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I’m a Tariff Man
From the President’s Twitter account: “President Xi and I want this deal to happen, and it probably will. But if not remember … I am a Tariff Man.”
“When people or countries come in to raid the great wealth of our Nation, I want them to pay for the privilege of doing so,” the president wrote. “It will always be the best way to max out our economic power. We are right now taking in $billions in Tariffs. MAKE AMERICA RICH AGAIN.”
The mocking reactions were predictable enough from both the right and the left. It’s interesting, too. From the left it seems we’ve finally found a tax the Democrats don’t want to embrace and a willingness to tell unionized industrial workers in America to go pound sand. From the right, we’ve finally found an issue where they’re willing to say that Ronald Reagan was full of it.
“Wait a minute,” you say. “NAFTA had its roots in the Reagan Administration!” True enough, but Reagan’s was also a presidency full of protectionist tariffs and policies*:
- Forced Japan to accept restraints on auto exports;
- Tightened considerably the quotas on imported sugar;
- Negotiated to increase the restrictiveness of the Multifiber Arrangement governing trade in textiles and apparel;
- Required 18 countries, including Brazil, Spain, South Korea, Japan, Mexico, South Africa, Finland, Australia, and the European Community, to accept “voluntary restraint agreements” that reduce their steel imports to the United States;
- Imposed a 45% duty on Japanese motorcycles for the benefit of Harley Davidson, which admitted that superior Japanese management was the cause of its problems;
- Raised tariffs on Canadian lumber and cedar shingles;
- Forced the Japanese into an agreement to control the price of computer memory chips;
- Removed third-world countries on several occasions from the duty-free import program for developing nations;
- Pressed Japan to force its automakers to buy more American-made parts;
- Demanded that Taiwan, West Germany, Japan, and Switzerland restrain their exports of machine tools;
- Accused the Japanese of dumping roller bearings on grounds so that the price did not rise to cover a fall in the value of the yen;
- Accused the Japanese of dumping forklift trucks and color picture tubes;
- Extended quotas on imported clothes pins;
- Failed to ask Congress to end the ban on the export of Alaskan oil and timber cut from federal lands;
- Redefined dumping so domestic firms can more easily charge foreign competitors with unfair trade practices;
- Beefed-up the Export-Import Bank, an institution dedicated to distorting the American economy at the expense of the American people in order to artificially promote exports of eight large corporations.
This was not out of character for Reagan. In the 1980 Republican Platform his ideals toward trade was laid out in clear and simple language. “The [Carter] Administration’s inability to ensure fairness and equity between our nation and some of our trading partners has resulted in massive unemployment in many core industries. As we meet in Detroit, this Party takes special notice that among the hardest hit have been the automotive workers whose jobs are now targeted by aggressive foreign competition. Much of this problem is a result of the present Administration’s inability to negotiate foreign trade agreements which do not jeopardize American jobs. We will take steps to ensure competitiveness of our domestic industries to protect American jobs.” (Emphasis mine.)
As international trade agreements began to be hammered out, through the Republican Administrations of the two Bushes and the Democratic Administrations of Clinton and Obama, how did this work out? Not so well? Hey, these jobs are gone and ain’t coming back. No Reaganite worth his salt would embrace Trump’s tariffs, right?
Again, from the ’80 Reagan platform with my emphasis:
The Republican Party believes that protectionist tariffs and quotas are detrimental to our economic well-being. Nevertheless, we insist that our trading partners offer our nation the same level of equity, access, and fairness that we have shown them. The mutual benefits of trade require that it be conducted in the spirit of reciprocity. The Republican Party will consider appropriate measures necessary to restore equal and fair competition between ourselves and our trading partners.
If you asked any conservative if we should unilaterally disarm militarily they would rightfully look at you as if you had grown a second head. Yet, they will insist on complete unilateral disarmament in trade. But, Trump, right?
*Source: Mises Institute
Published in General
I do business with a company who is in a similar situation. The tariff on a certain item is brutal. Funny story: the margin was sufficient and they’re making “less” and still making “enough” and I didn’t have to raise my price.
Less profit is not a “cost” if you’re still in the black.
The Florida sugar farmer who opposes allowing Caribbean sugar into the United States might hire a spokesman who uses the rhetoric of “national security” and “we can be dependent on other nations for our food.”
But in reality, the Florida sugar farmer is just ripping off the American consumer and acting in self-interest.
I, as a consumer of sugar, will act in my self-interest and ask Congress and the President to allow Caribbean sugar imports into the United States, without a heavy import tariffs (preferably a zero import tariff or perhaps an import tariff sufficient to pay for the customs services).
If I am a baker and I want my bakery to be able to turn a profit, I also will oppose sugar protectionism.
