The Unseen Cost Of Saving Jobs With Tariffs

Investors Business Daily ^ | March 8, 2016 | WALTER E. WILLIAMS

[expat_panama]

...when making laws or economic decisions, it is imperative that we examine not only what is seen but also what is unseen. In other words, examine the whole picture...

...A concrete example was the Bush administration’s 8% to 30% tariffs in 2002 on several types of imported steel. They were levied in an effort to protect jobs in the ailing U.S. steel industry.

Those tariffs caused the domestic price for some steel products, such as hot-rolled steel, to rise by as much as 40%....

...there is no such thing as a free lunch...

...steel-users — such as the U.S. auto industry, its suppliers, heavy construction equipment manufacturers and others — were harmed by higher steel prices.

It is estimated that the steel tariffs caused at least 4,500 job losses in no fewer than 16 states, with more than 19,000 jobs lost in California, 16,000 in Texas and about 10,000 each in Ohio, Michigan and Illinois.

In other words, industries that use steel were forced to pay higher prices...

...back in 2002, the typical hourly wage of a steelworker ranged between $15 and $20, in addition to fringe benefits — so we might be talking about an annual wage package averaging $50,000 to $55,000 — how much sense did it make for American consumers to have to pay $800,000 in higher prices, not to mention lost employment in steel-using industries, to save each job?

It would have been cheaper to tax ourselves and give each of those 1,700 steelworkers a $100,000 annual check...

...When Congress creates a special privilege for some Americans, it must of necessity come at the expense of other Americans...

...Congress ought to get out of the miracle business and leave miracle-making up to God.

[expat_panama]

REQUEST: If anyone really feels the need to hijack this thread for a Trump rally, then lets at least try to focus our chat on Trump's import-tax hikes.

[expat_panama]

Good time to kick a hornet’s nest?

[onona]

I’d like Walter to outline just exactly how to save those jobs. I’d really like to know.

[Alberta's Child]

I saw the same thing first-hand with the tariff on Canadian softwood lumber back in 2001-03. All it did was drive up the price of lumber for U.S. contractors, and drive up the price of new homes here in the U.S.

[Wpin]

Good example of ideological nonsense rather than economic science. Easy to put down fair trade when one ignores the other side of so called free trade. We have lost millions of jobs, all those wages, profits, taxes to overseas because we ignorantly insist on free trade when it is only free on our side. Trump is setting up for a negotiation stance to remove tariffs and other impediments to American business. He cannot do that with the stupid type negotiations we have done in the past, he has to use leverage. Everyone understands this, except of course those blind ideologues who don’t have a clue about what they are talking about. Sorry assed article to post that is anti American and just plain ignorant.

[DoodleDawg]

He cannot do that with the stupid type negotiations we have done in the past, he has to use leverage.

And his leverage is to add tariffs on imported goods raising the cost to all U.S. consumers as Williams points out. How will that cause foreign countries to renegotiate instead of retaliate?

[Fai Mao]

I think the issue is also tied to production cost in the US. Higher tariffs are, in and of themselves, depending on their severity, problematic and cause real economic distortion. (example: The Bahamas has a really screwed up economy because of the extremely high import tariffs)

That said a slight rise in tariffs AND cost control measures such as reducing corporate taxation in the US plus perhaps a national right to work law to reduce excessive union demands might reduce imports and stimulate domestic production.

To the best of my knowledge the Bush raise in steel tariffs did not also include a reduction in corporate taxes

[uncitizen]

not seeing how he made his point here....

[expat_panama]

Happy Mid-week everyone!  Stocks took a bit of a hit yesterday w/ indexes falling a % in weaker trade and all while gold/silver followed suit tapering off to $1,258.09/$15.41.  I had to laugh this AM when I check out today's stock futures and saw that my conflict yesterday "(pointing either up or down)" continues today but w/ the directions reversed (?!).

fwiw--

7:00 AM MBA Mortgage Index
10:00 AM Wholesale Inventories
10:30 AM Crude Inventories

and--

O's Reforms Increase the Cynicism About Wall Street - David Dayen, TNR
Obama Peddles Economic Fiction, Ignores Fact - Peter Schiff, Euro Pacific
How Does This 7-Yr. Old Bull Measure Up to Others? - Adam Shell, USAT
There's Less Than Meets the Eye with the Market - Doug Kass, RealMoney
Why the S&P 500 Is Outperforming Dividend Funds - Paul Katzeff, IBD

[binreadin]

I had an email exchange with the John Batchelor Show executive producer, Lee Mason. Here’s what he wrote, and I’ve never seen it put better:

“What galls is the cavalier attitude of those who made megabucks from shifting American income to Chinese robbers, among others. Twenty-five years ago most Chinese people were barely hanging on, slopping pigs, and praying for good farming weather. It’s phenomenal that hundreds of millions of almost-starving people now have satisfactory homes (for as long as they can hold on to them) and a good meal a day. However, today there are more billionaires in China than in the US, and I think most of them are in the national parliament.

