn't work, then we keep the tariffs (shitsville all around, but a mostly happy base)

    I don't see where he's going to eliminate them if they don't work to get nukes out of NK. IF any of this speculation is even right.

    Not to minimize the NK threat, but you think they are just going to up and nuke us as soon as they are able ? Don't see it. Iran ? Much more likely. I'll bet the leadership of both have read "One Second After" and jerk off to it regularly, however unrealistic it is (or isn't).

  • loveconstitution1789||

    I don't want to find out if NK will nuke us immediately after getting the capability to accurately target the USA. NAP does not require that. The USA is still at war with NK and they have threatened to nuke various parts of the USA. Fuck them. Don't threaten the USA.

    With that being said, I hope talks work out a peaceful solution. Evidently China would not budge without strong arm trade tactics. Maybe its to save face, so they can claim a win-win-win trade deal with the USA and peace in Korea.

  • Iheartskeet||

    Well, we aren't technically at war, as we signed a peace treaty. They ARE technically still at war with SK.

    I hardly want them to have that capability either...I am saying you seem to think an immediate strike is in the offing, and I am saying that sounds like BS. The only reason they have developed all this is for leverage to get other things, and to satisfy a certain paranoia that we are going to re-invade them. An outright unprovoked attack on us doesn't get them anything.

  • Ken Shultz||

    Again, look at the recent case of ZTE.

    Trump uses every opportunity to use more leverage against China, and then he backs off from it when he gets what he wants from them in regards to North Korea.

    Just, watch for the pattern.

  • zombietimeshare||

    I see a lot of "could" and "might" cause this or that in the article not a lot of "will".

  • Eidde||

    Losers? Trump has no time for losers, because he is the champion.

  • Cloudbuster||

    There are more factors to be considered than the straight-up 25% tariff.

    The exporters in China can't afford to have a large amount of their customers go out of business. Producing goods with nobody to buy them isn't good for business. Thus, they're unlikely to pass along the full amount of the tariff to the customer -- they'll have to lower their price to compensate.

    This does put pressure on China to alter practices that Trump is targeting, like its disregard for IP laws.

    It also opens a window for American or providers in other foreign countries to step in -- just because those sources aren't available today doesn't mean they won't be shortly, if there's money to be made. That's market forces at work, right?

    I'm a fan of free trade, but what we have with China today isn't free trade. How are you supposed to negotiate better if you come into the talks effectively disarmed? Engaging in a real fight for something usually means both you and the opponent are going to suffer a little pain.

  • vek||

    Exactly. All these morons seem to think that we can just walk up to China acting all nice, hat in hand and say "Hello Mr. China, we were wondering if you might possibly consider ceasing to steal our intellectual property and charging exorbitant import duties on our products? We'd be ever so grateful..." They'll obviously just laugh and ignore us.

    However you threaten to cut off over 1 trillion dollars a year in trade, or severely curtail that, and all of a sudden they have a hell of a big reason so seriously consider doing what we want. We're still in a far stronger position than they are. A few odd products aside we're in a position to completely cut China off with minimal harm to ourselves, we can import from other low wage countries... But they would go completely into chaos if we did that. That means if we really wanted to push it as hard as we could we would 100% guaranteedly win, and they would lose. Trump isn't even pushing it that hard, although frankly he probably should. The more hardcore the threat the more likely they are to blink. If he were smart it would be an across the board tariff on any and every thing made in China, and all they have to do to avoid it is drop to 0% tariffs on all USA made goods and we'll drop all ours to 0% as well. They'd cave.

  • Cloudbuster||

    Tariffs are going to kill that business!

  • Harvard||

    Anyone care to explain why we can't manage a trade surplus from a single ferking county? Free trade is a one way street?

  • aajax||

    We do have a surplus with some countries. Canada, for instance. But you can relax. A trade deficit is not a loss for us. In fact it creates an equivalent increase in foreign investment. Trade really is win-win. If it weren't, people would not trade. I hope Trump is just playing dumb in order to get China to be less protectionist, but I'm afraid he really is dumb.

  • vek||

    Except for foreign investment ALSO means we're selling off our assets to finance current consumption, with those assets and all future profits now going to foreign nationals. It's a lot like taking out a 2nd mortgage on your house to buy a new car, new clothes etc... If you start out with enough equity you might be able to get away with that for awhile, but sooner or later you'll have no net asset value, and all the consumable goods you purchased will be worthless. That's the problem with excessive and perpetual trade deficits.

  • aajax||

    How is it that the president can impose a tax on what Americans buy? I thought only Congress could do that. This is taxation without representation.

  • joebanana||

    It's not a tax, it's a tariff.

