If an organization calls itself “United”, assume it isn’t. There is a splinter somewhere.
Tariffs are taxes. They make the price of goods go up. The producers and importers don’t pay the tax; we do.
“Tool” is right. My wife is unfortunately aligned against Trump and keeps me well-informed on whatever gets her goat on any particular day.
One evening she started berating Trump for the effects of tariffs and I responded that it was just a negotiating strategy. A “tool”.
Fortunately we don’t have a couch, as she was well-versed that evening in liberal logic on tariffs et al and I didn’t feel like sleeping on the porch or having to hide my weapons...
https://www.thoughtco.com/the-economic-effect-of-tariffs-1146368
Study after study has shown that tariffs cause reduced economic growth to the country imposing them. A few of examples:
The essay on Free Trade at The Concise Encyclopedia of Economics looks at the issue of international trade policy. In the essay, Alan Blinder states that “one study estimated that in 1984 U.S. consumers paid $42,000 annually for each textile job that was preserved by import quotas, a sum that greatly exceeded the average earnings of a textile worker. That same study estimated that restricting foreign imports cost $105,000 annually for each automobile worker’s job that was saved, $420,000 for each job in TV manufacturing, and $750,000 for every job saved in the steel industry.”
In the year 2000 President Bush raised tariffs on imported steel goods between 8 and 30 percent. The Mackinac Center for Public Policy cites a study which indicates that the tariff will reduce U.S. national income by between 0.5 to 1.4 billion dollars. The study estimates that less than 10,000 jobs in the steel industry will be saved by the measure at a cost of over $400,000 per job saved. For every job saved by this measure, 8 will be lost.
The cost of protecting these jobs is not unique to the steel industry or to the United States. The National Center For Policy Analysis estimates that in 1994 tariffs cost the U.S. economy 32.3 billion dollars or $170,000 for every job saved. Tariffs in Europe cost European consumers $70,000 per job saved while Japanese consumers lost $600,000 per job saved through Japanese tariffs.
These studies, like many others, indicate that tariffs do more harm than good.
https://www.freerepublic.com/focus/bloggers/3662335/posts?page=1
The effect of tariffs and trade barriers on businesses, consumers and the government shifts over time. In the short run, higher prices for goods can reduce consumption by individual consumers and by businesses. During this period, some businesses will profit, and the government will see an increase in revenue from duties. In the long term, these businesses may see a decline in efficiency due to a lack of competition, and may also see a reduction in profits due to the emergence of substitutes for their products. For the government, the long-term effect of subsidies is an increase in the demand for public services, since increased prices, especially in foodstuffs, leave less disposable income. (For related reading, check out In Praise Of Trade Deficits.)
Tariffs increase the prices of imported goods. Because of this, domestic producers are not forced to reduce their prices from increased competition, and domestic consumers are left paying higher prices as a result. Tariffs also reduce efficiencies by allowing companies that would not exist in a more competitive market to remain open.
I bet you have a major trade deficit with your grocery store. I bet you buy a lot more from them than they buy from you.
From my alma mater, from a paper I wrote for when I was there:
http://hillsdalecollegian.com/2018/02/newsprint-tariffs-hurt-local-journalism/
Upon a complaint from a single paper mill in Washington state, the U.S. Commerce Department placed tariffs of up to 10 percent on Canadian paper last month. In choosing to protect one industry over another, the U.S. government is smacking the already struggling newspaper market, as 90 percent of all newsprint in the Northeast and Midwest come from Canada, according to a study cited by CNN.
Newsprint costs for local newspapers, such as The Collegian and The Hillsdale Daily News, have increased between 13 and 15 percent as a result of the tariff. Matt Davison, publisher and president of the Idaho Press-Tribune, told Bloomberg News he believes these tariffs could have a “catastrophic impact on community journalism.”
In a bipartisan letter published after the announcement of the tariff, U.S. senators argued that Canadian paper helps support more than 600,000 U.S. jobs in newspaper publishing and commercial printing industries alone. The impact, however, will be more widespread than this.
Local news plays a vital role in the community. Stories that may not garner any regional or national attention may be of utmost importance to smaller audiences, such as the description of a suspect in a string of neighborhood burglaries or the details of a fundraiser for a local family made homeless by a fire. Newsprint tariffs squeeze the already tight margins of the papers that report local stories, restricting the accessibility and freedom of local news.
