MENU

Reason.com

Free Minds & Free Markets

Trump's Trade War Means American Companies Are Making Less Money on Cars and Trucks

Ford expects to lose $1 billion due to higher steel prices, while Caterpillar's stock dropped sharply this week after it said tariffs cost it $40 million.

KEVIN DIETSCH/UPI/NewscomKEVIN DIETSCH/UPI/NewscomJust weeks after President Donald Trump took office, Ford Motor Company flattered the jobs-obsessed chief executive with the announcement that it would invest $850 million to upgrade a Michigan plant amid plans to bring production of two pick-up trucks, the Ford Ranger and the Ford Bronco, back to the United States.

The plans were already in place before Trump was elected, but that didn't matter much to Trump. "Big announcement by Ford today," Trump tweeted on March 28, 2017. "Car companies coming back to U.S. JOBS! JOBS! JOBS!"

Less than a year later, the Trump administration thanked Ford by announcing plans to impose 10 percent tariffs on imported aluminum and 25 percent tariffs on imported steel—tariffs that Ford executives say will cost the company more than $1 billion over two years.

The broad-based steel and aluminum tariffs imposed earlier this year have fallen off the front page amid the Trump administration's continued escalation of a trade war that's now more focused on Chinese-made items like electronics, home goods, and industrial imports. But this week brought a fresh reminder of the economic pain that the higher import taxes on steel and aluminum continue to cause for American industries that require those raw materials to build other products.

Companies that build cars, trucks, motorcycles, and other vehicles have been particularly hard hit—as investor information released this week by Ford, as well as heavy by machinery builder Caterpillar and motorbike-maker Polaris, demonstrate.

"U.S. steel costs are more than anywhere else in the world," Joe Hinrichs, Ford's president of global operations, told Bloomberg earlier this week.

After rocketing upwards in the months after Trump announced the new tariffs on steel, American-made steel has seen a mild drop in price but remains significantly more expensive than steel from other regions around the globe. The tariffs on imported steel have allowed domestic steelmakers to increase prices, and greater demand for domestic steel has further fueled the price increase (though there is still little to no evidence that American steelmakers are expanding production or hiring more workers).

Source: SteelBenchmarkerSource: SteelBenchmarkerSome American manufacturers are trying to avoid taking a hit on those higher prices by forcing suppliers to eat the cost of tariffs, though it's not clear how successful that strategy can be over the long term. That's what Polaris, a Minnesota-based maker of snowmobiles and motorbikes, has been trying to do, according to investor information reported this week by Bloomberg. Even so, the company estimates that tariffs have cost it about $40 million this year, and Polaris' stock price has fallen by 31 percent since January.

Heavy machinery builder Caterpillar estimated this week that tariffs added $40 million to its raw materials cost, and announced that it would have to increase prices next year to keep up. The news caused the company's stock to drop sharply Tuesday, and it has now lost about 30 percent of its value since January.

None of this should come as much of a surprise, since the one-and-only goal of tariffs is to increase the price of imported goods in order to give domestic producers a competitive advantage. The problem, of course, is that there are many, many more American businesses that consume steel and aluminum—and it's those businesses that pay for the cost of tariffs, even if Trump continues to push the fallacy (as he did again in a tweet on Tuesday) that other countries somehow bear those costs.

Yes, billions of dollars are flowing into the Treasury because of tariffs. But as the latest earnings reports and comments from Ford, Polaris, and Caterpillar readily indicate, those dollars are being drained out of American companies—the very companies that are providing the blue collar jobs that Trump likes to tout.

Photo Credit: KEVIN DIETSCH/UPI/Newscom

Editor's Note: We invite comments and request that they be civil and on-topic. We do not moderate or assume any responsibility for comments, which are owned by the readers who post them. Comments do not represent the views of Reason.com or Reason Foundation. We reserve the right to delete any comment for any reason at any time. Report abuses.

  • John||

    The tariffs on imported steel have allowed domestic steelmakers to increase prices, and greater demand for domestic steel has further fueled the price increase

    If the "TRADE WAR!!" is having such dire effect on American consumers, why is demand for american made steel going up rather than down? Perhaps these things are a bit more complex than your "Idiots Guide to Tade Policy" book that reason gave you says they are?

  • Jerryskids||

    "Trump Shits Bed, Provides Jobs For Laundry Workers"

  • John||

    I don't write the laws of supply and demand. But you can't tell me that consumers are hurting when demand is increasing. The facts are what they are. If they disgree with your theory, change your theory. If their disagrement offends you, stop calling your theory a theory and just be honest and admit that it is a religion.

    Perhaps reason's cartoon views on trade are not the full picture? God forbid we look at the facts and consider that question. No, better to yell TRUMP and TRADE WAR!!. Doing that is safe and ensures no one's deeply held beliefs and "meh principles" don't get bruised. Sacred cows are sacred for a reason I guess.

  • Remember to keep it all polit||

    Maybe you should consider that very little in an economy is instantaneous. The tariffs, for instance, are publicized well ahead of time, so everyone stuffs their order list to get goods before the prices go up. That gives a temporary boost to the economy, but once the tariffs hit, orders drop correspondingly.

    This is pretty basic stuff. You should pay attention.

