U.S. Exporters Will Be a Surprise Loser From Tariff Fight

Wall Street Journal ^ | July 9, 2018 | Greg Ip

[reaganaut1]

Who’s the biggest loser when tariffs are imposed on imports? The surprising answer: exporters.

Though completely counterintuitive, theory and evidence show that taxes on imports act just like a tax on exports.

Though it’s early, the Trump administration’s recent round of tariffs is already rippling out to exporters: Soybean farmers face plunging prices as China raises tariffs, Harley-Davidson will move production of motorcycles destined for the European Union out of the U.S., and BMW says foreign retaliation may hit exports from its South Carolina plant.

Economists credit Abba Lerner, then a graduate student at the London School of Economics, for proving theoretically in 1936 that an import tariff was equivalent to a tax on exports. The Lerner Symmetry Theorem is considered a key principle of trade economics, like 18th century economist David Ricardo’s theory of comparative advantage.

The practical link was obvious to protectionists and free traders alike as far back as the 1600s, says Douglas A. Irwin, an economist and trade historian at Dartmouth College. They understood that a country that shuts out imports deprives its trading partners of money to buy exports.

This, Mr. Irwin notes in his book “Clashing Over Commerce: A History of U.S. Trade Policy,” is why Americans were so divided over tariff policy in the 1800s. When northern states succeeded in raising tariffs to protect their manufacturers, they angered southern states who paid more for manufactured goods and suffered falling prices for their exports such as cotton and tobacco. Mr. Irwin’s data show that while exports and imports have varied between 3% and 25% of gross domestic product since 1790, the two tend to move together.

[central_va]

A tariff will speed up our economy. The only down side is perhaps a little inflation.

[central_va]

"I keep asking the establishment shills why America has some moral obligation to tolerate foreign countries imposing higher tariffs upon us than we impose upon them. Seems facially unfair, right? So, there’s got to be a really good reason because how can you support our working people facing a higher obstacle to trade than the foreigners do? I’m just wondering what’s wrong with a level playing field. Fair is fair, right? But I never get a good answer."

Link here.

[central_va]

If US tariffs are bad for the US economy, why is no one discussing why country X’s current and retaliatory tariffs are bad for X’s economy?

[OA5599]

There bikes look cool. They sound cool. But, they’re POS and need constant, costly maintenance.

You've obviously never owned a Harley. Why don't you quit yapping about shit you don't know about. I have an eleven year old Hog (along with a few Japanese motorcycles). Bought it new, and it has been one of my most reliable machines. It actually has the least amount of routine maintenance required of the bikes I've owned. No chain to lubricate, no valve adjustments. Only the three separate oil changes are a pain compared to the others.

PS it's their bikes, not there bikes

[Uncle Lonny]

This will be Trumps biggest blunder. Just in time for the midterm elections.

What was he thinking?

[billyboy15]

“pretty good for three sentences”

Yes and all of them over your head and beyond your ability to comprehend.

[Alas Babylon!]

Wait...

So you’re for EVERYONE having tariffs and restrictions to protect their own farmers, right?

So how does that differ if NO ONE had tariffs or protections but an absolutely free market for all?

Wouldn’t that ultimately benefit the world’s consumers?

At least it would promote agriculture best suited for the climate and region.

Local produce could still be the cheapest due to low or practically no shipping costs.

Big staples like wheat, corn, rice etc. are best produced in large volumes on the best lands, no?

With 7 billion plus people on the planet, I think cheap food is good thing for humanity—without the government’s involvement, and as the population grows, more farmers can produce more food. Grow the pie, don’t figure out new ways to slice it up.

[kosciusko51]

;-)

[central_va]

What was he thinking?

Unlike you thinks long term and he is a patriot.

[small farm girl]

Yes, they have been saying if a country wants free trade it goes both ways. My point is everyone is reacting to the imposition of or increasing tariffs, not why. They are running around screaming shark, pointing at our President and causing panic, when in reality, China is the shark. Rewrite the WSJ opening line "Who’s the biggest loser when tariffs are imposed on imports?" to "Who’s the biggest loser when the US matches tariffs on imports?". It's a non-starter. I believe if President Trump and Sec Ross used the word "match" every time it would be harder to react to...even children understand the word equal and matching.
Being Jaws season, this line jumps to mind: "You yell 'Barracuda,' everybody says 'Huh? What?' You yell 'Shark,' we've got a panic on our hands on the Fourth of July." :)

[OA5599]

HD customer base is aging out and dying off plus Polaris Indian is eating their lunch with innovative desirable product that impinges upon their place in the market, some gorgeous retro-modern cruisers that beat the pants off of HD in every meaningful way. They need to wake up and raid Indian for some talent before they shuffle off into the sunset, that would be a pity. They are a heritage domestic brand with a grand history. Shame to lose that, ball’s in their court on that though.

Harley's share of the domestic heavyweight motorcycle market was 53% last year. Indian's was around 10%, but that's mostly because Victory shutdown.

Motorcycle sales in the US are down 9.2%. Harley's loss was 8%. Indian sales increased, yet Polaris' motorcycle sales were down even more than Harley at 14%.

As for innovation, Harley did introduce an entire mid-weight line for the millennials and are supposedly working on electric motorcycles. Also, their big twin engine is all new and gets rave reviews.

So to recap, Harley has over half the heavy weight market, is attempting to appeal to millenials, saw their sales dip at lesser rate than average (unlike Polaris). And I might want to add, Harley's sales are up in Europe.