Interesting take:
http://www.businessinsider.com/trump-trade-war-tariffs-study-on-economic-impact-lost-jobs-2018-4
President Donald Trump said his new tariffs on China and metals would boost the US economy.
A study by the Tax Foundation found the tariffs will actually hurt the US economy and cost Americans jobs.
The study also found that low- and middle-income Americans would pay the highest costs from the tariffs.
https://www.washingtontimes.com/news/2017/jan/5/the-problem-with-tariffs/
More than a year ago, when the billionaire mogul was preparing to enter the GOP presidential race, economists Stephen Moore and Larry Kudlow wrote a brilliant piece for Investors Business Daily that warned of the dangers in Mr. Trump’s plan.
“Here’s a historical fact that Donald Trump, and many voters attracted to him, may not know: The last American president who was a trade protectionist was Republican Herbert Hoover,” they wrote.
“Obviously that economic strategy didn’t turn out so well — either for the nation or the GOP,” they wrote, then posed this question:
“Does Trump aspire to be a 21st century Hoover with a modernized platform of the 1930 Smoot-Hawley tariffs that helped send the U.S. and world economy into a decade-long depression and a collapse of the banking system?”
Yes, Mr. Trump is right when he complains about the unfair trading practices by China and other economies around the world — pirating our technologies and patents, and counterfeiting our goods, say Mr. Moore and Mr. Kudlow.
“But clapping Trump’s punitive tariff on imported Chinese goods will hurt Americans at least as much as it does Beijing,” they said.
Many voters may have forgotten that Trump’s proposed 35 percent tariff on imported goods is nothing more than a tax added to the cost of the products they buy.
Not only would it be “the biggest tax increase on U.S. consumers in modern times,” the two noted conservative economists said, it would hurt the most vulnerable people in our economy.
“Wal-Mart has been one of the greatest anti-poverty programs in world history, and it has achieved the ‘everyday low prices’ that greatly benefit the poor and middle class in part through low-cost imports,” they point out.
Prices at these and other discount chain stores would rise sharply under Mr. Trump’s tariffs, hurting retail businesses across the country, resulting in store closings, widespread layoffs and a weaker economy.
Her is some interesting information from Dave Ramsey.
https://www.daveramsey.com/blog/what-are-tariffs
Have you heard the buzz about tariffs in the news lately? Specifically, tariffs on goods imported from China? The U.S. government just released a list of over 1,300 Chinese goods that could be subject to tariffs.
So, what is a tariff, exactly? How do tariffs lead to trade wars? How do tariffs and trade wars impact the economy? And how does any of this affect your wallet? Those are good questions. Here are your answers.
What Is a Tariff?
A tariff is a tax that a government places on a group of imported goods. Tariffs benefit domestic producers of those goods, because the tax essentially makes the imported version of the good more expensive. Any country can impose a tariff on goods from any other country.
There are generally two types of tariffs. An ad valorem tariff is a fixed percentage of the good’s value. So, the tax on that product will go up or down as the international price of that good changes.
A specific tariff is a fixed amount that does not change if the international price of the good goes up or down.
Goods can include anything from tennis shoes to computer chips. A country may import retail items—like TVs—or it may import raw materials like steel or corn.
A Tariff Example
If a government thinks trade with another country is getting unbalanced, it might tax certain items from that country.
For example, the U.S. imports more goods from China than any other country in the world—to the tune of $505 billion in 2017. On the other hand, the U.S. exported just $130 billion in goods to China that same year. The gap between those two amounts—$375 billion—is called a trade deficit.(1)
In January, the U.S. government started to impose tariffs on a few items from China, like solar panels and washing machines.
In March, the U.S. announced a 25% tariff on steel coming into the U.S.(2) And in the beginning of April, the U.S. released a huge list of items it would tax—from cash registers to artificial teeth—if imported from China.(3) And those new tariffs could impact your budget. More about that later.
Who Benefits From Tariffs?
The theory behind a tariff is simple—at least on paper.
When taxes are imposed on an imported item, like steel, U.S. companies needing that item have to pay more for it. But as an alternative to buying imported (foreign) steel, a U.S. company could purchase it from a domestic supplier with a better price.