  • John||

    Except that that wouldn't cause demand to rise now. It would cause it to rise right before and maybe a little after the tarriffs as business fufilled orders that were paid for before the tarriffs.

    This is very basic stuff. So, you should stop insulting my intelligence with shit you are pulling out of your ass. At least try to know enough about this to be dangerous. You are not even that far yet.

  • Remember to keep it all polit||

    How could anyone insult your intelligence?!?

  • John||

    Since you seem to have no intelligence, it makes sense you would have no idea how to insult it. Do you have anything of substance to say or are you just another angry dumb ass?

  • Mark Question||

    It's so refreshing to see libertarians finally start to see the folly of free trade, and the danger of having anything not American in its borders.

    There's hope for you yet. Now you just need to jettison this whole idea that we can have a free society (we can't unless you want the Left doing what it does best, fucking up everything).

  • John||

    It is sadly not refreshing to see we have attracted another leftist troll to the site.

  • John||

    My apologies. I thought you were being sarcastic. I am the worst about that.

  • Nardz||

    It is, but its pretty good at it.

  • SQRLSY One||

    "Trump Shits Bed, Provides Jobs For Laundry Workers"

    Trump burns down our houses and hotels; provides opportunities for workers to provide NEW, MORE ENERGY EFFICIENT houses and hotels! "Cash for clunkers" was for novices... Trump trumps cash for clunkers! What will Trump call it? Cashes for ashes?

  • OpenBordersLiberal-tarian||

    Look, the economy is in the toilet, and it's all Drumpf's fault. If you paid more attention to Palin's Buttplug posts, you'd know this.

    #DrumpfRecession

  • John||

    +1

  • Mark Question||

    You know what you're biggest problem is? You and people like you are soft and entitled. What this country needs is a reminder in what hardship, real hardship, looks like. I guarantee you if by some weird cosmic event the United States and the rest of the world gets back to the stone age (say all electrical devices cease functioning or something), the Left would vanish overnight. It can only thrive in a culture of fat, overfed, soft, lazy, prosperous people.

    Don't you get it? Our freedoms are being endangered by our prosperity. Which would you rather have?

  • SQRLSY One||

    That's a hell of a question, actually. I hardly know where to start... But lemme take a whack at it, I hope it is not too whack!

    Freedom comes first, and then prosperity follows. In more detail, freedom ACCOMPANIED BY RESPONSIBILITY comes first! My libertarian streak is simple; it derives from the Golden Rule. I don't wan't every bum under the bridge, every drunk at the bar, and every self-righteous, sanctimonious asshole (often empowered by Government Almighty) telling me what to do, and then telling me HOW MUCH MORE righteous they are, than I am! Since I don't want others to do that to me, I try not to do that to others.

    So the two of them, freedoms (and the peace engendered by classical-liberal freedoms) and prosperity go together, and I do not know how to separate them, one from the other.

    Is that a good start? Where to go from here?

    I don't want to lust after hardships to teach us a lesson, though... SURELY there must be a better way?!?!

  • Mark Question||

    Freedom + Prosperity = left wing politics = misery for Americans.

    Very simple. We either need to go back to the caves (which is not possible) or give up Freedom.

    I'll wait while your tiny brain tries to parse this elementary and correct formula.

  • SQRLSY One||

    "Freedom + Prosperity = left wing politics = misery for Americans."

    I like both freedom AND prosperity! Poverty = misery, and is NOT a virtue!

    Suffering = poverty, poverty = suffering, and both are to be avoided! When I have a headache, I take an aspirin already! Per M. Scott Peck! Needless (show-off-ish) suffering is NOT a virtue! Per Martin Luther King Jr., un-earned suffering on the behalf of the unjustly treated others IS redemptive! It's complicated!

    But putting needless suffering up on a pedestal a HUGE mistake! It is the route of the Evil One! (Now I sound like a whack job, but there it is).

  • Chipper Morning Baculum||

    John needs to read up on the broken windows policy. That's what this trade war is, a broken window.

  • John||

    No I don't. You need to stop using words and concepts you don't understand. The two things are nothing alike. Go read a book and try understanding it this time

  • sarcasmic||

    It is exactly like the broken window fallacy.

    In this case the taxes on the imported steel are the broken window. These taxes make imports more expensive, which encourage the purchase of domestic steel. That money that goes to pay for the higher priced domestic steel is the money that was used to pay for the broken window. It's opportunity cost. Sure we see lots of economic activity because of people shifting from foreign to domestic steel, but that's the same as when the baker generates economic activity by replacing the window. He could have used the money for something else, and kept the window. So wealth was lost. In this case the steel users could have purchased the cheaper steel and then used that money for something else. Opportunity cost. Seen and unseen. It's exactly the same thing.

  • SQRLSY One||

    John is ignoring you. Honest thinking hurts his brain. John can NOT hear you! Na-na-na-blah-blah-blah!

  • Tony||

    "Trump can literally do nothing wrong except sometimes he goes a bit far on Twitter."

    --90% of the commenters here

  • Fist of Etiquette||

    I don't care what you say, his tweets do sometimes get carried away.

  • ||

    He sometimes went too far before Twitter too.

  • John||

    It is good to know that you are as ignorant of trade policy as you are of every other topic.

