Posted on 03/04/2018 8:00:35 AM PST by Kaslin
One of the ironies of trade protectionism is that tariffs and import quotas are what we do to ourselves in times of peace 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 by punishing with tariffs in order to make Americans more prosperous. If ever there were a crisis of logic, this is it.
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, it puts at risk 5 million manufacturing and related 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 above the price paid by our foreign rivals.
In other words steel and aluminum may win in the short term, but the steel and aluminum users and consumers lose. In fact tariff hikes - which are really tax hikes.
Some of those 5 million jobs will be put in harm’s way. And if they sell less to foreigners, the trade deficit goes up, not down. Since so many of the things Americans consumers buy today are made of steel or aluminum, a 25% tariff may get passed on to consumers at the cash register. This is a regressive tax on low income families.
Trump should also examine the historical record on tariffs, because they have almost never worked as intended and almost always deliver an unhappy ending.
The Smoot Hawley tariff of 1929 signed into law by Republican President Herbert Hoover gave us and worsened the Great Depression.
Richard Nixon’s 10% import surcharge contributed to the stagflation of the 1970s.
George W. Bush tried to save the steel industry by imposing tariffs on steel and If those tariffs worked, we wouldn't be having this discussion today. We tried to save the color TV industry with protectionist measures and instead they wiped out the domestic production.
We aren't persuaded by the Trump administration 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 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 to the U.S.?
What does worry us is that Canada and Mexico are now both threatening retaliatory tariffs against America. This tit for tat trade breakdown could put NAFTA in serious jeopardy. That could inflict severe economic damage to all three nations, and a stock market meltdown.
Trump should continue to make American producers more competitive in global markets through tax, regulatory, energy, and other pro-America policy changes that bring jobs and capital back to the United States. That is happening at a furious pace right now as Trump has made America almost overnight the best and most reliable place in the world to invest. Steel and aluminum import tariffs work decisively against this goal.
In the early 1980s Ronald Reagan’s invoked anti-dumping provisions against Japanese steel. It was one of his few decisions he later confessed he wishes he hadn’t made. Trump will come to learn the same thing, and we hope it is sooner, not later.
I’ve heard all this internationalist slop x 30 years while watching American jobs flee our shores, China become a superpower and our trade deficit explode. Sorry, your trade policies were kicked to the curb on 11/8/16 and they aren’t coming back. It’s now OUR turn.
Go Trump!
A country needs an electronics industry in order to survive
The USA didn't import hardly anything from any foreign country all the way up to 1970. CNN and the media people to think we need to “trade” with China so that America will be destroyed.
Wrong. It will save jobs that are threatened to be lost now, as well as, saving necessary industries for this country to remain. The cost to consumers will be offset by the handouts needed for those lost jobs. Just like Reagan did for Harley Davidson & semi-condictors. In 1977 and again in 1979 President Jimmy Carter’s administration established minimum prices at which foreign-produced steel could be sold. In 1984, when it seemed as if the whole steel industry was on the brink of extinction the Reagan administration tightened America’s trade policies further by negotiating quotas with foreign countries.
So there are 3 options, tariffs, quotas, or price controls, and Reagan used tariffs & quotas, while Carter employed only price controls.
Cost some jobs yes. But think of jobs created by decent wages for more steel workers plus the quality of the steel.
Our infrastructure has suffered with low quality foreign steel.
None of which has happened, nor will happen. Ever negotiate?
It takes the most treasonous form of idiocy to assert that the amount of protectionism required to maintain military preparedness is somehow wrong, damaging, or optional.
I don't know how you could come to that conclusion from what I posted. I asked if we are currently having a problem supplying our military needs from our current steel and aluminum base? But while we're on the subject, you are aware that we already depend on foreign sources for some of our defense needs?
NOte that Kudlow did not oppose French imposed tariffs on Chinese steel implemented two years ago and approved by the EU.
We'll see this week, won't we?
“Americans like negative taxed imported goods”
Except when their job gets exported.
As usual, Kudlow is mired in his econ theories and seems incapable of including factors such as national defense and domestic jobs in his opinions.
Sometimes I agree with Kudlow, but over the years he has been one of the biggest, give China whatever it wants advocates with a public forum.
Throw away your econ books, Larry, and try to learn more about national defense needs and what it takes to remain an independent, sovereign nation.
I call B.S.
Read the article. We export steel and Canada is a dominant supplier of our imports.
Do you think the fracking industry was a result of tariffs against foreign oil? If we’d have put tariffs on foreign oil, I’d wager domestic oil companies would have been much more powerful and would have discouraged independent oil drillers from ever starting the fracking revolution that saved our butts.
Tariffs are a terrible idea and directly tax our own people while making our own exports less competitive.
As for “fair” trade, one person’s fair is another person’s squealing unfairness. That’s called competition. Someone is always losing to someone else.
Larry Kudlow has more economic knowledge in his little finger than the combined knowledge of his critics in here.
Trump is wrong on this one, just as Reagan was. Hopefully he’ll recant and avoid the prospect of a trade war.
Until he does, beware the stock market. It really doesn’t like this sort of messing around.
>>Yes, tariffs are taxes and steel and aluminum are strategic commodities which we need to be able to produce for ourselves.<<
To the extent that is true, direct subsidies are far more effective and more easily justified.
And they work. Just look at the overbuilding we’re getting of wind and solar power. Not that these are strategic, but subsidies work.
We should decide whether any particular product is in danger of being outsourced solely to despotic countries (not Canada, for example) and subsidize the minimum amount of production determined to be necessary for maintenance of the capability. Production can always be ramped up in time of war as WWII proved beyond doubt.
And right now, the current domestic steel and aluminum industry are sufficiently established that no subsidy would be necessary. Nor are tariffs, an even worse idea than subsidies.
Ah, so now we’re traitors. Thanks for that.
Unless this is very very very selective all it’s going to mean is that whatever that product is if made out of something being subjected to that tax.
It’s going to cost you more.
Plus the country affected will retaliate by putting taxes on stuff we send them and it will cost them more. Usually it hurts our Agri business. Creating inflation and slows down economic development.
It strikes me what Trump is looking at are those thousands of small manufacturers who’ve gone out of business because of the expansion of cheap Chinese imports (of which many were design knock offs) into this country. Remember the Obama quote on MANUFACTURING IS FINISHED IN THE US.
But that was a slow gradual process when it began. Then accelerated by policy. So it should be when as we’re trying to bring small industry back.
Certain key manufacturing and re-manufacturing processes essential to defense should be targeted first and done on a very very limited basis. Because a wholesale approach would wreck our economy.
So you don’t mind paying one way(subsidize), just the other way(tariff) is bad?
Good point. Kudlow picks up a weekly check from CNBC so that could explain things.
Targeted tariffs imposed on certain raw materials do nothing but pit one U.S. industry against another. I don’t see how protecting Alcoa and U.S. Steel to the detriment of Ford and Carrier makes any sense from an economic perspective.
Kudlow (and Stephen Moore and Art Laffer who also co-wrote this piece) was an early and strong supporter of Trump in 2016. You conveniently forgot that fact.
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