Why is the price better? Because it doesn’t include the import tax. Make sense? The goal is for the tariff to create a level playing field in the steel industry and help U.S. companies thrive. Again, in theory.
What Is a Trade War?
Here’s where it gets interesting. In response to the recent list of Chinese goods that could be subject to U.S. tariffs, China announced it would impose its own set of tariffs on U.S. goods sold in China, including fruits, wine, nuts and pork.(4)
When countries go back and forth with round after round of new tariffs on each other’s imports, the result is a trade war. Eventually, the two countries in question negotiate to make their trade partnership more balanced.
But in today’s global economy, a battle over tariffs doesn’t just impact the two countries involved. For example, the European Union has said that if they’re hit with U.S. tariffs, they’ll hit back—imposing tariffs on a range of things from jeans to motorcycles.(5)
And other countries that have had good trade relationships with the U.S. in the past, like Canada and Mexico, are getting jitters because they could be next. Everybody is nervous, including investors.
More on that later, too.
Are We in a Trade War With China?
It’s too soon to tell whether the U.S. is in a trade war with China. That’s because it takes time for the tariffs to go into effect.
The government will hold hearings with companies later this spring to negotiate the tariffs, so things aren’t set in stone yet.(6) As of now, think of the trade discussion with China as a heated dispute rather than an all-out fight.
How Do Tariffs Impact the Economy?
The goal of tariffs is to make marketplace competition fair. This helps economies grow as nations compete with each other to sell their resources. When the U.S. economy thrives, that trickles down to you and me in the form of more affordable goods. That’s one theory from economists. Others say tariffs could make the cost of goods go up because companies just increase their prices to cover the tariff.
For example, the U.S. government recently attached tariffs to imported Chinese aluminum. As a result, the cost of things like beer kegs and baseball bats (which contain aluminum) could go up in the U.S., and those higher costs affect the overall economy.
How Do the Tariffs Affect My Wallet?
That’s the big question on everyone’s mind. Once the tariffs take effect, you might see prices go up slightly on everyday items like peanut butter, orange juice, and even jeans. That means you need to keep an eye on your monthly budget so you don’t overspend.
Now you know why keeping track of your expenses throughout the month is so important!
You’ll really feel the tug on your wallet with big-ticket items affected by these tariffs.
For example, many televisions imported from China could cost 25% more—if companies increase their prices to cover the cost of the tariff.(7) So, a $560 television from China could cost you $140 more—making the final price $700. The same principle applies to other big items, like tractors, snowblowers, and boats.
If you’re in the market for a big item, you have four options: 1) Pay the higher cost; 2) Purchase the item from a company that’s not affected by the tariff; 3) Buy a used item; or 4) Wait to buy your item until the tariffs lessen again (and they usually do).
How Do Tariffs Affect Investing?
The people on Wall Street have been nervous about the tariffs, too. And if other countries jump in the ring to duke it out, that concern could increase.
On Tuesday, April 3, the Dow Jones Industrial Average dropped 510 points in response to the latest list of taxed goods. Ouch. But the next day, it bounced back and gained 230 points. That’s a 740-point swing in just two days.(8)
Now, if you panicked and sold investments that Tuesday because you were afraid of losing more money, you made a poor decision. You lost out on Wednesday’s gains. Plus, you will likely pay more for that same investment if you purchase it again. That’s not a smart investing strategy!
Instead of jumping out of the roller coaster while it’s still in motion, stay in your seat and keep your seatbelt fastened. Wait out the rocky ride of trades and tariffs. Keep investing every month. The market will go up and down, but if you ride it out, your investments will pay off. History has shown us that.
If you have extra cash on hand, you could even invest that money while mutual funds are on sale (when the market drops). So, if you play it smart, you could benefit from the dips in the market.
