Posted on 06/12/2017 5:37:45 AM PDT by reaganaut1
Donald Trump has ordered a “national security” review of steel imports with a goal of justifying a broad-based tariff. If his advisers look honestly at the evidence, they can’t possibly find enough to justify such a job-killing, economically harmful policy.
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The greatest harm from broad-based steel tariffs would be to the thousands of American businesses and workers that use steel. These would include the higher cost of American steel for construction (42% of steel shipments), automotive (27%) and machinery (9%). Public works and homes would cost more to build.
Many U.S. companies that compete globally would risk losing business to overseas competitors. Some would turn to substitute materials such as plastic or aluminum, tweak their supply chains or move production overseas. Auto makers would likely utilize more high-strength aluminum and shift more production to Mexico and Canada. American steel workers could even be harmed if demand for steel drops as users adapt to higher prices.
There are 16 times more workers employed today in U.S. steel-consuming industries than the 150,000 or so American steelworkers. A study by economists Joseph Francois and Laura Baughman found that more American workers lost jobs (200,000) after George W. Bush imposed steel tariffs in 2002 than were employed in the entire steel industry at the time (187,500). The result was $4 billion in lost wages.
This is pretty much the same dilemma for any tariff proposal.
A tariff is a political move that goes beyond economic issues. It can also punish those who are major exporters of steel to the US, the world’s biggest market. The tariff is a bargaining chip, not an end unto itself.
Why was the first law enacted by the first congress and signed by G. Washington the tariff act?
Why does the US Constitution provide for congress to levy tariffs?
How did the USA became the premiere industrial power when tariffs funded the US government and were very high until 1913?
How come trade deficits were nil until the USA foolishly off shored and started to de industrialize?
Adam Smithian zealots are worse and more destructive than Keynesians. Both groups are crazy.
This is a dilemma, we need a native source for war and to "shut up" the Iron Ranger socialists here in Minnesota (the Iron Range and the inner twin-cities keep electing people like HHH, Dayton, Ellison, Franken and other maniac-crats).
Consider that the administration has done the following:
-- Forced Japan to accept restraints on auto exports. The agreement set total Japanese auto exports at 1.68 million vehicles in 1981-82, 8 percent below 1980 exports. Two years later the level was permitted to rise to 1.85 million.(33) Clifford Winston of the Brookings Institution found that the import limits have actually cost jobs in the U.S. auto industry by making it possible for the sheltered American automakers to raise prices and limit production. In 1984, Winston writes in Blind Intersection? Policy and the Automobile Industry, 32,000 jobs were lost, U.S. production fell by 300,000 units, and profits for U.S. firms increased $8.9 billion. The quotas have also made the Japanese firms potentially more formidable rivals because they have begun building assembly plants in the United States.(34) They also shifted production to larger cars, introducing to American firms competition they did not have before the quotas were created. In 1984, it was estimated that higher prices for domestic and imported cars cost consumers $2.2 billion a year.(35) At the height of the dollar's exchange rate with the yen in 1984-85, the quotas were costing American consumers the equivalent of $11 billion a year.(36)
-- Tightened up considerably the quotas on imported sugar. Imports fell from an annual average of 4.85 million tons in 1979-81 to an annual average of 2.86 million tons in 1982-86. Not only did this continued practice force Americans to spend more than other consumers for sugar, but it created hardships for Latin American countries and the Philippines, which depend on sugar exports for economic development. The quota program undermined President Reagan's Caribbean Basin Initiative and intensified the international debt crisis.(37)
-- Negotiated to increase restrictiveness of the Multifiber Arrangement and extended restrictions to previously unrestricted textiles. The administration unilaterally changed the rule of origin in order to restrict textile and apparel imports further and imposed a special ceiling on textiles from the People's Republic of China.(38) Finally, it pressured Hong Kong, Taiwan, and South Korea, the largest exporters of textiles and apparel to the United States, into highly restrictive bilateral agreements. All told, textile and apparel restrictions cost Americans more than $20 billion a year.(39) The Reagan administration has stated several times that textile and apparel imports should grow no faster than the domestic market.(40)