In this case, opposing higher tariffs is good for American jobs. If you make more expensive the components of the products that American businesses assemble by raising import tariffs, you are putting American businesses at a disadvantage.
A Dutch bakery might not face the prohibitive import restrictions on Caribbean sugar that the American bakery faces. So, the American bakery closes down and the Dutch bakery stays open.
If we lived in a nation that was smaller both geographically and in terms of population, lower trade barriers would be more obvious to us.
Sweden, for example, which has a population of about 10 million people, is in some sense even more of a free trading nation than we are.
The world population is around 7 billion and the Swedes have about 10 million. So, the Swedes understand that allowing their citizens to purchase freely from the 7 billion makes them better off. The Swedes don’t have any illusion that they can be self-sufficient in all products and services. They know that they will make more of some items and purchase other items from abroad.
Also, take Singapore. They would never try to obtain “energy independence.” Singapore is city. They aren’t going to get all of their energy from within their borders. They will purchase it from abroad.
In the United States, because we are such a large nation, we sometimes talk about “energy independence” as if this always a good thing to pursue. In our case it is a reasonable thing to pursue because we have lots of untapped energy we can access somewhat inexpensively. But if it cost us 200 dollars per barrel to access our oil reserves, we’d be better off buying the oil on the world market.
So, I agree that there is no need to panic. It’s just that whenever Trump opens his mouth about trade, you have to wonder if he believes half of what he is saying.
It is exactly the same. It doesn’t matter what either party thinks or alleges. Doesn’t change the facts a whit. Do we believe Ricardo or not? If we do, then BOTH parties are worse off if ONE of them engages in unfair trade practices. To garner the benefits of free trade BOTH parties must trade freely with each other.
Why China “shoots itself in the foot” matters not if we are getting hit with the ricochets. And we are.
Seriously, I don’t know why you keep explaining the general principle. We know. I don’t think there is one person on this thread supportive of tariffs as a generaln principle. I don’t think President Trump is supportive of tariffs as a general principle – he keeps suggesting zero tariffs! Short of that, I don’t believe tariffs are a one way hurt. Maybe if you only ever consider the effects on consumption, but to me consumption is not the only concern involved.
Does anyone here play Hearts? In this game, points are bad. You want to pass off bad cards to other players whenever possible. Except that if one player manages to take all of the points then that is called Shooting the Moon which is good because then all of the other players get 26 points instead and the moon shooter has 26 points subtracted from his score. Luckily, just a little bit of monitoring and a little bit of willingness to eat a point or two if it becomes necessary can prevent another player from shooting the moon and saddling everyone else with twenty six points.
This is basically what the monopoly formation is, isn’t it?
Offer a good enough product at a below market value where you may have some loss or at least not as good of gains. Lowers the costs of everyone else at the table, often times to the point they go out of business. Hopefully, you are the last man standing and jack up your prices because your competition doesn’t exist anymore.
It’s why anti-trust laws are so confusing. With them, you promote competition. Without them you are a more pure capitalist society… but the consumer is much less free.
With luxury items, the concern isn’t that great. But with necessities or security related goods, the concern is greater.
China wants a global monopoly. Without a one-world governing force that they are beholden to (which we shouldn’t want), we are limited in actions to take to prevent a growing global monopoly.
Even if Amazon or Wal mart has the cheapest price, sometimes eating the cost to buy it at a local business is worth it in the long run.
But that is not what is happening. It would if Holland was shipping massive amounts of bread here, but they are shipping close to none. Our bakeries, meanwhile, are open and baking. Donutiers are also doing well.
I’d love to lose the sugar tariffs – if we could get the same quality, grade, cut, and purity of sugar elsewhere. OTOH, American sugar is produced with American standards. I’m not so sure that a Thirdish World country would do the same.
My son used to purchase parts for an electronics company. They would go through boxes of Chinese parts and throw out a lot of it because their quality control was lacking. I don’t doubt that there was a bean counter who could work out what percentage of working parts would cover their needs and how much the extra labor of looking over these parts was costing them.
There was an old chicken commercial where fast food clerk would intone, ‘parts is parts’.
Not always.
And sure, the market works out the kinks eventually.
But it is work and it costs money too.
“The United States Constitution gives Congress the power to impose and collect taxes, tariffs,
duties, and the like, and to regulate international commerce. While the Constitution gives the
President authority to negotiate international agreements, it assigns him no specific power over
international commerce and trade. Through legislation, however, Congress may delegate some of
its power to the President, such as the power to modify tariffs under certain circumstances. Thus,
because the President does not possess express constitutional authority to modify tariffs, he must
find authority for tariff-related action in statute” CRS
I believe it is Article 1, Section 8
I’m a big fan of taxing the middle and lower classes. They’re undertaxed compared to what they get from government. Unless we can reduce their demand for government services, we need to pay for those services somehow. And since we’re not willing to do it via the income tax, let’s get the money some other way.