If these tariff and trade negotiations are making you anxious about your investments, or if you’re wondering if you should make some adjustments, talk with your financial advisor.
https://fee.org/articles/why-the-uk-chooses-free-trade/
In The Wealth of Nations of 1776, Adam Smith first uncovered why freeing trade can generate wealth for all parties involved, because countries could export what they make efficiently and import what they cannot:
The tailor does not attempt to make his own shoes, but buys them off the shoemaker. The shoemaker does not attempt to make his own clothes, but employs a tailor… What is prudence in the conduct of every private family can scarcely be folly in that of a great kingdom.
https://fee.org/articles/the-smoot-hawley-tariff-and-the-great-depression/
In 1930 a large majority of economists believed the Smoot-Hawley Tariff Act would exacerbate the U.S. recession into a worldwide depression. On May 5 of that year 1,028 members of the American Economic Association released a signed statement that vigorously opposed the act. The protest included five basic points. First, the tariff would raise the cost of living by “compelling the consumer to subsidize waste and inefficiency in [domestic] industry.” Second, the farm sector would not be helped since “cotton, pork, lard, and wheat are export crops and sold in the world market” and the price of farm equipment would rise. Third, “our export trade in general would suffer. Countries cannot buy from us unless they are permitted to sell to us.” Fourth, the tariff would “inevitably provoke other countries to pay us back in kind against our goods.” Finally, Americans with investments abroad would suffer since the tariff would make it “more difficult for their foreign debtors to pay them interest due them.” Likewise most of the empirical discussions of the downturn in world economic activity taking place in 1929–1933 put Smoot-Hawley at or near center stage.
Economists today, however, hold a different view of the effects of Smoot-Hawley. While economic historians generally believe the tariff was misguided and may have aggravated the economic crisis, the consensus appears to relegate it to a minor status relative to other forces. We believe many modern economists are wrong because flawed modeling leads to two systematic understatements of the tariff’s negative effects. The first reason for this is that reliance on macro aggregates can sometimes mask serious underlying problems by dissipating their apparent impact over a broad area. For example, U.S. national income declined 36 percent in real terms from 1929 to 1933, and the view held by prominent economists, ranging from University of Chicago Nobel laureate Robert Lucas and Yale economist Robert Shiller to MIT economists Rudiger Dornbush and Stanley Fischer, is that since the foreign-trade sector was only about 7 percent of gross national product (GNP), the tariff (though misguided) could not explain much of this decline.
Viewed at the level of “macro magnitudes,” critical micro connections suffer from a “dissipation effect” and always look small. But size does not equal significance. While it is true that foreign trade represented only a small percentage of the overall domestic and international economy, it does not follow that the tariff was insignificant in its effects. The Panama Canal contains but a small fraction of the world’s ocean water, but if it were closed the effects would be quite devastating to world trade. A focus on aggregates risks missing the trees for the forest, and not all trees are created equal.
Here’s a second way Smoot-Hawley is underestimated: If regulations or tariffs are studied in partitioned models, their interrelationships are missed and their true impacts are trivialized. For example, recent attempts have been made to quantify price distortions caused by the tariff. Mario Crucini and James Kahn have tried to correct systematic underestimates of the harm of Smoot-Hawley found in a variety of macro studies that ignored the effect of tariff retaliation on the rate of capital accumulation. Using a general-equilibrium model, they calculate that the microeconomic distortion effects reduced U.S. GNP by only 2 percent in the early 1930s. Likewise economist Douglas Irwin computed the general-equilibrium inefficiencies caused by the tariff at nearly 2 percent of GNP.
So when even ostensibly free-market, free-trade economists such as Lucas, Irwin, and others downplay the negative effects of the Smoot-Hawley Tariff, what’s the verdict? Were the loud protests of over a thousand professors of economics just unsophisticated exaggerations? Were these pre-Keynesian classical theorists misguided because they lacked the tools of modern macroeconomics and econometrics? Or did their vision remain unclouded for the same reason? Were they Chicken Littles or Cassandras?
Hillsdale College economics professors are among the most recent to warn President Donald Trump and Congress against passing tariffs on steel and aluminum.
Along with 12 Nobel laureates and hundreds other economists across the country, at least five Hillsdale professors signed the conservative advocacy organization National Taxpayers Union’s open letter urging the federal government against protectionist measures of withdrawing from free trade agreements and levying tariffs on steel and aluminum.
A letter signed by 1,028 economists in 1930 against the Smoot-Hawley Tariff Act, which economists agree exacerbated the Great Depression, inspired NTU to begin its efforts and submit its letter that it hopes will have even more signatures than the original memo had. It plans to submit its letter on May 3 to commemorate the Smoot-Hawley letter’s 88th anniversary.
