Skip to comments.Prof. Walter Williams: Shooting Ourselves in the Foot -- Here's a Better Alternative to Tariffs
Posted on 07/17/2018 7:50:43 AM PDT by SeekAndFind
The Canadian government, lining the pockets of its dairy producers, imposes high tariffs on American dairy imports. That forces Canadians to pay higher prices for dairy products. For example, Canadians pay $5.24 for a 10.5-ounce block of cheddar. In Washington, D.C., that same amount of cheddar sells for $3.64. Canadians pay $3.99 for a 1-pound container of yogurt. In Washington, D.C., you can get nearly twice as much yogurt for a little over $4. It's clear that the Canadian government's tariffs screw its citizens by forcing them to pay higher prices for dairy products.
What should the U.S. response be to Canada's screwing its citizens? If you were in the Trump administration, you might propose imposing tariffs on soft wood products that Americans import from Canada in other words, retaliate against Canada by screwing American citizens. Canadian lumber such as that from pine, spruce and fir trees is used in U.S. homebuilding. Guess what tariffs on Canadian lumber do to home prices. If you answered that they raise the cost and American homebuyers are forced to pay higher prices, go to the head of the class.
This retaliation policy is both cruel and not very smart. It's as if you and I were in a rowboat out at sea and I shot a hole in my end of the boat. What should be your response? If you were Secretary of Commerce Wilbur Ross or Secretary of the Treasury Steven Mnuchin, you might advise retaliating by shooting a hole in your end of the boat. If I were president, I'd try to persuade officials of other countries not to serve special producer interests by forcing their citizens to pay higher prices. But if they insisted, I'd say, "Go ahead, but I'll be damned if I'll do the same to Americans!"
The ruse used to promote producer interests through tariff policy is concern about our large trade deficit. It's true that we have a large current account trade deficit. However, that's matched exactly by a very large capital account surplus. Translated, that means Americans buy more goods from other countries than they buy from us; that's our current account deficit. But other countries find our investment climate attractive and invest more in the U.S. than we invest in other countries; that's our capital account surplus.
Have you ever wondered why foreigners are willing to invest far more money in Texas and California than they are willing to invest in Argentina and Venezuela? Do you think it's because they like North Americans better than they like South Americans? No. We've always had an attractive investment climate, and we've had current account deficits and capital account surpluses throughout most of our nation's history. In fact, the only time we had a sustained current account trade surplus was during the Great Depression, when we had a surplus in nine out of 10 years, with 1936 being the lone exception.
Let's delve a bit into the politics of trade tariffs. Whom do we see spending the most resources lobbying for tariffs on foreign steel and aluminum? Is it American users of steel and aluminum, such as Harley-Davidson and John Deere? Or is it United States Steel Corp. and Alcoa? Of course it's U.S. Steel and Alcoa. They benefit from tariffs by being able to sell their products at higher prices. Harley-Davidson and John Deere lose by having to pay higher prices for their inputs, steel and aluminum, and their customers lose by having to pay higher product prices.
There's a lot of nonsense talk about international trade, which some define as one country's trading with another. When an American purchases a Mercedes, it does not represent the U.S. Congress' trading with the German Bundestag. It represents an American citizen's engaging in peaceable, voluntary exchange, through intermediaries, with a German auto producer. When voluntary exchange occurs, it means that both parties are better off in their own estimation not Trump's estimation or General Motors' estimation. I'd like to hear the moral case for third-party interference with such an exchange.
But I disagree. The point of tariffs, from our point of view, is to eliminate or lower tariffs already imposed by our trading partners. They already put tariffs on our goods. Trump says, take yours down and well take ours down. But we had to put some in place to be able to make that offer.
Since they sell more to us than we sell to them, they cant really hurt us by further raising tariffs on us. At some point they have no choice but to make a deal. Or, we simply get the same product from somewhere else.
So his argument is, it is okay that we send a lot of our money overseas to purchase products, because those foreign companies use that money to purchase ownership in US companies?
Higher prices in Canada pay for all the socialized “goodies” they love... until they start complaining about the pricing and taxes...
Perhaps they too, think somebody else is paying for it all... Does the idiocy ever end?
Canada is the equivalent of a remora that attaches itself to the side of a shark. The American “shark” needs to rub off the Canadian remora and see just how long it survives without the ability to suck the life out of us. The imposition of tariffs when you are the big customer, is just a means to get the other guy’s attention. Actually, this goes for the rest of the world for that matter. We have been the world’s sucker for so long, we’ve forgotten just what economic power we have.
"I keep asking the establishment shills why America has some moral obligation to tolerate foreign countries imposing higher tariffs upon us than we impose upon them. Seems facially unfair, right? So, theres got to be a really good reason because how can you support our working people facing a higher obstacle to trade than the foreigners do? Im just wondering whats wrong with a level playing field. Fair is fair, right? But I never get a good answer."
Walter Williams should be on Trump’s team. Thomas Sowell too.
The Canadian dairy cartel limits production to keep prices high. That is all.
Dear God please keep these Free Traitors away from the White House!
Yes, there is good and bad about tariffs.
They impost 270% on our dairy. There must be some tariff that would hit them hard, STRATEGIC tariffs, that we could later easily remove.
Even though I really like they guy, this is disingenuous of Williams. Yes, of course tariffs hurt American consumers, but what he purposely leaves out here is that they also hurt other nations trying to sell goods here. The real argument is "Who does it hurt more and can the hurting stop the foreign nation from imposing tariffs on American exports?". I wish his column had addressed that.
Free trade is great when all the participants in the equation are good actors, well intentioned, etc.
It doesn’t work when they aren’t. You wouldn’t sell a gun to a person you knew had a high likelihood to use it against you, no matter what price he offers to pay.
And that’s the probelm with the “capital account surpluses”, foreign entities aren’t all investing in the US for our benefit, they are doing so they can influence us politicially for their benefit.
Dollar for Dollar. If they dont agree, then impose a tariff.
In the short term perhaps, but who would they help in the long term?
RE: So his argument is, it is okay that we send a lot of our money overseas to purchase products, because those foreign companies use that money to purchase ownership in US companies?
If I understand him, that is PART of his argument. His response to that would then be — What’s wrong with foreign businessmen and investors owning American companies? Don’t Americans do the same when they buy stocks in Toyota, or Alibaba if not directly, via International Mutual Funds?
And his next rhetorical question would be this — would foreign investors be so stupid as to allow American companies whose stocks that own to do badly so that they lose money?
His point, if I understand him is this -— investors are investors regardless of whether they are Americans or Asians or Canadians. They have a vested interest in seeing the companies that they own DO WELL. How is that a bad thing?
Go walk around the 55,000 factories closed since 1999 and the surrounding devastated small towns for your answer. North Carolina would be a great place for your education to start.
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