Tariffs Are Taxes

One of the ironies of trade protectionism is that tariffs and import quotas are what we do to ourselves in times of peace and what foreign nations do to u‎s with blockades to keep imports from entering our country in times of war.

Or consider that we impose sanctions on U.S. enemies such as North Korea, Russia, and Iran because we want them to feel the economic pain of being deprived of imports.

But now we are imposing sanctions on our own country, putting up tariffs supposedly to make Americans more prosperous. If ever there were a crisis of logic, this is it.

President ‎Donald Trump genuinely believes that his steel and aluminum tariffs will save thousands of blue-collar jobs. And we know from our interactions with him that he truly cares about these workers in Pennsylvania, Ohio, and other Rust Belt states. We do, too, and we don’t want factories to shut down.

But even if tariffs save every one of the 140,000 or so steel jobs in America, they put at risk 5 million jobs in industries that use steel. These producers now have to compete in hyper-competitive international markets using steel that is 20 percent above the world price and aluminum that is 7 to 10 percent higher than the price paid by our foreign rivals.

Steel and aluminum may win in the short term, but steel-and-aluminum users and consumers lose.

Tariffs are really tax hikes. Since so many of the things American consumers buy today are made of steel or aluminum, a 25 percent tariff on these commodities may get passed on to consumers at the cash register. This is a regressive tax on low-income families.

Meanwhile, up to 5 million jobs will be put in harm’s way. And if U.S. steel-and-aluminum-using industries sell less to foreigners, the trade deficit goes up, not down.

Trump should also examine the historical record on tariffs. If he does he’ll see they have almost never worked as intended and have almost always delivered an unhappy ending.

The Smoot-Hawley tariff of 1929 was signed into law by Republican president Herbert Hoover. It gave us the Great Depression and worsened it along the way.

Richard Nixon’s 10 percent import surcharge contributed to the stagflation of the 1970s.

George W. Bush tried to save the steel industry by imposing tariffs on steel. If those tariffs had worked, we wouldn’t be having this discussion today.

Remember when we tried to save the color-TV industry with protectionist measures? Instead of saving it, we wiped out domestic production.

We aren’t persuaded by the Trump administration’s claim that we need to impose these tariffs for national-security reasons. Despite stiff competition from imports, many specialty steel producers are doing just fine, and are actually exporting steel to Mexico and Canada.

Meanwhile, Canada is the number-one exporter of steel to the United States. Does anyone really believe Canada is a national-security threat?

And tariffs, to be sure, are a two-way street. Canada and Mexico are now threatening retaliatory tariffs against America. This tit-for-tat trade breakdown could put NAFTA in serious jeopardy, inflict severe economic damage on all three nations, and spark a stock market meltdown.

Trump should continue to make American producers more competitive in global markets with tax-, regulatory-, energy-, and other pro-America-policy changes that bring jobs and capital back to the United States. This is happening at a furious pace right now. Almost overnight, Trump has made America the best and most reliable place in the world to invest. But steel and aluminum import tariffs work decisively against this goal.

In the early 1980s President Ronald Reagan invoked anti-dumping provisions against Japanese steel. It was one of the few decisions he later confessed he wished he hadn’t made. ‎

— Lawrence Kudlow, Arthur B. Laffer, and Stephen Moore are co-founders of the Committee to Unleash Prosperity.

I have been a head of a union one time. We split away from the regional since they wouldnt support us. I also ran a small corporation for 25 years. Treated my workers good and never fired but one-for drinking on the job.

Anytime. I will go on through the next time I drive back up and let them know that although they have the right to work, they also have the right to be fired without cause..which has been happening all through the right to work states. Dont get me wrong buddy, I am for right to work, and I am for the right to organize labor when a jackass like you take advantage of those workers firing them with out cause. Thats what they call it dont they buddy? Lets work them till just before they can collect retirement or something and then fire them. Thats how it works. Then to get around it all, nanny goats like you hire illegals to do the work, that way you assholes get away from paying workers comp and unemployment.

Idiots like you are the reason for unions. If you had taken care of your workers and treated them like humans instead of scum this country wouldnt have never seen the unions become the way they have-most likely never seen unions at all. US Steel, Ford, The Coal industry are some of the ones who caused organized labor. Maybe those assholes should have tried to treat workers the way Westinghouse treated his employees.

As for your little rant about the gold standard, is that so? Then how come China is one of the biggest purchasers of gold?

Your right though..it is cheap steel, about as cheap as your arguements.

Never said I was opposed to the gold standard. You need to quit smokin that mexican dirt weed up there and mounting them sheep.

And I never said I was against trade, most of us ARE against free trade though, unlike you and and your globalist cabal buddies most of us are for FAIR trade.

