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Easy to Win? Trump's Trade War Requires Handing More Power to Unelected Bureaucrats

One government intervention into the economy begets another, and American businesses are caught in the chaos. Good and easy to win? Not so much.

Sipa USA/NewscomSipa USA/NewscomAt three manufacturing plants in Arkansas, some 1,500 workers are waiting to hear whether the Commerce Department will let them keep their jobs.

Those workers make a product that you've probably never thought much about: tire cords. They are the lattice-like structures, often made of steel fibers, that line the inside of rubber tires to help them maintain their shape. The owners of those three Arkansas-based tire cord manufacturing plants say they will have to close their doors and lay off their workers, Arkansas Today reports, because the type of steel wire needed to make tire cords is not available from domestic manufacturers and foreign suppliers are now subject to a 25 percent import tax. They have applied for a special exemption from President Donald Trump's steel tariffs, and the Commerce Department is considering the request.

Perhaps nothing else about the ongoing debate over tariffs so clearly demonstrates the quiet horror of the Trump administration's attempt at central planning. Workers and factory owners who produce a necessary but unremarkable product, filling a hole in a supply chain that few Americans ever notice, now fear that they will be forced out of business if their application for relief does not find favor with federal bureaucrats.

They are hardly alone. More than 1,200 businesses have filed over 20,000 requests for exemptions from the Trump administration's steel tariffs. The Commerce Department is sorting through them, one by one, deciding which companies get a special favor from the government and which have to deal with an unexpected new tax that might force layoffs or worse—destroy entire businesses.

"The only reason the Commerce Department is supposed to grant companies waivers is if a certain steel or aluminum item they need cannot be made anywhere in the United States," The Washington Post's Heather Long noted in April, when the waiver process began. Businesses applying for waivers from the tariffs have to argue that they need a specialized item not produced domestically, "but the Commerce Department has wide latitude to make the call if that is truly the case."

In other words, the federal government is literally picking winners and losers. It's a cliche, yes, but the idea of the government picking winners and losers used to drive conservatives mad when the Obama administration was seen as doing it in less direct ways.

Last week, the first set of seven winners were announced by Commerce Secretary Wilbur Ross. At the same time, the department rejected 56 applications from 11 different companies.

Those that do get exemptions get more than a lifeline. They also gain a huge advantage over any competitors not lucky enough to score an exemption from federal bureaucrats.

Ross is "doling out to the early comers a huge market advantage in the form of these exemptions, which might not be available for everyone else," Dan Ikenson, director of the Cato Institute's Center for Trade Policy Studies, tells Reason. "Don't make companies waste their time and resources standing in line to kiss his ass down at the Commerce Department."

Far from being "good and easy to win," the Trump administration's determination to pursue protectionist economic policies requires ever more government intervention into the economy. The tariffs, which are really just import taxes paid by consumers and businesses, are a burden for all. More insidious still, the waiver system empowers the government to relieve that burden at its own discretion.

Now, Ross is talking about yet another potential intrusion into the market. He told the Senate Finance Committee last week that the administration is launching an investigation into whether American businesses might be unfairly profiting off the White House's decision to slap tariffs on imported steel and aluminum. While the tariffs, which are taxes paid by consumers on imported goods, were meant to increase the price of imported steel by 25 percent (and imported aluminum by 10 percent), Ross says the White House has seen evidence of higher price spikes.

"That's clearly a result of antisocial behavior by participants in the industry," Ross told the committee.

Speculation is a part of any global commodity market, of course. Instead of being evidence of "antisocial behavior," though, the rising prices caused by the Trump administration's trade policies are another indication of the extent to which this White House has underestimated the complexity of the global marketplace. Huge changes to current policy—like imposing tariffs on America's $29 billion annual steel import market—have consequences that ripple out in all directions.

Once the government has made that mess, it will have justified further intruding into the marketplace, picking more winners and creating more losers. Someone has to clean it up, after all.

Indeed, Ross' idea of targeting companies that have supposedly cheated the tariffs for profit has been encouraged by some businesses and industries that opposed the tariffs in the first place. Now, they have a perverse incentive to invite this additional governmental interference.

Jim McGreevy, President and CEO of the Beer Institute, a national craft brewing trade association that had sharply criticized Trump's aluminum tariffs when they were implemented, says he supports government efforts to ensure that "unfair market practices do not disproportionately harm end users, such as the beer industry."