  • Tony||

    What I do know is that if Obama had done literally every single thing Trump has done on trade or probably anything else, you'd be shitting your pants in rage about it all. You don't have beliefs, John. You barely have thoughts.

  • John||

    All you know is how to rage about Trump and Obama. We know that Tony. That is what I said. Now go away and let the rest of us have a serious conversation for once.

  • Tony||

    You were seriously pro-tariff before Trump came along? Did he get the idea from you perchance?

  • TuIpa||

    Why are you asking people questions when your response will be "you're lying" if you don't like the answer.

  • Dillinger||

    trap!

  • Peter Duncan||

    So, you were in favor of Obama's tariff on imported tires or were you outraged??

    John, you are a lying, piece of shit Progressive.

  • TuIpa||

    "What I do know is that if Obama"

    OMFG suck his dick more.

  • SQRLSY One||

    Here comes Tulpa The Magnificent, enlightening us all with His Deep Intellectual Discourses again! All Hail Tulpa!

  • TuIpa||

    OMFG suck my dick more.

    How have you let me become such an important part of your life.

  • SQRLSY One||

    You miss my point as usual, you totally self-centered narcissist you! Go read http://reason.com/archives/201.....tu#comment ... I am not the only one who wishes you'd either grow up, or blow away in the wind, like the insignificant dust that you are. Look for search-string "griefer"; unique in the whole thing... And read all around that central search-string.

    ...And you will see that you regularly post worthless shit that causes us thoughtful people to NOT want to tell ANYONE to come to reason.com, so as to see rational and thoughtful libertarian, pro-freedom discourse! Because we have to wade through endless course grade-school, empty-headed insults coming from self-absorbed duh-heads like you!

    I wish I could point to a grade-school-insults site for you to go to, but I don't know of one. It probably wouldn't help, since you enjoy inflicting pain and suffering on other people. Get some help, you evil, self-centered egomaniac!

  • Mark Question||

    How dare you. Tulpa is possibly the most patriotic commentator here, you progtard human turd. When he jerks off he literally jizzes selfless patriotism.

    All you jizz is love of liberty, foreigners, and money.

  • TuIpa||

    And yet, it is you who follow me around. Pathetically.

  • TuIpa||

    "I am not the only one who wishes"

    See? You even have a comment bookmarked. How fucking sad is that? That you care about that, and think I wouldn't troll you harder because I got to you. That you and who knows how many other losers want something that will never happen is WHAT I WANT.

    How fucking stupid do you have to be to STILL not get that and keep tugging at my pantleg?

  • TuIpa||

    Nah, the US is only OK. Sorry to spoil your dumb fake post.

  • SQRLSY One||

    Says the one with a fake brain.

  • TuIpa||

    As you continue to slurp me.

  • Mark Question||

    If Obama did this it would be to tax Americans, not protect jobs. You got to look at how right wing they are. The more right wing, the better they are for America. That's why it would have been awful under Obama.

  • ||

    What I do know is that if Obama had done literally every single thing Trump has done on trade or probably anything else, you'd be shitting your pants in rage about it all. You don't have beliefs, John. You barely have thoughts.

    Are we talking a hypothetical third term Obama who suffered a stroke or something and decided to dismantle his previous 8 yrs. of work or a hypothetical first term Obama who never did any of it in the first place?

    Hypothetical third term Obama wouldn't be too bad and, you're right, I would be yelling about hypothetical first term Obama. But it wouldn't exactly be my (I mean hypothetical third term universe's me) fault because I wouldn't know how much worse he could've been.

  • Mark Question||

    That's quite correct. Trump can literally do nothing wrong.

    This is a fact. That it is a fact explains your hysteria, progtard scum.

    I hope one day the government comes to it's senses about people like you.You're very existence is toxic and puts American freedom and prosperity in jeopardy.

  • efreet||

    So Reason is taking up the cause of rent-seekers now.

  • TuIpa||

    "two pick-up trucks, the Ford Ranger and the Ford Bronco, "

    Suddenly Eric's posts make sense.

  • John||

    Ten bucks says Eric doesn't have a drivers' license and has never ridden in a pickup truck much less driven one.

  • TuIpa||

    No bet.

  • Unicorn Abattoir||

    Actually the Bronco was build off the F-series pickup frame, and initially came in a pickup option.

    /Pretending to have knowledge and not merely grabbing info from Wikipedia

  • TuIpa||

    Which ACTUALLY changeS nothing, as the convertible version ( what it was called by ford) hasn't been manufactured in decades.

    I am well aware of the origins of the Bronco. The Jeep Liberty is based on the Fiat 500, but it is still an SUV.

    Thanks for trying tho.

  • TuIpa||

    And as an aside, I LOVE that you started your post with "Actually" when you weren't ACTUALLY correcting anything.

  • TuIpa||

    "The Ford Bronco is a model line of SUVs that were manufactured and marketed by Ford from 1966 to 1996. After the first generation of the Bronco was introduced as a competitor to compact SUVs (including the Jeep CJ-5 and International Harvester Scout), the succeeding four generations of the Bronco were full-size SUVs, competing against the Chevrolet K5 Blazer and Dodge Ramcharger. The first Bronco was assembled using its own chassis"

    So. ACTUALLY, I was right.

