Posted on 07/17/2018 7:50:43 AM PDT by SeekAndFind
The Canadian government, lining the pockets of its dairy producers, imposes high tariffs on American dairy imports. That forces Canadians to pay higher prices for dairy products. For example, Canadians pay $5.24 for a 10.5-ounce block of cheddar. In Washington, D.C., that same amount of cheddar sells for $3.64. Canadians pay $3.99 for a 1-pound container of yogurt. In Washington, D.C., you can get nearly twice as much yogurt for a little over $4. It's clear that the Canadian government's tariffs screw its citizens by forcing them to pay higher prices for dairy products.
What should the U.S. response be to Canada's screwing its citizens? If you were in the Trump administration, you might propose imposing tariffs on soft wood products that Americans import from Canada — in other words, retaliate against Canada by screwing American citizens. Canadian lumber — such as that from pine, spruce and fir trees — is used in U.S. homebuilding. Guess what tariffs on Canadian lumber do to home prices. If you answered that they raise the cost and American homebuyers are forced to pay higher prices, go to the head of the class.
This retaliation policy is both cruel and not very smart. It's as if you and I were in a rowboat out at sea and I shot a hole in my end of the boat. What should be your response? If you were Secretary of Commerce Wilbur Ross or Secretary of the Treasury Steven Mnuchin, you might advise retaliating by shooting a hole in your end of the boat. If I were president, I'd try to persuade officials of other countries not to serve special producer interests by forcing their citizens to pay higher prices. But if they insisted, I'd say, "Go ahead, but I'll be damned if I'll do the same to Americans!"
The ruse used to promote producer interests through tariff policy is concern about our large trade deficit. It's true that we have a large current account trade deficit. However, that's matched exactly by a very large capital account surplus. Translated, that means Americans buy more goods from other countries than they buy from us; that's our current account deficit. But other countries find our investment climate attractive and invest more in the U.S. than we invest in other countries; that's our capital account surplus.
Have you ever wondered why foreigners are willing to invest far more money in Texas and California than they are willing to invest in Argentina and Venezuela? Do you think it's because they like North Americans better than they like South Americans? No. We've always had an attractive investment climate, and we've had current account deficits and capital account surpluses throughout most of our nation's history. In fact, the only time we had a sustained current account trade surplus was during the Great Depression, when we had a surplus in nine out of 10 years, with 1936 being the lone exception.
Let's delve a bit into the politics of trade tariffs. Whom do we see spending the most resources lobbying for tariffs on foreign steel and aluminum? Is it American users of steel and aluminum, such as Harley-Davidson and John Deere? Or is it United States Steel Corp. and Alcoa? Of course it's U.S. Steel and Alcoa. They benefit from tariffs by being able to sell their products at higher prices. Harley-Davidson and John Deere lose by having to pay higher prices for their inputs, steel and aluminum, and their customers lose by having to pay higher product prices.
There's a lot of nonsense talk about international trade, which some define as one country's trading with another. When an American purchases a Mercedes, it does not represent the U.S. Congress' trading with the German Bundestag. It represents an American citizen's engaging in peaceable, voluntary exchange, through intermediaries, with a German auto producer. When voluntary exchange occurs, it means that both parties are better off in their own estimation — not Trump's estimation or General Motors' estimation. I'd like to hear the moral case for third-party interference with such an exchange.
Exactly. I generally love Walt Williams, but he is up in years and I am so tired of those accusing Trump of being a misunderstanding yahoo for making the threats he’s making — expressly to finally get a level playing field, instead of US companies having to bear more tariffs to export than other companies deal with importing here.
The asymmetric tariffs do hurt the American worker more than anybody, and that is what Trump is working to address. God bless our president for all the crap he has to put up with.
We (Canadians) might not need or want tariffs on dairy products if your government didn’t subsidize the hell out of their production. You know, subsidies, the things that you keep slapping tariffs on our softwood lumber for? The US massively overproduces dairy products because of those subsidies.
RE: Why is it morally wrong for us to do what the rest of the world is doing to us?
I think Prof. William’s argument is not about morality, it’s about the PRACTICAL EFFECTS of doing to others what they do to us — if they are shooting their consumers in the foot, we should not be doing the same thing.
RE: We (Canadians) might not need or want tariffs on dairy products if your government didn’t subsidize the hell out of their production.
OK, what about a deal — you don’t subsidize your products (including drugs) and we don’t subsidize ours.
The Chinese, for example, believe strongly in protecting their industries.
And they do reinvest their money, buying up huge swaths of farmland in the US, and oil and gas properties, mineral rights, and companies particularly involved in technologies that interest them. Their land and oil purchases usually are at the 33% level to keep them under the radar, but they are enormous.
US investors are not able to do the same thing in China. And even if they were able to, their investments simply do not have the same legal protections, they can be taken anytime as people building companies there have discovered.
So, again, there is no level playing field. Their industries are protected, and ours are not. Their investments here are protected, and ours there are not. And not many people get that, and not many who get it have any interest in doing anything about it.
It is not the price...it is the jobs..
If you have no job you have no money
Do we pay 10% more for a product and people work or we pay welfare because there not working..
Oh, and BTW, the dairy industry was an exception to the FTA specifically carved out during negotiations. The US agreed to it. If we drop the tariffs, US dairy products will probably completely swamp and destroy the Canadian dairy industry, again due to the massive subsidies in the US.