Most Americans haven’t figured out how to make a billion dollars legally within two decades or so, and I doubt others have, either. So our work was handed to the cheapest - heavily government-subsidized - manufacturers across the Pacific; they responded by pricing us out of the market, channeling income to their wickedest, creating a vast economic chasm there, and now we see the capital flight ($1 trillion PA) that pours stolen dollars into US real estate and prices New Yorkers out of their homes.

People making over $100K don’t seem to grasp the logic here.”

[Alberta's Child]

The underlying dilemma here that doesn’t get any attention in these discussions is that a wealthy country like ours with a high standard of living is usually going to be at a competitive disadvantage in any trade arrangement. There’s nothing anyone can do to “fix” that without undermining our living standards here in the U.S.

[Wpin]

“And his leverage is to add tariffs on imported goods raising the cost to all U.S. consumers as Williams points out. How will that cause foreign countries to renegotiate instead of retaliate?”

Please, you do not understand business or negotiating enough to understand DoodleDawg. Let’s just hope the stupid people in government get out of his way and let him do this...it is really easy actually. A high school student could succeed in those negotiations.

[Wpin]

“The underlying dilemma here that doesn’t get any attention in these discussions is that a wealthy country like ours with a high standard of living is usually going to be at a competitive disadvantage in any trade arrangement. There’s nothing anyone can do to “fix” that without undermining our living standards here in the U.S.”

Wow, that is a very limited view and defeatist attitude...the opposite is true my friend.

[expat_panama]

...like Walter to outline just exactly how to save those jobs...

From what I can gather it seems his view is first we  need to stop making things worse.  I kind of agree that; like, if we can't agree there then the discussion's over.

[Alberta's Child]

... and now we see the capital flight ($1 trillion PA) that pours stolen dollars into US real estate and prices New Yorkers out of their homes.

And that is where the whole "fair trade" argument falls apart.

China doesn't conduct trade with the U.S. in yuan (their currency). The trade is conducted in U.S. dollars, and since the Chinese can't eat dollars they have to use them to buy assets that are priced in dollars.

So the money ends up back here anyway. It's just a question of who gets it and how it impacts the U.S. economy.

Here's an interesting little anecdote ... wealthy Chinese families are considered a prime source of enrollments at exorbitantly overpriced U.S. colleges.

[expat_panama]

...We have lost millions of jobs...

Aw heck why now billions --no, WE'VE LOST TRILLIONS OF JOBS!!!

 

 

[Don't we all feel a lot better now?]

[Alberta's Child]

Baloney. That's just called economic reality.

I'll make it very simple for you:

1. Ask yourself how much you would be willing to pay for a product or service.

2. Ask yourself how much you would charge to provide that same product or service to someone else.

If you're honest, there will likely be a huge gap between these two numbers. This gap between what we demand from others and what we want for ourselves is the underlying issue that drives almost every political/economic/trade policy in the U.S. today.

[Wpin]

Fairly put, Trump does a better job of explaining however. We have taxed our employers, heaviest in the world, regulated to death, allow other nations to put in impediments to importing our exports, and have devalued their currency to the point where our employers have been forced to go overseas for relief and a chance to survive. It is a real cluster F@#$k of mismanagement. We just need to rework these things to restore opportunity and fairness so that we can truly achieve a free trade status.

So called free traders refuse to consider these impediments to American employers and the American public. They always spout the “cheap products” line when they cannot understand that we will need ever cheaper products as our aggregate purchasing power by individuals continues to remain stagnant or lower for the common man. It is literally a cycle of certain failure economically.

[DoodleDawg]

Please, you do not understand business or negotiating enough to understand DoodleDawg.

And here we have the stock Trump Chump reply. Donald Trump will do it because he's Donald Trump. Nobody knows how to do it but him. He will succeed because he says so.

[major-pelham]

The cost accounting stops too early. The targeted tariff is too narrow. The USA became a colussus with a wide trade policy - not with only applying to lumber made from only Maine based fir 2x6 boards. You’ve seen how China has become a colussus with it now too. Ricardo or Bastiat shoukd come down from heaven and strangle off this mis-application of dogmatic free trade.