  • Unicorn Abattoir||

    "The first Bronco was assembled using its own chassis, while the full-size Bronco was derived from the Ford F-Series (F-100, later F-150) pickup truck."

    Let's not leave that part out.

  • TuIpa||

    Why? It doesn't change anything. You're obviously not a car guy so you're missing the point. Car manufacturers were very flexible with the use of their chassis, and the origing of said chassis means LITERALLY NOTHING.

    The Bronco, even on the F-100 chassis was never a pickup truck.

    Which was the entire reason I gave you the Jeep Liberty example.

    I was right.

  • TuIpa||

    The Honda Ridgeline. I'll wait.

  • Unicorn Abattoir||

    El Camino - car or truck?

  • TuIpa||

    You seem to be misunderstanding what is happening.

    The answer is "The Bronco was never a pickup"

  • TuIpa||

    "El Camino - car or truck?"

    The fact that you have to ask proves it isn't as simple as "THE CHASSIS!" which....makea me right. Again.

  • Dillinger||

    trar

  • TuIpa||

    I don't think he even knows what he's debating anymore. The original Dogde Caravan waa built on the K car chassis but only a total ignoramus would say that makes it a car.

    It makes it SHITTY, but not a car.

  • Fist of Etiquette||

    Less than a year later, the Trump administration thanked Ford by announcing plans to impose 10 percent tariffs on imported aluminum and 25 percent tariffs on imported steel...

    Like they still bake metal into modern automobiles.

  • Unicorn Abattoir||

    Alt text - Grab them by the CAT.

  • Fist of Etiquette||

    I don't get it.

  • TuIpa||

    I am also married.

  • ||

    Heh, Cummins makes the Cat purr.

  • Dillinger||

    Ford does fine.

  • John||

    Heavy machinery builder Caterpillar estimated this week that tariffs added $40 million to its raw materials cost, and announced that it would have to increase prices next year to keep up. The news caused the company's stock to drop sharply Tuesday, and it has now lost about 30 percent of its value since January.

    Catapillar is a multibillion company. The idea that its stock fell 30% because of $40 million in increased materials' costs is absurd. It is something so stupid appearently only a 20 something liberal arts major working for reason could believe it. Catapillar stock has fallen for a lot of reasons but mostly because its stock has been cyclical for about 40 years now and is just on its downward trend.

    http://seekingalpha.com/articl.....cope=email profile https://www.googleapis.com/auth/userinfo.email https://www.googleapis.com/auth/userinfo.profile

    Reason seems incapable of being honest about anything involving trade or immigration.

  • Unicorn Abattoir||

    I think this has more to do with market psychology than math.

  • John||

    Stock prices usually do. These price increases need to be put into perspective. Right now US rolled steel is $941 per tonne. Chinese Steel is around $550 or nearly $400 less. That sounds like a lot. But it is per tonne of steal. It takes right about a tonne of steel to make a car. So, if you assume that this is preventing American car makers from buying anything but American steel, that means it is adding about $400 to the price of a new car. Since the average price of a new car is around $35,000, these tarriffs are increasing the price of cars by about 1.1%. And that is assuming the entire cost can be passed onto consumers, which it can't. It is not insignificant, but hardly the TRADE WAR apocolypse Reason was hoping for.

  • Ken Shultz||

    It's a cyclical industry like aircraft. In cyclical industries low p/e is associated with the expectations of a market top. My guess is that this is about the economy of China slowing down. Haven't they been buying construction equipment like crazy for 20 years? That party may not be raging so hearty in the immediate future. Internal demand ain't what it used to be.

  • John||

    That is probably a good guess. Whatever it is, four thousand dollars in extra steel cost on a 300,000 piece of equpment isn't the reason.

  • Remember to keep it all polit||

    I thought you were one of those arguing that the stock market reality puts the lie to people who say tariffs hurt the economy.

  • John||

    You thought wrong. I would never make such a stupid claim. The stock market is the product of a ton of factors and only correlated to the general health of the economy in very tangial ways.

  • Mark Question||

    You mean Libertarians seem incapable of being honest about anything involving trade or immigration.

    Fixed that for you.

    Freedom is slavery

  • jasno||

    If they raise prices, their sales might drop in a non-linear fashion. There may also be other factors related to the 'trade war' which cause sales to fall, such as reduced sales to China and increased competition from Chinese equipment manufacturers.

    The market is hysterical, but it is also sometimes driven by analysts who are smarter than either of us.

    FWIW, seekingalpha is crap. You're basically linking to someone's blog ramblings.

  • Juice||

    What the hell is Trump saying here with his "little boats" comments?

    Twatter

    Is he really insulting civilian rescue efforts like the Cajun Navy? Pretty dumb move if that's what he's doing.

  • TuIpa||

    Get a hobby.

  • Juice||

    Can't argue with that, I guess.

  • Ken Shultz||

    Make the case for trade in terms of people's best interests or you won't change the minds of anyone who isn't already convinced.

    People who support trade barriers want companies to hire American even if it hurts their profits.

    Feel it. Know it. Live it.