True, dat. And we should work on taxing the poor and destitute because they consume a lot.
“I’m a Tariff Man” is the title of this now 6-page post.
Ok, but there have since been six pages of comments. And even that part of President’s Trump’s comment was the stick backing up the carrot. As has been argued in some comments over the last six pages, if we need to take a stick to trading partners then we have few options.
You obviously haven’t been paying attention to how Trump negotiates. Remember “Rocket Man” and threats of bigger nukes. Etc. Etc. Etc.
He always goes extreame to move the other side back to the middle.
Phil, do you agree that negotiations sometimes require threats you’d rather not carry out for various reasons? Do you agree that sometimes these threats will need to be carried out anyway? Do you agree that these need to be credible threats in order to have effect?
Like Joseph said earlier, I don’t mind a reasonable disagreement over whether the circumstances indicate enough of a problem to justify making threats or being willing to follow through on them. What I have a problem with is people pretending to not understand how that process works.
I’m not sure paying more is what I want or that I’m comfortable with you deciding what is a “win” for me.
I’m open to some of your arguments (this is an incredibly tough issue for me), but this particular formulation is probably one you want to avoid (and I recognize that those on the other side use it also).
This stopped me dead in my tracks. Is that really what you meant to say?
If you are still making a profit, albeit less than what you were, you are still not operating at a loss.
Obviously. But that’s not what she said, which is why I asked for clarification.
I wasn’t deciding for you or anyone else. I was working with Heavy Water’s stated desire for a Korean car and so he gets one in my scenario. That sounds like a win to me. I was also addressing his argument that an economics is only ever between two parties. I disagree with that view, but if he accepts it in one instance then he has to accept it in the other instance too. Imposing a tariff on an importer is an isolated transaction and doesn’t involve Heavy Water any more than his transaction with the importer involves the government.
No, actually, import tariffs on my Korean car is a tax. Some have been arguing for higher taxes. I am for lower taxes.
Trump can jack up the taxes as high as he wants. But this will make his reelection bid in 2020 more difficult, not easier.
When people feel the pinch at the stores where they shop, they aren’t going to blame Nancy Pelosi. They will blame Trump.
Yes, a tax on a foreign company. The government taxes the company. You are not involved.
Also, who says that that tax needs to be high? In this thread you’re not arguing for lower taxes, you’re arguing for no taxes.
Besides: no one is arguing for tariffs as a general principle! In some hypothetical theoretical way I might consider a general tariff in exchange for eliminating payroll tax or income tax, but that is nowhere near this thread.
There is more than enough room in the msrp of your car to make up for the tariff. Otherwise the dealer wouldn’t negotiate. Make a better deal for yourself; don’t let the dealer pass his tax on to you.
How about this for a “fair trade” policy?
Our tariff policy rate for goods coming in from any particular country are a direct mirror of whatever the source country’s tariff rate is.
If China charges 30% on automobiles imported from the US, we charge 30% on automobiles imported from China.
If China require ownership interest and disclosure of IP in any American-backed enterprise in China, we require the same of any Chinese-backed enterprise in the US.
Here’s another thought: if we’re going to take an absolutist position on tariffs out of fidelity to freedom to choose, then do we need to take an absolutist position on immigration too?
Even if we want more immigration, is there ever a scenario where threatening restrictions might be useful for international negotiation of trade policies?
That sounds very similar to the OP. EJ quoted the Republican platform for the 1980 campaign and election of Ronald Reagan. That platform demanded the same level of equity, access, and fairness from our trading partners as we give them. Exactly what Trump is insisting on. He has only one stick to use, short of war. That stick is tariffs. No one in our debates here in many different threads has ever put forward an alternative. But should one develop, I would love to consider it.
Immigration is an interesting analog. Once could consider immigration restrictions to be parallel to tariffs.
What’s the fundamental difference between restricting/raising the cost of imported goods, and restricting/raising the cost of imported labor?
Keeping out tens of millions of cheap laborers from Mexico and Central/South America (or Sweden) prevents me from getting the lowest possible price on Lawn care/construction labor or hot Swedish Au Pairs providing child care.
Logically if you’re in favor of zero tariffs because they raise the cost of goods to the consumer, one must also be in favor of zero restrictions on immigration, right?
I support unilateral free trade, with exceptions for nations like Iran, North Korea, etc.
I am in favor of unlimited Hot Swedish Au Pairs.
Not me. I support free trade but I oppose open borders.