“Congress did not take economists’ advice in 1930, and Americans across the country paid the price [during the Great Depression],” NTU’s letter reads. “…Much has changed since 1930 — for example, trade is now significantly more important to our economy — but the fundamental economics principles as explained at the time have not.”
Trump has said he is looking to implement a 25 percent tax on imported steel and 10 percent duty on imported aluminum with a particular focus on balancing trade with China. The Smoot-Hawley Tariff Act raised taxes on more than 20,000 goods and was the second highest tariff in U.S. history. The U.S. Senate passed it by a margin of two votes.
Economics professors Michael Clark, Christopher Martin, Ivan Pongracic, Charles Steele, and Gary Wolfram said they have signed the letter. While the economists said free trade is one issue on which a majority of economists can agree, they said they are pessimistic that politicians in Washington, D.C., will heed their recommendations.
“Do politicians care? No, I don’t think so,” Pongracic said. “That doesn’t mean it’s not worthwhile. It’s important to have a public statement to stand up for these things.”
The letter cites at length from the Smoot-Hawley letter. In 1930, numerous influential economists signed the letter, which Steele said was “unprecedented” at the time.
“History tells us, ‘No, the letter wasn’t effective,’” Steele said. “They ignored what these guys said. I think it is important to go on the record and say, ‘We told you so.’ If the tariffs come into play, I’m quite sure it will be bad for the American economy and bad for Americans.”
Wolfram, the economic department chairman, agreed, noting that while the tariffs will be beneficial for steel and aluminum producers in the United States, companies that use those metals in their products will face higher costs. Ultimately, he said, that will hurt American consumers, because prices will increase.
The professors said calls for tariffs often come from special interests looking to score an advantage in the marketplace and from those who misunderstand trade deficits.
The United States has a trade deficit, which means it imports more than it exports. Wolfram, however, said this can be a good thing, because it means foreigners want to invest in the American economy.
“We tend to think of trade deficits as a bad thing, but a capital surplus — that’s a good thing,” he said. “They’re the same thing. If we are the country where people want to invest, buy bonds, then we have a booming economy.”
Wolfram, who has written against the proposed tariffs in The Detroit News and Investor’s Business Daily, said he signed the letter because he thinks it will gain some notoriety and foster discussion on the levies and the Smoot-Hawley tariffs.
“Friedrich Hayek in his ‘Constitutional Liberty’ said one of the benefits of democracy is that debating over the issues will advance the state of knowledge,” Wolfram said. “If we have a debate over tariffs, the state of knowledge will be greater.”
https://www.history.com/news/trade-war-great-depression-trump-smoot-hawley
n particular, experts have pointed to the failure of the Smoot-Hawley Tariff Act, passed in June 1930, to protect U.S. industries with tariff increases.
Although this came several months after the stock market crash of 1929, the U.S. hadn’t yet entered “the full onset of the Great Depression,” says Claude Barfield, a resident scholar at the American Enterprise Institute. The thinking among Congress and President Herbert Hoover was that by raising taxes on thousands of imports no matter what country they came from, the act would protect American farmers and secure the nation’s economy. But experts disagreed.
“Economists around the country argued to the Republican Congress that this would only hurt the world economy, and the United States economy,” Barfield says. (Before the political parties realigned in the mid-20th century, the Democrats were the “free trade” party.)
And they were right. Although it did not cause the onset of the Great Depression, it did help extend it. Other countries responded to the United States’ tariffs by putting up their restrictions on international trade, which just made it harder for the United States to pull itself out of its depression.
In effect, the Smoot-Hawley Tariff Act “prolonged [the depression] and possibly deepened it around the world, not just in the United States but for other countries,” he says.