There's a lot of money at stake. According to the Beer Institute, the beer industry purchased 36 billion aluminum cans and aluminum bottles, which contain about $2.7 billion worth of aluminum.

But this is all folly. The underlying assumption is that the tariffs will work if only the federal government can pull the right levers and enforce the right penalties against those who try to cheat—which, in this case, is anyone who responds to the economic incentives created by the tariffs. It is a socialist mentality, and a "new form of central planning," as Jeffrey Tucker argues.

Ross made the rounds on cable news in March and April to assure Americans that tariffs on steel and aluminum would barely be noticed. America would reap all the benefits of getting tough on trade without having to pay for any of the costs. "They should have known at the outset what they were doing," says Ikenson, "and realized it was going to be more complicated."

Taken together, the stories I've reported from people hurt by these tariffs belie the big claim Trump made at the beginning of this economic nightmare: that trade wars are "good, and easy to win."

Photo Credit: Sipa USA/Newscom

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  • SIV||

    Like the multi-thousand page multilateral trade agreements which every Reason writer supports (or is editorially-forbidden from questioning) don't empower unelected bureaucrats?

  • Ship of Theseus||

    This is a red herring. But you're the kind of shithead who loves red herrings.

  • Just Say'n||

    Not sure if it's a red herring so much as it is off topic and a distraction

  • Just Say'n||

    Red herring suggests that the argument made is false, when managed trade does very much empower bureaucrats. But his point is neither here nor there since the actions taken by the president are further empowering these bureaucrats

  • Ship of Theseus||

    Red herring suggests that the argument made is false

    It does not. You can look this up.

  • John||

    Meanwhile

    Then there is the outlier: The USA. Here at home growth is sizzling. Almost all economists now predict a growth rate of above 4 percent for the second quarter of 2018 and Dan Clifton of Strategas, one of the best forecasters of recent times, believes we may hit 5 percent later this year. He points to the surge of investment capital flowing into the United States and the increased business spending points to several more quarters of this torrid growth, while the rest of the world treads water.

    http://www.washingtontimes.com.....e-us-no-1/

    At some point, your world view has to start taking the facts on the ground into account. "Trump's Trade War" whatever it is, is not having the effect reason and others are claiming it to have.

  • ||

    I don't think framing it as a Trump trade war is helpful. In a way, countries are always in some kind of 'trade war'. The EU has been one on-going trade war onto itself.

    It's just that Trump is looking to restructure how American figure in those deals.

    Deals aren't written in blood after all.

  • John||

    No it is not. Nor is claiming every tarriff is another Smoote Hawley that will destroy the world economy.

  • Agammamon||

    Just. One. More. Feather.

  • sarcasmic||

    He points to the surge of investment capital flowing into the United States

    I'm unsure as to why you're not complaining about this. After all, foreign investment means that foreigners own stuff in America. And that is bad, is it not? So what if it creates jobs and grows the economy? Foreigners aren't supposed to own American property. Americans are. Right? By the way, know where those dollars come from? They come from us buying more than we are selling, aka trade deficit. That's how foreigners get dollars to invest and create jobs here at home.

    Our trade deficit is giving foreigners the dollars to invest here and grow the economy. That should be terrible news!

  • John||

    What happens then? Does the free trade monster rise from the sea and punish the unbelievers?

  • BestUsedCarSales||

  • $park¥ The Misanthrope||

    Only decent BOC song right here.

  • BestUsedCarSales||

    TOO SAUCY

  • Just Say'n||

    That is unbelievable nonsense

  • Ben_||

    This just in: people who have no ideas are sure Trump's ideas are wrong. People who make money on cheap foreign labor don't want their gravy train disrupted for the benefit of Americans who lost their jobs.

    Self-focused one-sided analysis tends to favor your side. Who would have guessed? Amazingly, forgetting about who is hurt and only focusing on who benefits leads to the conclusion that a policy is clearly beneficial.

    Melodramatic "quiet horror" makes a poor substitute for clear-headed strategic thinking.

  • John||

    And any time someone else suffers economically, it is the judgment of God and we must all know they are getting what they deserve. If the speaker suffers, then that is the result of evil government intervention and is an assault on all that is right and good.

