Posted on 03/14/2018 9:10:10 AM PDT by Kaslin
Maybe Donald Trump is such a powerful communicator and pot-stirrer that other countries, embarrassed by their own trade barriers, will eliminate them.
Then I will thank the president for the wonderful thing he did. Genuine free trade will be a recipe for wonderful economic growth.
But I fear the opposite: a trade war and stagnation -- because much of what Trump and his followers say is economically absurd.
"(If) you don't have steel, you don't have a country!" announced the president.
Lots of things are essential to America -- and international trade is the best way to make sure we have them. When a storm blocks roads in the Midwest, we get supplies from Canada, Mexico, even China. Why add roadblocks?
Steel is important, but "the choice isn't between producing 100 percent of our steel (and having a country) or producing no steel (and presumably losing our country)," writes Veronique De Rugy of the Mercatus Center.
Today, most steel we use is made in America. Imports come from friendly places like Canada and Europe. Just 3 percent come from China.
Still, insists the president, "Nearly two-thirds of American raw steel companies have gone out of business!"
There's been consolidation. But so what? For 30 years, American steel production has stayed about the same. Profits rose from $714 million in 2016 to $2.8 billion last year. And the industry added nearly 8,000 jobs.
Trump says, "Our factories were left to rot and to rust all over the place. Thriving communities turned into ghost towns. You guys know that, right?"
No. Few American communities became ghost towns. More boomed because of cheap imports.
It's sad when a steelworker loses work, but for every steelworker, 40 Americans work in industries that use steel. They, and we, benefit from lower prices.
Trump touts the handful of companies benefiting from his tariffs: "Century Aluminum in Kentucky -- Century is a great company -- will be investing over $100 million."
Great. But now we'll get a feeding frenzy of businesses competing to catch Trump's ear. Century Aluminum got his attention. Your company better pay lobbyists. Countries, too.
After speaking to Prime Minister Malcolm Turnbull of Australia, Trump tweeted: "We don't have to impose steel or aluminum tariffs on our ally, the great nation of Australia!"
Economies thrive when there are clear rules that everyone understands. Now we've got "The Art of the Deal," one company and country at a time.
I understand that Trump the developer liked to make special deals, but when presidents do that, it's crony capitalism -- crapitalism. You get the deal if you know the right people. That's what kept most of Africa and South America poor.
But Trump thinks trade itself makes us poorer: "We lose ... on trade. Every year $800 billion."
Actually, last year's trade deficit with China was $375 billion. But even if it were $800 billion, who cares? All a trade deficit shows is that a country sells us more than we sell them. We get the better of that deal. They get excess dollar bills, but we get stuff.
Real problems are imbalances like next year's $1 trillion federal government budget deficit. That will bankrupt us. Trade deficits are trivial. You run one with your supermarket. Do you worry because you bought more from them than they buy from you? No. The free market sorts it out.
Trump makes commerce sound mysterious: "The action that I'm taking today follows a nine-month investigation by the Department of Commerce, Secretary Ross."
But Wilber Ross is someone who phoned Forbes Magazine to lie about how much money he has. Now he goes on TV and claims, "3 cents worth of tin plate steel in this can. So if it goes up 25 percent, that's a tiny fraction of one penny. Not a noticeable thing."
Not to him maybe, but Americans buy 2 billion cans of soup.
Political figures like Ross -- and Trump -- shouldn't decide what we're allowed to buy. If they understood markets, they'd know enough to stay out of the way.
Not only that, the meme of steel not being critical is all wrong - if we could have controlled steel being used in Germany, then Essen would not be known as the city that armed Germany....
If that were the case, why can’t they import food? The people are starving.
They have the capacity to produce more food than they need. It’s government control of the economy that discourages businesses and individuals from engaging in any productive agricultural activity.
Capacity and production are two different things. The gov’t has so badly managed the economy that they cannot buy any production inputs outside their own boarders, including fertilizers, seeds, even gasoline is in short supply in a country flooded with oil. The reason is because they cannot buy replacement parts for the industries they nationalized. They, too, thought trade deficits meant nothing because of their oil reserves. They ignored the fact that you need to be able to get the oil out of the ground.
In theory, genuine free trade would increase overall world output. But the theory doesn't guarantee every country would benefit from that increase in output. In fact countries like ours would likely suffer.
Jobs would move to countries that have excess labor. Wages would start to equalize between nations. US wages would fall while China wages would rise.
Think about that. US wages would fall until they are no better than the rest of the world.
What you have is a long period of Joseph Shumpeter's "creative destruction" due to technology and productivity improvements, which led to general improvements in quality of life in the US. Some industries (e.g., horse buggies and buggy whips a century ago) are dying or shrinking due to technological advances and/or poor government policies (like minimum wage and odious regulations) that increase the cost of goods or services to the point where they become uncompetitive (i.e., "pricing themselves out of the market") relative either to other producers of same / similar goods or other industries which can produce alternative options (such as 3D printing/cutting or "additive"/"subtractive" manufacturing) which has little or nothing to do with country's overall trade deficit or surplus. Composition of trade deficit / surplus may be of interest — is it raw materials for production, finished goods, services etc.
We usually don't complain about importing oil when its price is low... unless we happen to work in the oil industry. And so on...
With the official unemployment around 4% and severe labor shortages in moderately skilled positions it's difficult to argue that workers have to "survive on slave wages" but some industries can be doing better or worse for reasons specified above.
Here's the typical headlines you see today:
The Great Labor Crunch - B (sub), by Avi Salzman, 2018 March 09
From The Great Labor Crunch - B (sub), by Mary Childs, 2018 March 10:
When 'Charlotte' started at the BMW auto factory in Spartanburg, S.C., five years ago, she stood out. ..... Charlotte — so named by a human co-worker — is among 60 lightweight "collaborative robots," or cobots, among the 2,000 robots employed by the German car maker at the factory.
Charlotte and her cohorts aren't supplanting their flesh-and-blood co-workers. They're generating demand for humans to program and maintain them, among other things. BMW is ramping up training programs for new technicians and engineers to keep the robots functional. Last year, the plant added 1,000 workers, for a total of 10,000.
AUTOMATION is revolutionizing manufacturing, trucking, retail sales, food services, and medicine, among other industries. ..... < snip >
A century and a half ago, 50% of the U.S. labor force worked in agriculture. Even as agriculture shifted to less than 2% of the labor force, the total pool of workers boomed, filling jobs in technology, manufacturing, and services.
In the U.S. 50 - 60 years ago computers were very expensive and human labor very cheap; now computers and computing power is very cheap and human labor is very expensive.
Most of what you see in some industries has more to do with that fact and poor government policies misallocating fiscal and human capital than it is with trade deficit. But don't expect some politicians to acknowledge that rather than exploiting it to get elected.
What is the underlying objective here? Is it to employ as many Americans as possible? Is it to maximize the productivity of our industries? Is it to maximize our standard of living? Whether a particular policy (a steel tariff, for example) is a "good" idea or a "bad" idea really depends on which goal you're pursuing.
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