The brilliantly free market Foundation for Economic Education. In my home town, and one of our best economics organizations.
https://fee.org/articles/free-trade-is-the-best-policy-no-matter-what/
Today’s quotation of the day is from Albert Gallatin’s January 1832 essay, “Memorial of the Committee of the Free Trade Convention” (available in full here), a part of which is quoted on page 169 of Douglas Irwin’s 2017 book, Clashing Over Commerce (emphasis added):
That by multiplying in any country the channels of domestic industry, a greater scope is given to its application, a market more diversified and less liable to be glutted procured to its products, and a larger field opened to every species of skill and talent, is undubitably true. But to direct that industry to unprofitable pursuits which cannot be sustained without exaggerated duties paid by the consumer, and a corresponding national loss, does not open new channels of productive industry, but only diverts it from profitable to unprofitable pursuits to the community. It is truly remarkable that the advocates of the restrictive system should pretend to consider your memorialists as wild theorists, when there cannot be a plainer matter of fact than that if a man pays two dollars more for his coat, his plough, or the implements of his trade, it is a loss to him, which he must pay out of the proceeds of his industry, and that the aggregate of those individual losses is an actual national loss.
From late September through early October 1831 there was held in Philadelphia a Free Trade Convention, about which I know very little other than what is revealed in this essay by Albert Gallatin.
Yesterday and Today
During the second quarter of the 19th century in the United States, Kentucky’s Henry Clay was the most powerful, vigorous, and (yes) uncompromising opponent of free trade. His “American System,” as it was called, was nothing but an early 19th-century version of economic nationalism. Clay and his followers saw the businesses and jobs made possible by government spending and by protective tariffs; they were blind to the businesses and jobs – and consumer goods – denied to the American people by these interventions.
One of the realities made clear by Doug Irwin’s account of the debate over trade policy that occurred back then is that the past is indeed prologue. The issues today are the same as they were back then even if the ‘feared’ trading partner today is different. (Back then that feared trading partner was Great Britain; today it’s mostly China.) The economic fallacies that fueled Henry Clay and his movement are identical to those that today fuel the hostility to free trade of likes of Donald Trump, Wilbur Ross, Peter Navarro, and Steve Bannon. And many of the accusations hurled against free trade by the protectionists of that past era differ in no substantial ways from the accusations hurled today.
There was the ad hominem. For example, Clay scurrilously accused the free(r)-trader Albert Gallatin of being hostile to American interests because he, Gallatin, was born in Switzerland.
And there was the simply mistaken – a frequent instance of which is nicely exposed in the above bolded portion of the Gallatin quotation. Protectionists (those whom Jon Murphy more accurately calls “scarcityists”), mistakenly supposing themselves to be profound, back then, as today, accused free traders of being idealists whose theory blinds them to reality. Yet as implied in Gallatin’s response, the theory that protectionists dismiss as speculative and unreliable is, really, a straightforward application of simple arithmetic and basic economic analysis: tariffs that force up the prices that domestic citizens pay for goods and services is a loss to those citizens, and because the domestic firms and industries that exist only because of trade restrictions and subsidies are generally ones that operate less efficiently than those domestic firms and industries that are destroyed by such interventions, the amounts of resources necessary to sustain any given standard of living (or rate of economic growth) are greater with such interventions than without. In short, such interventions make most people poorer than they would otherwise be.
Unproven Free Trade Is a Myth
It is a myth that free trade is unproven in practice. Forget that countries with freer trade have both higher per-capita incomes and faster rates of economic growth. Look instead at the essentials of the case. Each and every day you trade freely with many merchants. Do you think that you and your family would be enriched if your neighbor extracted punitive payments from you whenever you buy some item that your neighbor judges to be from a seller located too distant from your neighborhood? Every day Arizonans trade freely with Texans and Rhode Islanders. Do you think that Arizonans would be enriched if the government of that state obstructed their ability to trade as they choose with people located in other states?
People trade freely countless times, each and every day. Yes, yes, I’m well aware that such trade isn’t ideally free. Occupational-licensing restrictions, for example, unjustly and harmfully obstruct domestic trade. But the fact remains that today within each country – including within the U.S. – trade is not typically obstructed based on geographic location or political boundaries. And therefore people buy and sell freely within countries. If the case for a policy of free trade were not practical – if it were only a theoretical curiosity – then it would be true that ordinary people would be even richer if the state obstructed their abilities to trade with each other domestically.
It’s a myth also that the economic case for a policy of free trade in any one country requires that other governments also practice free trade. The case for a policy of free trade is, at bottom, a case for unilateral free trade: while nearly everyone in the world would be better off if all governments adopted policies of free trade, nearly everyone in the home country would be better off if the home government adopts a policy of free trade regardless of the policies of other governments.
Protectionism is a nasty mash of logical fallacies, half-truths, hubris, economic ignorance, and cronyist apologetics.