  • John||

    If you asked the public if they were willing to pay $400 more for a new car in exchange for the US having a viable steel industry, I bet the answer would be overwhelmingly yes. Reason needs to recognize that fact and at least try to come up with a reasonable response to it. If they continue to just scream TRADE WAR while making exagerated claims about the harms of these tarriffs, they are not going to convince anyone of anything.

  • Ken Shultz||

    Rightly or wrongly, few are worried if hiring American means some shareholders miss out on some dividends.

  • John||

    Perhaps tarriffs are not the end of the world? Maybe you can have a healthy economy with some measure of protectionism. Reason refuses to even contemplate that possibility much less give a rational argument why it isn't true.

  • Ken Shultz||

    I'm against them, but nobody's about to have their minds changed like this.

  • John||

    I am against them if they are taken to the extreme. I am, however, more undecided when it comes to moderate measures like this. For the longest time I was a committed free trader and against all of them. But, the last ten years showed that the results of free trade were not what its advocates thought they would be. People who lost their jobs to trade were supposed to be reabsorbed into the economy with lower paying jobs but still be better off thanks to all of the cheap consumer goods provided by trade. That didn't happen. People were not absorbed back into the economy in jobs that were even close to their old wages. Middle class wages have been stagnant for decades. We basically flipped our economy from a manufacturing one to a service one. That was great for people who were in the service sector and who were consumers but not so good for everyone else.

    The free trade advocates assumed labor was totally fungible and killing entire industries would be no big deal because the people in them would get jobs in new industries. That was an absurd dream. Not everyone is cut out to be a lawyer or finance guy or a computer guy or a free lance graphic desinger. We never saw the benefits claimed and the price has been enormous.

  • Mark Question||

    Finally, somebody who recognizes that workers are not consumers and consumers are not workers, and benefits to one do not accrue benefits to another.

    Now you guys just need to chuck out your obsession with classical liberalism, get behind the idea that it will take radical, violent, coercive measures to stop the Left, and you are on your way to the free (well, least unfree) society you guys keep insisting can be made possible.

    Libertarians are finally growing a brain. Once it's finished you'll be a fascist like me.

  • Mark Question||

    Finally, somebody who recognizes that workers are not consumers and consumers are not workers, and benefits to one do not accrue benefits to another.

    Now you guys just need to chuck out your obsession with classical liberalism, get behind the idea that it will take radical, violent, coercive measures to stop the Left, and you are on your way to the free (well, least unfree) society you guys keep insisting can be made possible.

    Libertarians are finally growing a brain. Once it's finished you'll be a fascist like me.

  • Ken Shultz||

    I wouldn't argue that the same people who are displaced by trade or technology will be better off as a result. Some people really are better off when they're getting paid $65 an hour to screw in lug nuts all day. Trade or technology displaces them, and they probably won't ever get paid that much to do so little ever again. They're not net better off because now they can save a few bucks on their next new car.

    Consumers as a group are better off without market distortions. Less distortion is generally better for the economy--over time. There is a lag in inefficiencies as they stack up. Over time, these market distortions will have adverse effects. When's the last time inflation was a serious problem? 1991? That was before China joined the WTO.

    We are still early in the inefficiency stacking cycle. Workers may not pay the price until Trump is out of office, but there are adverse consequences to artificial market distortions--as sure as the sun will rise tomorrow.

  • Ken Shultz||

    Maybe think of it this way: Is the Fed raising rates to match double digit inflation good for the economy in the short term?

    The correct answer is no.

    If it doesn't do the short term painful thing though, we're gonna wish it had.

    That's what we're talking about with increasing employment through market barriers. It feels good for a little while. Eventually, it causes big problems that can't go away until those market barriers are taken down.

  • Mark Question||

    Oh what a load of neoliberal horse shit.

    "Market distortions" are just buzzwords for "things plutocrats don't like."

    There is only one consideration that matters, and that is the well being of the American people.

    That well being is being sacrificed on the alter of "free trade", cuz God forbid we should pay a fair price for something instead of letting Chinese goods and Mexican people infest us like the invasive parasites that they are.

    That you would suggest that anything bad at all can come from these tariffs exposes your inner Leftism. So fuck off and go back to the indoctrination ca--excuse me, university, talk a lot of sophisticated nonsense with the econ professors (blah blah Market Distortion blah blah inefficiency stacking cycle, more made up words), and let the rest of us continue building the Great Patriotic Utopia.

  • Ken Shultz||

    "Market distortions" are just buzzwords for "things plutocrats don't like."

    Your denial of basic economics is appalling.

    It's like discussing physics with someone who can't count to ten.

  • Ken Shultz||

    P.S. is there anything more retarded than referring to markets free of distortions as what "plutocrats" want?

    "Plutocrats" want rent-seeking. They want their preferred distortions.

    Markets free from such distortions is the opposite of plutocrats--markets free from such distortions is the opposite of central planning.

  • Mark Question||

    Funny you should say basic economics, because there's only one basic economic principle to keep in mind: if it puts money in the pockets of Americans, it's good. Otherwise, it's not good. Show me someone trying to explain it's more then that and I'll show you an academic spouting sophisticated nonsense to justify the increased relevancy of academia.

    And I think it's adorable how you libertarians keep insisting that the last thing plutocrats want is unrestricted freedom of action.