I imagine we might be willing to discuss dropping the Canadian tariffs on dairy if you were willing to discuss dropping your subsidies.
Fine with me. The US has a lot more subsidies, particularly agricultural, to eliminate than Canada does.
We don’t subsidize drugs in this country. The government negotiates prices for them with drug produces, and all Canadians benefit from that single large buyer’s negotiating power.
If foreign companies buy out US companies - they can close those companies / use them as proxies forcing us to buy MORE from the foreign companies. Some tax money may stay here, but profits and such all go back to the main office. Capital and know how is shifted and all that is left are Mc Jobs. Further, do you really want China & Co to have controlling interest in our infrastructure?
TBH kicking out the gazillions of low-skill illegals will get us sufficient jobs. But good jobs moving people up the scale of employment require that we stop selling out to the rest of the world. As does our economic power, which of course is the root of (and route to!) our security.
Trump is a third party too.
I missed where Prof. Williams offered a solution. In fact, he seemed to endorse the notion that enormous outward flows of cash hundreds of billions of dollars isn’t anything to worry about. Is this because he believes that printing paper money without any product to back it up is economically harmless?
RE: he seemed to endorse the notion that enormous outward flows of cash hundreds of billions of dollars isn’t anything to worry about.
I think he believes that the money that goes out DOES NOT STAY OUT. They come right back to the USA in terms of foreign investments as well as the purchase of our debt instruments.
But I disagree. The point of tariffs, from our point of view, is to eliminate or lower tariffs already imposed by our trading partners. They already put tariffs on our goods. Trump says, take yours down and we’ll take ours down. But we had to put some in place to be able to make that offer.
Since they sell more to us than we sell to them, they can’t really hurt us by further raising tariffs on us. At some point they have no choice but to make a deal. Or, we simply get the same product from somewhere else.
........
I love Dr Williams, however, I disagree, too.
Also, where in the article is the ALTERNATIVE SOLUTION...I hate posted stuff that leaves out the punch line. “oh, you should read the whole thing”...no, I shouldn’t; I take in a ton of info and if I do that, I don’t have time to read ad infinitum.
If there were no tariffs, no third party should interfere.
There are multiple, large, unfair {to US workers} tariffs and barriers to prevent US goods from being bought by German citizens {in the case of Mercedes}.
Walter Williams, and all of the other 'free traders' live in a world as they want it to be, not as it is.
The USA is not pure in the tariff battle, we protect sugar, hell we even protect 'peanut farmers', llama raisers, and hell raisers.
Trump wants a world with no tariffs and then let the cream rise to the top.
Hey, Walter, I majored in Economics in college, and have studied the field for my entire adult life. I am very well aware of what free market textbooks and doctrine are regarding tariffs. Put simply: “Tariffs = Bad.”
However, like many academics, you have failed to step back from looking intently at a few trees so that you can look at the entire forest - and thereby obtain a better view of what is really going on.
Donald Trump understands economics - well. If he didn’t, he wouldn’t have turned a $1 million loan into a multi-billion dollar fortune. But he also understands looking at the big picture - again, well.
The big picture is that we are on the losing side of a trade war with much of the rest of the world - mainly because people like you have (in good faith) pressured our government into NOT fighting such a trade war. Well, what happens when only one side fights a war? The other side loses, EVERY SINGLE TIME. Well, Donald Trump decided that this was/is unacceptable, mainly because it is incredibly naive and simply isn’t working for this country. He is imposing tariffs in order to force the other side to the negotiating table. It is similar to Nixon bombing the crap out of Hanoi and Haiphong Harbor in late 1972 - you wouldn’t ordinarily do so, but inflicting pain on someone that you want to negotiate with is a great way to get him to the table, and also to get him to make some concessions to you because he wants you to stop inflicting pain upon him.
Walter, this is a NEGOTIATING TACTIC. Be assured that Donald Trump knows a thing or two about how to successfully negotiate with those whose interests are diametrically opposed to his own. His goal is not to have tariffs, or a protectionist policy, it is to get the OTHER NATIONS to reduce or eliminate THEIR tariffs.
Really, this is not all that complicated. Why otherwise intelligent people don’t get it is beyond me. Maybe it is because they don’t live in the real world of making money (or going broke if you don’t do that well).
I don't know about that. Trump has never stated that ever but if I am wrong post a reference.
Hopefully the tariffs will be permanent. The income raised can be used to reduce the debt and lower income tax rates. Tariffs are superior to income taxes, actually all consumption based taxes are in that regard. The old Republican Party, pre WWII was all about the tariff and rightly so.
I’ll agree with you that consumption-based taxes are better than income taxes. Tariffs have their uses, but they tend to subsidize companies that cannot compete (either that, or once the tariff is put in place, they cease to improve their products and/or services much, and thus cannot sell much outside of the country).
It’s a bad thing because they have motives beyond just making profits.
The US has the preeminent military force in the world, and people in other countries have a vested interest in influencing where and how and who that force is unleashed upon.
So country A wants to get rid of country B, but does not want to expend the military resources (or has no such resources) available, what do they do? Invest in US companies, then through monetary donations buy influence in the US political process, get the US to attack country B.
That’s just one example. People who are your countrymen who will share the same fate with you are more likely to work for your mutual interest then foreigner who is only interested in self-gain. Economists make the mistake of assuming that everyone is just motivated by money, when it’s only one of many things that motivate people.
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