As we highlighted last night, China has threatened to respond to President Trump’s steel and aluminum tariffs with unspecified actions that Chinese officials said could “seriously hurt the international trade order.”
And as Axios warned in a piece published Friday, investors shouldn’t interpret their lack of details as a sign of an empty threat: Rather, China actually has far more leverage with which to retaliate against the Trump tariffs than it did when George W Bush briefly imposed tariffs on imported steel in the early aughts. Back then, Bush rescinded the tariffs, it’s widely believed, because the European Union threatened targeted sanctions that would hurt swing states like Michigan and Florida - states that Bush needed to carry during his 2004 campaign. Unsurprisingly, the EU is embracing a similar strategy this time around.
But today, China’s ability to retaliate now rivals that of the entire European Union - which means this could be the last time the US can “set the agenda” in terms of its relationship with its largest economic rival.
Back in 2002, China produced less than 200 million tons of steel. As of 2016, China could churn out 1 billion tons, forcing Beijing to pare back production or risk a destabilizing glut.
https://www.nationalreview.com/2018/03/trump-steel-tariffs-bad-economics-bad-policy/
It’s not like nobody saw this coming: Trade protectionism — crony capitalism for well-connected and politically sensitive firms and industries — is bad policy, but it is one of the few issues about which Donald Trump has been consistent in his public statements going back decades, to the 1980s at least. He ran on a protectionist agenda and specifically named steel imports as a source of irritation.
The economics here are pretty straightforward. Trump thinks steel is just one more example of the Chinese getting one over on Americans, but China is in fact a minor player in the U.S. steel-import business, being No. 11 among nations exporting steel to the United States. A quarter of our imported steel comes from our NAFTA partners, mostly from Canada, which provides 16 percent of U.S. steel imports. Among Asian steel exporters, South Korea is our largest trading partner, not China. Moody’s projects that the country that will be most adversely affected by the tariffs is Canada, followed by Bahrain, a country that does not loom particularly large in our economic consciousness, having as it does an annual national economic output about one-fifth of the Ford Motor Company’s. It is better to punish one’s enemies than one’s allies.
And it is no good at all to punish producers and consumers both, which is what tariffs do. Tariffs are a sales tax, in this case on a raw material that is used in everything from buildings to automobiles and industrial machinery — and the latter two are a big part of the U.S. export portfolio, something that ought to occur to a president who obsesses about the balance of trade. Steel is a necessary part of the machinery that produces the agricultural commodities, electronics, and industrial implements that are the heart of U.S. exports of goods. Advantaging a small number of politically connected firms at the expense of the broader manufacturing economy — which employs vastly more people and represents vastly more in the way of both economic production and exports — is damned foolish. As an economic matter, it is illiteracy in action. There’s a reason Caterpillar shares sank after the tariff announcement, along with Boeing, United Technologies, General Motors, and others.
The likelihood of the industrial economy of 60 years ago returning is, at best, chimerical. Cities like Pittsburgh have long since moved on from their smokestack legacies, investing resources in education and medicine. If Pittsburgh’s air were as smoky as it was in the days when men in white-collar jobs had to bring a second shirt with them to the office because the first would be speckled with soot by lunchtime, it would not be a finalist for Amazon’s second headquarters.
And even in the profoundly unlikely circumstance that the domestic steel industry regained its former preeminence, chances are it wouldn’t employ nearly as many people as it did in its heyday, not with many of the tasks in manufacturing now being carried out by robots.
That is what the liberals did with Marxism and they continue to be faithful no matter what horrors arise from it.
Some conservatives are just as wedded to the free trade idea. In concept it is as beautiful dream as the Marxist "from each according to his abilities to each according to his needs."
Goods will flow freely from where it makes sense to make them to areas who will buy them and spend their time on grander and greater concepts.
As the Marxist use the concept of family for their dream the Free Trade people use the town concept for theirs. The vet does not spend his time making his own clothing but buys it from the tailor who buys his food from the market who buys it from the farmer who employs the vet to tend his animals and everyone prospers.
The problem is that in real life dealings between countries does not work that way.
No, not even between allies. Because they are not part of your town. They have their own town they want to see prosper and if it comes at the expense of yours, well, that is ok.