Tariffs are a form of taxation. They may be popular in some circles and even help win votes, as politicians at least as President William McKinley are proving, but they are still disastrous in the long term.
Last week a 25 percent tariff on steel imports President Donald Trump gave him could win a few more votes in Michigan and Pennsylvania and the rest in what was called the “Rust Belt” when it was a center of heavy US manufacturing. For the rest of us, this means higher prices.
It may actually be the case that imported steel and aluminum are priced unfairly and anti-competitively because the governments of the countries where they are mechanized and manufactured subsidize their production. But is it wise to respond by saying, in fact, we will increase the price of these goods at our level and the price of what you are selling will better reflect the cost of production? At best it is a risky proposition.
Trump steel tariffs pushed up prices in the spot market by up to 20 percent almost overnight. Its downstream economic effects are substantial, no matter what Commerce Secretary Wilbur Ross or anyone else has to say about it. Anything produced using steel turned out to be more expensive. Anyone who’s received a salary increase or bonus or both from their employer because of a recent tax cut has seen a little bit of it come back almost across the board. It’s hard to find an industry in America that doesn’t use steel or buy things made from it.
Sure, it’s nice to think we stuck sugar into the ribs with sharp elbows. They steal an estimated $500 billion of US intellectual property every year and nothing we’ve done so far has been able to stem that tide. Some form of economic retaliation may be in order – no matter how much US debt it is buying, every time the US Treasury auctions something off – but we want to sell more things to China and to China, not less. It would be irrational for Beijing not to respond to tariffs one way or another and, if we know one thing about the Chinese, it is that they are quite rational when it comes to business matters. They are playing the long game too.
political cartoon on economy
But let’s put aside for a moment the idea that Trump’s tariffs could lead to a trade war with the Chinese or anyone else. Even in a global economy, the rest of the world is inextricably linked to its business roots. The United States is naturally prone to free trade, pigeon-holing us to protectionists in other countries, who continually give us concessions that the president has repeatedly called “bad trade deals.” Protectionism, in the long run, is not good for American industry or American workers.
Remember the economic displacement of the 1970s, when the oil shock and high inflation rocked the US economy? We thought then that protectionism of our industry was the way to go.
It didn’t turn out that way. The protectionism of the economy was badly hurt as it moved from industrial to post-industrial. It killed jobs. It killed communities. It almost killed the country as no one was ready to face the reality and respond with the necessary measures to be competitive in the emerging global economy.
It wasn’t just about tariffs – then or now. Other countries had learned in more than one case to produce goods that were as good or better than those manufactured here, as well as less expensive because we showed them how to do it. American industry failed to respond, not just because they saw the threat coming, but because they couldn’t: an entire regulatory regime stood in the way, a regime that American businesses would eventually flee the country. Ran when it became clear it was killing the same businesses whose sponsors and patrons claimed it would save.
This president, like Ronald Reagan before it, has shown that regulation brings tremendous economic benefits. Actions on the regulatory front by the Trump administration in its first year have saved the US economy from recession in a decade. It would be a shame to see that seem to be undone by a new push toward protectionism that, while perhaps sounding sensible now, will be pushed to greater heights by those who can follow Trump to office, his immediate predecessor. were not like. understand how economies work and they were only interested in winning votes.
If it only turns out to be a negotiating ploy to convince Chinese, Canadian, Mexican, European and other trading partners to seriously end the era of America getting the short end of the stick in trade deals. If so, these tariffs may someday be cited as an example of political courage that produced great dividends for the nation. If he is serious about them, if he really believes the rhetoric that comes with these charges that is not only here to stay but more to come in future days, he is already in his presidency. has begun to erode its economic legacy. “Major McKinley” may have been able to make it work but that was then; It is now.