[Hawthorn]

>> Tariffs imposed by us will result in retaliatory tariffs against our exports. That will cost exporters business. It isn’t rocket science <<

You’re absolutely correct.

But the problem is even more fundamental, because with or without tariffs, foreigners will buy U.S. exports only if they have U.S. dollars.

And where will they get those dollars? When U.S. firms and consumers buy those foreigners’ products.

Therefore, if we buy zero foreign products, the foreigners will have zero U.S. dollars. And they will buy zero U.S. exports.

Then by logical extension, changes in the level of imports will generate corresponding changes in the level of exports, with the same arithmetic sign.

It’s just a matter of simple deductive logic that is confirmed by empirical studies of the data.

[dynoman]

“said the cost of aluminum has risen about 45 percent and steel has gone up about 30 percent since the tariffs took effect last month.”

Wasn’t the aluminum tariff 10%?

Supply and demand will still have an effect and the increasing economy alone will increase demand and prices. People seem to forget that and blame it all on tariffs.

[Alberta's Child]

I would recommend keeping everything pretty much as it stands now. Agricultural commodities should be negotiated in separate trade deals from “transferable” products and raw materials like steel, electronics, cars, etc. And the U.S. should not hold it against any country that wants to protect their own agricultural products for any reason.

[catnipman]

“Harley Davidson sales have been plummeting for two years.”

yeah, not many of the pajama boys being turned out by the government schools are interested in hogs ...

[qaz123]

Thanks English Professor Douchebag,

Did I hit a nerve that you might be one of 40-50yr olds that have a, HOG, because it’d get you chicks. Probably have a real nice leather vest with all sorts of patches and rocker on the back from somewhere. Bet you even have one of those reedikulus HD dew-rags you ware arownd town so yew luk like a reel biker. Soooo very kool

[qaz123]

Exactly. All scare tactics for their puppet masters and the Koch’s to put pressure on the administration.

[OA5599]

Thanks English Professor Douchebag,

Did I hit a nerve that you might be one of 40-50yr olds that have a, HOG, because it’d get you chicks. Probably have a real nice leather vest with all sorts of patches and rocker on the back from somewhere. Bet you even have one of those reedikulus HD dew-rags you ware arownd town so yew luk like a reel biker. Soooo very kool

You're welcome and yes, encountering stupidity does strike a nerve with me.

Bought the Hog when I was 31, so while you are technically correct now, most of the miles were put on it before I turned 40. I did not buy it because I thought it would get me chicks, but holy hell did it ever! That was an amazing benefit stepping off of a sportbike and onto the Hog.

I don't own a leather vest... a few jackets but no rockers and only one has a patch. The patch is heavy metal related, and not biker related.

I do have a ridiculous dew rag, but have only used it while riding in the desert. I should mention that it was around my neck. I was constantly soaking it in water to keep cool. Rode to Vegas in August from NYC... maybe not the smartest time for such a trip. But that ridiculous dew rag sure helped.

[qaz123]

You are the coolest. I wonder, you must be one of very few, if not the only person that has had a trouble free and reliable HD. The Atlanta Police Dept went to HDs, from Kawasaki’s about 10 years ago. Nothing but problems. Repair orders went from a small stack, mainly routine maintenance, on the Kawasaki’s to stacks a foot high or more on the HDs. Most of which were extremely expensive to fix. Both the cops riding them and the guys working on them, hate them.

But you’re the best. And I’m sure it got you the ladies. They got you to give them a ride around the block, you thought you were gonna get laid, bought them some drinks and then they left with nothing more than a peck on the cheek.

[OA5599]

You are the coolest. I wonder, you must be one of very few, if not the only person that has had a trouble free and reliable HD.

I'm going to go out on a limb here and guess you don't talk to many Harley owners. If their reliability was truly as wretched as you claim, how do they continuously capture over 50% of the heavy-weight motorcycle market?

The Atlanta Police Dept went to HDs, from Kawasaki’s about 10 years ago. Nothing but problems. Repair orders went from a small stack, mainly routine maintenance, on the Kawasaki’s to stacks a foot high or more on the HDs. Most of which were extremely expensive to fix. Both the cops riding them and the guys working on them, hate them.

Sounds anecdotal to me. Couldn't find anything along those lines during a quick Google search. Looks like APD still uses Harley, so my guess is your claim is BS or issues were resolved.

BTW I have that vintage bike. The main issue with them is hot engine temperatures. I have the first year of the then-new 96cid engine. Rode it through the Valley of Fire during the summer and have sat in NYC bumper to bumper traffic for hours. Not a single issue other than a sweaty crotch. And FYI that engine is no longer in production. The new big twins run a lot cooler.

But you’re the best. And I’m sure it got you the ladies. They got you to give them a ride around the block, you thought you were gonna get laid, bought them some drinks and then they left with nothing more than a peck on the cheek.

This is all very amusing to read. As were a few of your other anti-Harley fantasies posted earlier. But I'm not exactly sure how to respond. How am I supposed to prove you wrong? Not like you can look this up on Google. But I'll do my best:

What you just wrote was not typical of what I experienced. Girls don't go up to guys in bars and ask for rides just for the sake of a quick ride on a motorcycle. They're not going to risk their life on a stranger in which they have no idea if he's under or over the limit if they didn't want more out of it. And once they are on it, the sound, the vibration, the speed, the city lights and the wind makes them primal. That's not where the night ends.