    "Hooreay! Government is raising my taxes, telling me what stuff to use in my product, telling me who I can buy raw materials from, how much I can pay or not pay my employees!" Yeah, sure, that's the clarion cry of the businessman all right.

  • Dillinger||

    >>>It's like discussing physics with someone who can't count to ten.

    awesome.

  • VinniUSMC||

    "For the longest time I was a committed free trader and against all of them. But, the last ten years showed that the results of free trade were not what its advocates thought they would be"

    Since when have we had free trade in the past 10 years? Just because they named it "free trade agreement" doesn't mean it was free trade.

    Hell, we've never had anything remotely resembling free trade with China.

  • Mark Question||

    Democracy is stupid. Just because an overwhelming majority of Americans support a thing doesn't mean it's right. Remember, the overwhelming majority of Americans support absurd shit like "Pathway to Citizenship" and letting people fry their brains with doobies, too, (not to mention being okay with people having buttsex in the privacy of their homes).

    That said, they happen to be right on this case, just be careful about using silly "b-b-but the Majority likes it" type arguments.

  • TuIpa||

    When was your head injury?

  • jasno||

    Why does America need a steel industry if we can purchase steel at a comparative advantage from our trading partners?

    I seem to remember at one point in the last decade you were a (authoritarian leaning) libertarian... It's almost as if some big event in the last couple years pushed you over the edge.

  • Remember to keep it all polit||

    0-D checkers FTW.

  • Bubba Jones||

    Other major automakers say rising commodity costs are not much of a problem.

    http://www.reuters.com/article.....SKBN1FD1WI

  • John||

    You mean Ford might be blaiming management or marketing failures on rising commodities costs that are out of its control? No way.

  • Diane Reynolds (Paul.)||

    Trump must be totally locking in the Union vote.

  • John||

    The proof is in the results. Unless and until unemployment or inflation starts to rise or the economy stagnates, Reasons claims about the evil TRADE WAR are just bullshit. Maybe the economy is doing so well in spite of all of this. That is certainly possible. But even if it is, that still puts lie to Reason's claim that these things were going to cause grave damage to the economy. At some point, however, you have to start to at least consider the possibility that the economy is doing well because of this and reason's beliefs on free trade are just wrong. I don't know when that point is, but the longer the economy continues to grow, the more compelling the case for it becomes.

  • Mark Question||

    Libertarians against free trade! Come on guys, you're almost there!

  • Libertymike||

    But, libertarians are not uniformly against Alexander Herzen.

  • Mark Question||

    Of course they aren't. They keep insisting that there must be some virtue to leftism somewhere.

    If they got their heads out of the clouds they'd realize that liberty is impossible, not unless you want a Left taking advantage of that liberty to take it away from people they don't like.

    Hitler had the right idea. Throw them all in jail.

  • Rev. Arthur L. Kirkland||

    Laid-off Ford workers should eat their Trump hats. I hope those hats are tasty and nutritious.

    Every tariff-related loss sustained by Ford executives who supported Trump, and by the company they operate, is a vindication of justice and accountability.

  • John||

    Yeah, it is all about the tarrifs. That is why every other car maker says the tarriffs are not hurting them. I guess they just have false consciousness.

    You do such a great service coming on here every day and reminding all of us that yes, Progressives really are as stupid as we think they are.

  • Ken Shultz||

    One of the reasons the left hates Trump is because they have nothing to complain about in terms of his economic policy.

    Trump is actually doing on trade what the left has been promising to do for generations.

    I oppose Trump's trade policy for the same reasons I opposed it when the Democrats were promising to do the same thing.

    I suppose that's why the left hates real free market capitalists, too. Our existence exposes them as frauds.

  • Mark Question||

    I literally cannot parse these sentences.

    You're trying to tell us that these patriotic policies are Democratic policies? Literally impossible. That's like saying the Bolsheviks wanted to murder all the Jews or that Nazis were fighting for gay marriage.

  • TuIpa||

    "I literally cannot parse these sentences."

    Literally no one is surprised about that based on your posts.

  • Ken Shultz||

    You have a hard time understanding that the AFL-CIO and UAW were anti-free trade, or you have a hard time understanding that the AFL-CIO and UAW supported the Democrats?

    Tulpa is right. You're easily mystified.

  • Bronze Khopesh||

    Anytime a tax goes up or a tax goes down, a new regulation is introduced or a regulation is struck from the books, business processes from, financing to locations to supply-chains are going to change. Sometimes even entire business models have to change.

    And it's really easy to cherry-pick from that melange of changes things that look bad.

    Well, this process of regulatory and tax regime change has been going on for 1000s of years now and it's not going to stop. There never has been, nor will there ever be a perfectly efficient economy. It's not even ever going to be close to perfect.

    We will never know what the actual true cost or price of anything is or should be. In fact everything you own that is more than some rock you picked up out of a field has had it's cost or price distorted in an uncountable number of ways including by political decisions that were made 1000s of years ago.

    To build a city here, or there. To fight this war, or not. To assassinate that tyrant or wait him out. And so on. All those decisions are reflected in the cost and price of everything. Of course the closer we get to our own time the more the effect.