  • Agammamon||

    Please John, please - explain why a steel manufacturer is worth me sacrificing in order to save his job but the steel using industry workers are supposed to just suck it up.

    What is it about the people in these protected industries that makes them special? What is it about them that imposes a duty on the rest of us to protect them?

  • Ship of Theseus||

    I always appreciate it when people with 0 understanding of economics reveal their ignorance.

  • John||

    I get that same feeling when reason talks about trade as well.

  • JoeBlow123||

    Ahh yes, the soft social science of economics. The same science where one side believes something crazy different and calls it scientific (socialism), another sits more to the right but not all the way there (Keynesian), and another that sits way on the other side of socialism (monetarism).

    Solid science, right up their with psychology.

  • Ship of Theseus||

    It's part math, part history, part psychology, and a lot of logic. You sound like an idiot.

  • Agammamon||

    Exactly. People, like me, who benefit from cheap imports to increase the scope and quantity of goods I can consume are not happy that a small fraction of politically connected industries are going to get to tank my quality of life in order to maintain theirs.

    You guys like to keep telling me I should care about these other Americans - but who's telling them they should care about me? Why do *I* have to suffer for them? What is it about them that makes them special and worth any sacrifice on my part?

    I can never get an answer to this question. It just seems that some of us are supposed to sacrifice in order to 'help' others without getting a corresponding duty to sacrifice back.

  • Scarecrow Repair & Chippering||

    They also won't answer why we are not at war with competition and innovation, both of which also de-employ people.

  • JoeBlow123||

    Which is why we need open borders, so we can hire immigrants to do the jobs robots refuse to do.

    In any event, I look forward to your spirited argument how competition is fostered when the barrier to entry is "You cannot make anything here, hope you have the cash, legal expertise, and connections to offshore to China. If you do not I hope you are prepared for China to dump product on your country that benefits from state subsidies, currency manipulation, and massive economy of scale."

  • Mark22||

    People, like me, who benefit from cheap imports to increase the scope and quantity of goods I can consume are not happy ... You guys like to keep telling me I should care about these other Americans

    Because, as history tells us, if you don't care about those other Americans, they are going to revolt and kill you.

    On top of that, if China keeps buying up Western means of production, and with it political power, we're eventually going to end up under Chinese rule. That's presumably also not in your interest. It certainly isn't in mine.

  • ||

    Well, thank God, Schick got an exception to the tariff.

  • Mark22||

    Easy to Win? Trump's Trade War Requires Handing More Power to Unelected Bureaucrats

    Well, Reason-style New Libertarians clearly prefer handing mroe power to elected bureaucrats! Because ochlocracy is the new libertarianism!

  • Headache||

    because the type of steel wire needed to make tire cords is not available from domestic manufacturers

    Not available! Must be because China controls 60% of the market through low labor and regulation cost.

    There are only four independent U.S. tire makers and they are not in Arkansas. So, foreign tire makers are going to close because foreign steel is taxed. That may be, but unlikely because that would turn out to be mishandling of capital. Think of all the dock workers put out of work because foreign companies create operations in the U.S.

    Maybe some innovation may pop up and steel could no longer be needed. Kevlar and carbon fiber come to mind.
    And if that happens that would be Trumps fault too.

  • Ship of Theseus||

    The ignorance shown here is nauseating.

  • MoreFreedom||

    If Congress doesn't like what Trump is doing, they might do the right thing and start writing the laws rather than allowing executive branch bureaucrats to do it (which would be great). And Congress might decide to change the law, whereby any executive action based on "national security" interests, would require agreement from Congress.

    Congress gave the executive branch a lot of their power, because Congress didn't want the blame for what they knew would be big government administrative regulations. Now that they've got a president that's using those powers (mostly for freedom IMHO, though I'm conflicted about starting a trade war with the objective to eliminate tariffs) perhaps they'll try to change the law, or at least be careful about giving their powers away to what the expected would always be a big government president. I'm laughing at the statists Congress for this.

  • alfachemistry22||

    The US Government sets the trade policy.

    The Chinese Communist Party sets the trade policy.

    The EU Committees set the trade policy.

    Trump at least wants free trade where the TOP MEN dont decide every facet of trade.

    http://www.cheapjcsuits.com/jewelry/necklaces

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