-- Required 18 countries--including Brazil, Spain, South Korea, Japan, Mexico, South Africa, Finland, and Australia, as well as the European Community--to accept "voluntary restraint agreements" to reduce steel imports, guaranteeing domestic producers a share of the American market. When 3 countries not included in the 18--Canada, Sweden, and Taiwan-- increased steel exports to the United States, the administration demanded talks to check the increase. The administration also imposed tariffs and quotas on specialty steel. These policies, with their resulting shortages, have severely squeezed American steel-using firms, making them less competitive in world markets and eliminating more than 52,000 jobs.(41)
-- Imposed a five-year duty, beginning at 45 percent, on Japanese motorcycles for the benefit of Harley Davidson, which admitted that superior Japanese management was the cause of its problems.(42)
-- Raised tariffs on Canadian lumber and cedar shingles. -- Forced the Japanese into an agreement to control the price of computer memory-chip exports and increase Japanese purchases of American-made chips. When the agreement was allegedly broken, the administration imposed a 100 percent tariff on $300 million worth of electronics goods. This episode teaches a classic lesson in how protectionism comes back to haunt a country's producers. The quotas established as a result of the agreement have created a severe shortage of memory chips and higher prices for American computer makers, putting them at a disadvantage with foreign competitors. Only two American firms are still making these chips, accounting for a small percentage of the world market.(43)
-- Removed Third World countries from the duty-free import program for developing nations on several occasions. -- Pressed Japan to force its automakers to buy more American-made parts.(44)
-- Demanded that Taiwan, West Germany, Japan, and Switzerland restrain their exports of machine tools, with some market shares rolled back to 1981 levels. Other countries were warned not to increase their shares of the U.S. market.
-- Accused the Japanese of dumping roller bearings, because the price did not rise to cover a fall in the value of the yen. The U.S. Customs Service was ordered to collect duties equal to the so-called dumping margins.(45)
-- Accused the Japanese of dumping forklift trucks and color picture tubes.(46) -- Failed to ask Congress to end the ban on the export of Alaskan oil and of timber cut from federal lands, a measure that could substantially increase U.S. exports to Japan.
-- Redefined "dumping" in order "to make it easier to bring charges of unfair trade practices against certain competitors."(47)
-- Beefed up the Export-Import Bank, an institution dedicated to promoting the exports of a handful of large companies at the expense of everyone else.(48)
-- Extended quotas on imported clothespins.
Tariffs should be used to retaliate against every country that tariffs our exports to them. Which is about every country on the planet.
Not a smithian zealot so I do not know what the accepted answers might be, but for the little it is worth here is my go at answering the questions.
Why China? I do not think that China is interested in lowering prices for consumers in their country. What “works” is what achieves the goal.
G. Washington’s tariff act? The original idea was that the states would have absolutely unlimited free trade with each other. Tariffs were the only mechanism for financing the fed govt. California could not under the original idea impose such regulatory burdens on business as they do.
Premier Industrial power? That is too big a question. There is a lot of ugly history there with millions of dead people all over Europe contributing to the answer.
Trade deficits were nil? Economist Walter Williams says trade deficits do not matter. “I have a trade deficit with my doctor. It has not hurt me.”
Destructive Smithians and Keynesians. The idiot Democrats made it impossible with their taxes and regulations to do business here. The idiot Republicans made it very easy to move offshore, and we wonder why there are no jobs. Now we are going to return to the Hawley-Smoot Tariffs with predictable results.
Solution? The government must immediately and permanently cease all operations which are not specifically authorized by the constitution! There would be no income tax, and the tariffs would be negligible.
Keynesians destroy monetary systems, Smithians destroy entire industries and destabilize society just like Marx predicted they would. Both are evil.