    As long as there have been states there has never been a free-market and there never will be because it's just not in the interest of the rulers that it be so.

    So pointing out some changes and fulminating about them as if it's the end of commerce is ridiculous.

  • Bronze Khopesh||

    Because you can literally go to any state in any year and complain about those changes.

    That's not to say that some things should not be fought. Nationalization of industries for example. Anything other than best-practices regulations (and even many, if not most, of those unjustly target smaller, less politically-connected companies). Minimum wage laws. Confiscatory taxes (any taxes on businesses generally are pointless as all money becomes personal income at some point).

    And there's a chance that protectionism works to increase real wages and lower unemployment even if it causes slightly higher prices. If so, what is there to complain about?

    If people are becoming better off and they can see it happening then that leads to social stability which leads to political stability. And isn't that worth frustrating a certain number of people who would rather have more trading options available to them?

  • Ken Shultz||

    "And isn't that worth frustrating a certain number of people who would rather have more trading options available to them?"

    It's important to remember that market forces are people making choices. Any claim that you're inflicting what people want on the market is absurd for that reason. You do not know what people want better than they do. You're just inflicting your own preferences on other people.

  • Bronze Khopesh||

    You're just inflicting your own preferences on other people.

    Well, yes.

    I'm a statist and am perfectly willing to do that while recognizing that they're going to try to do it to me.

    I value social and political stability and I see protectionism (in a market economy) as a strategy to achieve those things. So I'm not bothered by the fact that some folks will have their options curtailed.

  • chemjeff radical individualist||

    So I'm not bothered by the fact that some folks will have their options curtailed.

    Until the collective decides to turn on you, that is.

  • Bronze Khopesh||

    This is a possibility under any form of government or economic system.

    Though much more difficult in a nominally representative market economy.

    Of course I don't know what exactly you mean by "collective" and "turns against". How many people are we talking about? How much power do they have? What will their actions look like?

  • Ken Shultz||

    Why all the bullshit about how "people are better off" when it's really just about you imposing your personal preferences on them then? Or are you just incapable of keeping track of your garbage from one post to another?

    "I value social and political stability and I see protectionism (in a market economy) as a strategy to achieve those things."

    Using the coercive power of the state to inflict your qualitative preferences on other people does lead to social and political stability.

    In addition to being ignorant of economics (and proud of it), I suppose you're also proud of being ignorant of history? Why would anyone bother conversing with someone who's so proud of being ignorant?

    What, are you in a union or something? The only people I've seen both this ignorant and this proud of being ignorant were all in a union. It's a leech mentality.

  • Ken Shultz||

    "Using the coercive power of the state to inflict your qualitative preferences on other people does [not] lead to social and political stability."

    Fixed!

  • sarcasmic||

    This is exactly like Bastiat's Broken Window fallacy. In that story someone breaks a window, so the person with the broken window must replace it. He pays the glazier, who then buys a suit (or something, details don't matter), the tailor buys a blowjob or whatever, and so on and so forth. Economic activity happens because of the broken window. The guy who broke the window is proud of himself because of all the buying and selling he initiated. He believes everyone is richer as a result. Except that the guy with the broken window could have bought something else with that money, generated the same economic activity, and still had the window. Wealth was lost.

    What was seen was the activity caused by the broken window. What was not seen was what would have happened had that window not been broken.

    The money that buyers of imported steel are now using to buy domestic steel could have been used to buy something else. Now instead of having the steel and something else, the only have the steel. We see the economic activity from buying domestic steel. We don't see what would have happened had that money been spent one something else.

    Opportunity cost.

  • sarcasmic||

    The extra money that buyers of imported steel are now using to buy domestic steel

  • Bronze Khopesh||

    Short-term, maybe.

    Long-term it's to encourage steel manufacturing here, inside the tariff wall. And from there to either become or increase the exports of steel (or whatever other product we could be talking about).

    This will directly create good paying jobs, leading to the indirect creation of many of other jobs. This will lead to a more content population. Thus less social and political upheaval.

    It may even make steel (or whatever other thing) cheaper!

  • sarcasmic||

    Jobs are a cost, not a benefit. Jobs producing things that can be acquired more cheaply by imports are waste. Comparative advantage. Look it up.

  • Bronze Khopesh||

    I know the theory. It's a thought experiment, not something to base policy on.

    It works with agriculture. If you can't grow certain things, there's no point in trying. Also in some luxury goods that get their cachet from where or by whom they are manufactured.

    But for industrial policy as developed by a state, it doesn't work at all. It's vastly better for a state to be able to manufacture what it needs, and the higher value things the better than to rely on some other provider who could turn into a foe or for some reason become unable to export to you.

    Also by encouraging high-skill production that leads to a virtuous cycle of other developments because your people are gaining skills and that leads to innovations the benefits of which your nation gets first.

    To do otherwise is to encourage a stasis in your industries and that leads to nowhere good, regardless of how much money you are (or think you are) saving by importing instead of manufacturing.

    Comparative advantage is like telling some young kid that because he's young and doesn't need much money as he lives at home he should never develop his skills to try to climb up the skill ladder and get paid more. You keep your rates cheap and you'll always be employed! After all your cheap rates are your comparative advantage. Twenty years later and where is he?

