Trade War Casualties

In addition to US tariffs raising the cost of the steel and aluminum Harley uses to make motorcycles for Americans, TrumpTrade is driving US manufacturing jobs to Europe. Doesn’t say how many jobs will be lost, but 40,000 motorcycles a year are no longer going to be made here. Meanwhile, Harley has to eat $30 to $45 million in 2018.

Tit-for-tat going as expected. It’s all the fault of those dumb Europeans, of course.

Harley-Davidson To Move Some Production Outside US Over EU Tariffs

This is new

But it still shows President Trump’s confusion on trade and tariffs. From whitehouse.gov:
Press Conference by President Trump After G7 Summit

Emphasis mine.

Q Mr. President, you said that this was a positive meeting, but from the outside, it seemed quite contentious. Did you get any indication from your interlocutors that they were going to make any concessions to you? And I believe that you raised the idea of a tariff-free G7. Is that —

THE PRESIDENT: I did. Oh, I did. That’s the way it should be. No tariffs, no barriers. That’s the way it should be.

Q How did it go down?

THE PRESIDENT: And no subsidies. I even said no tariffs. In other words, let’s say Canada — where we have tremendous tariffs — the United States pays tremendous tariffs on dairy. As an example, 270 percent. Nobody knows that. We pay nothing. We don’t want to pay anything. Why should we pay?

We have to — ultimately, that’s what you want. You want a tariff-free [sic], you want no barriers, and you want no subsidies, because you have some cases where countries are subsidizing industries, and that’s not fair. So you go tariff-free, you go barrier-free, you go subsidy-free. That’s the way you learned at the Wharton School of Finance. I mean, that would be the ultimate thing. Now, whether or not that works — but I did suggest it, and people were — I guess, they got to go back to the drawing and check it out, right?

So, they did teach him that tariffs are a bad thing in his Econ 101 course. One would think this attitude would have made NAFTA easy to re-negotiate.

Since this is the first time I can recall any mention of it in the President’s otherwise protectionist, multitudinous rants; maybe he’s just now remembered it. Better late than never, but his recall is incomplete and confused.

Canada does, indeed, levy a 270 percent tariff on milk imported from the US. However, it is not the US that pays that tariff, it is Canadian consumers. Just like it’s American consumers and businesses who pay US tariffs on softwood lumber, steel, aluminum, washing machines, cars, etc., etc..

As to no subsidies: If Canada wants to subsidize US purchases of steel, aluminum, softwood lumber, or cars: I say let them. Those are subsidies given to US consumers by Canadian taxpayers. It’s stupid for Canada to do it, but it isn’t our problem.

President Trump is confused about who pays tariffs, and he appears to view trade as a zero sum game. If one side wins the other side must lose. Nothing could be further from the truth. By definition, in any freely conducted trade all the traders win.

If he could just remember that lesson from Wharton, he’d be a much better CEO. Maybe he missed class that day.

Mercantilist revivalism

Used to be when you said “conservative” people had a clear idea of what you meant philosophically. Adam Smith, W. F. Buckley, Goldwater, Reagan, or Cruz might come to mind. Maybe it would invoke the tea party, free trade, Constitutional originalism, free markets, and opposition to deficit spending. Now, it’s all a mess thanks to a long run of “conservatives” like John McCain, George Bush, and Donald Trump

There’s “conservative,” “neo-conservative,” “cuckservative,” “Trump conservative,” “Alt-right,” etc.. TOC has worried in the past about this philosophical dilution – defining freedom down. The current round of internecine attacks, including selective rejection of long standing principles, have been more damaging than anything the Progressives have accomplished.

Cronyism and protectionism are seen as fine if the correct people do it. Now protectionism is “conservative,” along with corporate bailouts.

We all need to reread Friedrich Hayek’s Why I am Not a Conservative: “The tug of war between conservatives and progressives can only affect the speed, not the direction, of contemporary developments.” Hayek was a classical liberal, a qualifier required since the collectivists stole the original word. Now we’re witnessing the further muddling of what has been meant in the United States by “conservative,” i.e., “classical liberal.”

The latest example; “Conservatives” who defend Trump’s populist trade shenanigans as ‘bargaining positions’ are expediently abandoning moral leadership.

Why Trump’s Higher Tariffs Now are Unlikely to Result in Lower Tariffs Later

I think it is absurd to assume that Trump’s real intention is to get us to a new equilibrium with lower tariffs all around the world. He does not understand the value of free trade and his closest adviser on this issue is an ardent protectionist. Trump’s negotiation experience is all in zero-sum games where he is trying to extract the most of a fixed pie for himself, not in trying to craft win-win solutions across multiple parties.

But here is the real reason this won’t work: The current relatively-free trade regime that exists today was built almost totally on America’s moral leadership on the issue…

[M]many of the most powerful political actors in our trading partners actually represent large corporations (some state owned and some just highly-aligned with the state) and powerful labor unions who would be perfectly happy to pursue additional crony protectionism of their industry even at the expense of the majority of their country’s consumers and businesses. All these forces for protectionism have always been kept at bay in large part by America’s leadership on the issue.

Not any more.

A thought on President Trump’s apparent renewed Trade War

Any price increase due to import taxes, aka protectionist tariffs, exactly equals the reduction in the disposable income of consumers in the country imposing the tariff.

While this benefits the general government coffers, it loots every citizen’s pocket – even those who never buy the good in question: The consumer is forced to either buy less of that good or less of some other good.