How much does Soros pay you to campaign for him?

“The Smoot-Hawley tariff of 1929 was signed into law by Republican president Herbert Hoover. It gave us the Great Depression and worsened it along the way.”

Nonsense. Kudlow, Laffer and Moore are not economic historians although they’d like you to think so.

The NBER is who calls our recessions, and the Great Depression began in August 1929 nine months before the Smoot Hawley Tariff passed in June 1930. Unless Smoot Hawley possessed magical powers it didn’t “give us the Great Depression”, it followed on its heels.

Moreover the Smoot-Hawley Tariff of 1930 was basically the same as the Fordney–McCumber Tariff of 1922, which using the logic of Kudlow, Laffer and Moore must have “given us The Roaring 20s”.

The Great Depression was not the result of tariffs passing, or the stock market crashing, it was the result of a massive collapse in the American banking system and the money supply. In three years one third of American banks collapsed and 30% of the American money supply simply vanished, always a risk in a fractional reserve monetary system.

Milton Friedman and Anna Schwartz wrote extensively about it, as did Joseph Schumpeter. Our peculiar branch banking laws and the absence of FDIC to protect depositors were two of the major factors, plus a Fed that froze and failed to provide liquidity to halt the cascading series of bank failures. Ben Bernanke was a student of Friedman and Schwartz, and the Fed’s response the 2008 economic crisis was based upon their study of the Fed’s failure to act during the Great Depression.

I would agree the major cause of the Great Depression was the Federal Reserve System and its mishandling of the monetary system. But the high tariffs didn’t help and if Milton Friedman was with us today he would be amazed at the current popularity of protectionism.

The economy is like a camel. Keep piling on the weight in the form of regulations, taxes and bad policy and sooner or later you will find the straw that breaks the camels back, or at a minimum burdens it to the point of slowing it down.

The Federal Reserve didn’t do anything to cause the Depression, so Friedman and Schwartz state in their Monetary History of the US.

The problem with the Fed was their failure to act in response to a series of panics that were wiping out sound banks. The panics began with the 1930 failure of Bank of the United States, a private bank whose name led people into thinking the country itself was in trouble.

The Fed needed to flood those banks with liquidity so that panicking customers would feel that they could always get their money and quit pulling it out- that disintermediation had the effect of shrinking the money supply. Even worse was what happened to depositors when banks did fail, there was no FDIC to keep their deposits from simply vanishing.

We had the Fordney McCumber tariff during most of the 1920s and it was little different from Smoot Hawley. If Smoot Hawley is such a big deal then those making that argument need to explain why the 1922 tariff accompanied eight years of boom times.

Foreign trade in that era amounted to less that 5% of the economy IIRC. We were virtually a self sufficient economy.

You need to read Murray Newton Rothbard’s work on the Great Depression if you think the Federal Reserve had no effect on the economy of the 1920’s and 30’s.

https://www.libertyclassroom.com/depression/

Rothbard would maintain that the FED allowed the speculative bubble to build and then allowed the depression to deepen after the bank failures. The FED has continually mismanaged over the years which is another reason to be skeptical of any group of politicians, bureaucrats, lawyers, bankers or even economists trying to run our lives.

This tariff issue reminds me of the early seventies when Nixon started the wage and price controls because of the ravings of the democrats and a few economically ignorant Republicans. It was a disaster. What temporary salutary effects it may have had at the beginning were soon followed by massive inflation.

Tariffs may not be as bad but it is still not good. It’s like another tax increase and will cause the price of most goods using steel and aluminum to rise.

I’ve read it and wasn’t persuaded. It’s the von Mises/Austrian School theory that the Fed offering cheap money to the banking system created an artificial boom during the 20s.

To me it’s a too simplistic version of the business cycle and it fails to explain why during the Depression only the American banking system suffered a massive deflation. American rural banks collapsed in huge numbers because restrictions on branch banking left them without money center partners to save them from being wrecked by a run- Canada by comparison had branch banking and didn’t suffer the same fate.

The Fed’s fault in it all was failing to act as lender of last resort once the panics began after the collapse of Bank of United States.

“This tariff issue reminds me of the early seventies when Nixon started the wage and price controls because of the ravings of the democrats and a few economically ignorant Republicans. It was a disaster. What temporary salutary effects it may have had at the beginning were soon followed by massive inflation.”

Nixon’s controls were a disaster. So was his abrogation of Bretton Woods breaking the dollar’s last link to gold.

The seeds of the 1970’s inflation began years earlier, back to Eisenhower in the 1950s, caused by something called The Triffin Dilemma:

https://www.investopedia.com/financial-edge/1011/how-the-triffin-dilemma-affects-currencies.aspx

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