    Of course a country can't make everything, so it should concentrate on the highest-skill, highest value items and work down from there.

  • sarcasmic||

    I've seen your argument refuted time after time. I choose not to engage because I'm not an economics professor. However I'm sure that if you sent that comment to Don Boudreaux he might help you understand where you are wrong.

  • sarcasmic||

    I SF'd that link.

  • sarcasmic||

  • Bronze Khopesh||

    "Refuted."

    Sure, by free-traders.

    Protectionism/mercantilism has a longer and more successful history than free-trading. The argument has been going on for a long time. On my side we have the benefit that our arguments fit in with nicely human nature. Yours, not so much.

    Here's a link for you!

    Here's another link for you!

  • sarcasmic||

    Protectionism/mercantilism has a longer and more successful history than free-trading.

    Longer, yes. Successful, not so much.

    Sorry but I ain't buying what you're selling.

  • vek||

    Well, actually, all the worlds largest economies became such during periods of being "protectionists" so I dunno about that.

    I think the best argument one can make for sure is that a nation doesn't NEED to be free trade to be successful. It might be more successful if it is, but it isn't required.

  • sarcasmic||

    If jobs were a benefit, then we should dig ditches with spoons. That would create jobs.

  • vek||

    Now, another thing that you absolutists never like to talk about is this:

    Let us say that you save 10% by importing widgets. That's good right! WIN! You can now spend 10% more money on other things!

    What you forget to note is that 90% of your money is now owned by a foreigner. That is net worth that is no longer owned by one of your citizens, who would have got it via wages or whatever to make the widget.

    In the olden days when we had REAL money, that was probably never going to return home. Today with fiat, it usually will... BUT it is still owned by a foreigner, not a citizen.

    You DO have 10% more to spend on other things, but that 10% can never actually create enough additional wealth to make up for the loss of the other 90% that is owned by a foreigner now. Even if that foreigner invests it back into your economy, they still OWN those new assets, or perhaps the sky scraper they bought... They will also own all the future profits from those assets.

    So the net worth of your nation is actually LOWER than it would have been if you'd simply paid 10% more to make it domestically. Basic math and logic here.

  • vek||

    Not to mention it will not have taxes paid on it either, which puts more burden on the remaining tax payers. It will also not be recirculated around the domestic economy as much as if it had been paid out in wages domestically, or paid to a US supplier of components, etc.

    The moral of the story is, if you can import an item and shave 75% off the costs of making it domestically, DO IT! You're definitely better off. However if it is a minimal savings, the nation will in fact not be better off. This is the case with a lot more goods than people like to think.

    If you think WHO owns assets is of no importance, as I have heard others say before... Then why don't you just turn the deed to your house over to some random guy, and pay him rent instead of paying the bank the mortgage directly. Ohhhhh, because who OWNS things DOES matter. I see.

    I don't understand why people have to be so black and white with so many issues. You can think free trade overall is better, while still accepting that many of the trades are not in fact beneficial for the nations economy overall. Or you can simply stick to the moral argument that it is somebodies right to do the trade, even if it is worse for the economy. You don't have to bury your head in the sand, ignore math, and pretend every trade MUST actually be better for the economy overall...

  • loveconstitution1789||

    Managed trade costs. All the costs that consumers and businesses lost wealth on because of the status quo.

    Thanks Trump for trying to get our trading partners to lower trade restrictions.

  • sarcasmic||

    Do you ever get tired of waving sticks at straw men?

  • Jane @ Modern Housewives||

    I don't know why Americans still allow that person to stay in charge of the country. In two short years he managed to destroy the healthcare system, openly tries to get you in conflict with some of the most powerful countries in the world, offends most of the population in some way, called some of the most authoritative media channels fake just because they said the truth about him, showed no sympathy for victims of all kinds of hurricanes and other disasters, and he openly supports rapists and is probably one himself. For a country that prides itself with its freedom, justice, liberty and all that, you definitely have a high tolerance for bullshit.

  • Knutsack||

    Is this OBL?

  • VinniUSMC||

    "... the one-and-only goal of tariffs is to increase the price of imported goods in order to give domestic producers a competitive advantage. "

    ...

    /sigh

    Is there a boogey monster in your closet too?

  • vek||

    Honest Question:

    How much as Ford SAVED because he lowered their taxes, and removed onerous fuel economy regulations?

    I suspect it will be more than $1 billion. So, while they might have got those advances without the extra costs and been better off... Overall they're probably still going to do better than the status quo 3 years ago. So there's probably no need to assume the apocalypse is just around the corner.

    These things shift costs, some win, and some lose. That's how ALL market distortions tend to work. This tiny couple billion dollar distortion to markets will have a tiny couple billion dollar amount of "damage" done, which is partially offset by more money staying in the US and being paid out in wages here. They may well HAVE to expand production of steel too.

    So if the top line figure is 25 billion in costs, and it generates an extra 20 billion in "benefits," the net cost would be 5 billion. It ain't nickels and dimes, but compared to other regulatory burdens and taxes it kind of doesn't even matter.

    Just a sober opinion here amongst all the The Sky Is Falling stuff.

GET REASON MAGAZINE

Get Reason's print or digital edition before it’s posted online