Half right.
We now have no steel industry left to hurt.
Tariffs have supplied up to 95% of all of the federal budget in past years. Our Founding Fathers instituted tariffs.
All taxes are penalties. Income taxes directly discourage income. Sales taxes directly discourage sales. Tariffs directly discourage purchase of anything from outside a country.
Honestly, which of those is healthiest?
There is not a single set of countries in the world with true free trade, so what are you and the WSJ trying to feed us?
The economy, our society and our freedom cannot survive the twin onslaught of Keynesian and Smithian economics.
I agree
This was argued for back in the 1970’s when Japan was accused of dumping steel in US markets “below cost”. The arguments were from the United Steel Workers, not the US steel companies. At stake: about 25,000 steel worker jobs. The average guy on the street was for the tariff because they don’t understand its impact. First, everything that uses steel immediately becomes more expensive. Your new car might cost $100 more now. Same for many appliances and other products...all steel products get more expensive. Second, it’s a windfall for the gov’t since they get the tariff revenues. They didn’t do anything to earn it; it does nothing to produce more steel, but those clowns in DC will spend it to get reelected (e.g., free cell phones for deadbeats. Really? That’s the best you can do for us?) Finally, since Japan and China both have a capital stock that is newer that US steel producers, they can produce at a lower cost. (We bombed Japan’s capital stock into the Stone Age in WWII and China was not an economic power at that time.) Tariffs lessen the incentive to be more efficient. If it’s true that foreign steel companies are selling at a loss, buy all we can from them and eventually drive them out of business.
In sum, all tariffs do it subsidize union workers who already make more than you do, provide a windfall gain for the gov’t to spend more of your money on stupid projects, and raise the price of everything that uses steel. It’s a stupid policy.
but when other countries subsidize their production to put US companies out of business, then that is economic warfare.
In case of emergency we could find ourselves without steel.
A review from a NATIONAL SECURITY standpoint is valid.
It's stupid to say tariffs only help union workers when 90% of manufactured goods are made in the USA by non union workers. What is stupid is to close major industries in the USA to increase global corporate profits. The consumer sees no benefit at all. The taxpayer gets killed and society shift further left as the "displaced" seek refuge in the state and drugs. Smithian economic policies are stupid.
Doesn't having these industries functioning protect the nation against other nations aggressive/restrictive trading policies?
Could it be true if regulations were made to help and protect rather than to restrict and close down these industries they could operate fine in the open market?
Also I think the America of creators is more dynamic the America of consumers - something deeply American about building both stuff and things.
As there is more and more automation shouldn't America leading the way in these industries moving the humans to different positions of running/maintaining/programming the bots rather then some dude(t) from another nation?
While we pussify and don't use our natural resources to keep America strong while other use theirs and get stronger isn't the USA going to become a temping target to take over. The uniparty/globalists have seem to have a good start down this road.
The consumer sees no benefit at all.
Really? So competition has no impact on prices?
What is stupid is to close major industries in the USA to increase global corporate profits.
And why do certain industries close? It's because someone else can make it cheaper, which means consumers pay less. True, jobs are lost, but one reason is because labor demands more than its productive worth. Is a fast food worker really worth $15/hr? No, which is why those workers are losing their jobs as the chains close in those markets where politicians were dumb enough to force that wage on employers. If your goal in life is to make $15/hr flipping burgers, chances are you didn't pay attention in school.
Also, to think that tariffs are going to fix the welfare state and the drug problem seems tenuous at best.
“...since Japan and China both have a capital stock that is newer that US steel producers, they can produce at a lower cost. (We bombed Japan’s capital stock into the Stone Age in WWII...”
Recall English PM Heath (?), saying the German economy was in better shape because their equipment had been destroyed.
A friend returning from England in the 70’s, was shocked at how ancient the equipment was.
They were still using a line shafts with flat belts.
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