  • Dan S.||

    Why does every word except "States" have a larger initial letter in the sign shown in the photograph. It effectively reads "United states International Trade Commission". Either there is some hidden message there (unlikely), or the sign's designer was just very sloppy.

  • joebanana||

    Oh, boohoo. Chinese products are crap. Chinese steel is the WORST steel ever made. The US used to make the best steel on the planet, until the cheap Chinese garbage put US steel manufacturing out of business.
    Every product shipped from China is toxic. Lead, arsenic. formaldehyde, mercury, cyanide, cadmium, and other toxins mot allowed in US products, are allowed or misrepresented in Chinese products.
    If these whinny snowflakes would buy American made products, instead of toxic Chinese garbage, we would all be better off.
    We make baking ovens right here in the USA, and if these business owners bought them, we would make more, giving jobs to Americans, not Chinese.

  • TJJ2000||

    The "Free Trade" advocates aren't a far shot from the "Free School", "Free Healthcare", "Free Housing & a Car" advocates. There is no SUCH THING AS A FREE LUNCH! And just because someone's XYZ resale business has been shoveling profits off the "Free Trade" tax-paid grants doesn't make if FREE.

    Look no further than the bankrupt USPS being subsidized by U.S. tax-payers due to their UPU ( United Postal Union ) agreement to ship IMPORTS ONLY practically free. Not only do they need bail-outs to maintain this treaty they also have to RAISE domestic shipping prices!

    WHY do American producers have to PAY taxes anyways?? Maybe to maintain government implemented infrastructure law that to a minor level protects producer and consumer from fraudulent behavior. Who PAYS for those infractions on imports? The American Tax-payer; thus that is also a tax-payer subsidy for "Free Trade" imports. Just think about it; We subsidize the business of shipping imports and American producers ALSO have to pay for the roads they are shipped on.

    Trump has just as much right to lay tariffs (i.e. Put American tax on foreign imported products) than the government has the right to tax it's own. There is no logical justification to put foreign companies on an EXEMPT from taxation list.

  • gphx||

    The Chinese got started on tariffs ages ago and Trump is the first president to have the balls to play ball.

  • InternetHandle12||

    Missing the point. China has already come to the table to reduce trade deficits. The tariffs are working and they will be gone when China agrees to new trade terms.

  • gphx||

    How come no Americans are in China telling them their tariffs are a bad idea?
    How come no Americans are in China telling them they don't have enough minorities in their movies?
    How come no Americans are in China telling them to use their preferred pronoun?

    Because China doesn't tolerate whiny bitches and unfortunately we do.

  • gphx||

    It's important to have strong US manufacturing. Do people think if we ever go to actual war with China they're going to let us keep buying the components we need to build things?

    Locally we had a coal mine and a steam power plant as the main employers. Environmental regs from both Bush and Obama shut down the power plant. They still mine the coal but ship it to China which has no environmental regs. When they burn it the smoke drifts across the Pacific and right over us. As a result we have less jobs and dirtier air.

    It's nice to have a president who doesn't want everyone to end up working at Walmart being living Pez dispensers for Chinese shit.

  • vek||

    Ugh. You people seem to have no concept of how negotiations work, also sometimes you have to endure short term pain for long term gain. Trump is offering China a carrot and stick, it's their call which they choose. He's said repeatedly he wants them to drop their trade restrictions and respect our IP. If they do that he won't use the stick.

    Also, some of these people saying they'll lose out are really saying other competitors will beat them in the market if these go into effect. If the price of gas goes up 25% people don't stop using gas. Last time when gas prices spiked some fleets switched to CNG, hybrids became more popular, etc. With most of these items what they mean is people might choose to buy the American made product because it will now be just as cheap... WHICH IS EXACTLY WHAT TRUMP WOULD HOPE FOR. Yes it's an increased cost on the consumer, but so is the income tax. Frankly I'd rather have his tax cuts and raising extra revenue via tariffs than the other way around. Tariffs do at least encourage local production, which means more jobs and more tax revenue generated in the USA, easing the burden on other existing tax payers.

  • vek||

    There are pros and cons to this stuff, but you people who paint it as a 100% downside, it's all evil, there are NO benefits, etc are full of shit. Especially since his main goal isn't even to put this stuff into effect, but rather for China to lower their restrictions. I will laugh my ass off if he puts this stuff in and 6 months later China caves and lowers their trade restrictions on US goods. Bottom line is it is intervention, and intervention is whack... But the shit China is doing is anti-market bullshit too. If somebody busts out a gun at a knife fight, do you trudge on with your knife, or try to whip out a bigger gun than theirs? The world is a shitty imperfect place, that's just the way it is.

    100% pure libertarians seem to not really get that sometimes you have to do unscrupulous things to get shit handled in the real world. You should try to keep it to a minimum, but there is a time and a place for stuff.

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