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
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.

Looting and Freedom

Whether political freedom or economic freedom is more important is a moot question.

The most basic property right is self-ownership. To the degree that right is compromised, so is freedom. A commenter at the linked article above noted this:

“I propose in the following discussion to call one’s own labor, and the equivalent exchange of one’s own labor for the labor of others, the ‘economic means’ for the satisfaction of needs, while the unrequited appropriation of the labor of others will be called the ‘political means’.”

   – Franz Oppenheimer, The State. New York: Free Life
      Editions, 1908 (1975), pp. 24-25

Beyond the unabashed wealth redistributionism of a Bernie Sanders, ‘unrequited appropriation of the labor of others’ includes all forms of rent-seeking: Regulation favoring entrenched business (from tariffs to requiring hair braiders to take hundreds of hours of training, to subsidies for solar panels, movies, art, mortgages, etc., etc., etc.); union shops; civil asset forfeiture and eminent domain; and zoning laws.

We may agree politically to give some portion of some of those freedoms to the State, but we will, by definition, be less free; and bureaucracies will always take more than is granted.

Principled resistance to the looting is a requirement of freedom.

Negotiating tactic

I keep seeing this defense of the President’s tariff policy: “The threat of trade war is just a smart negotiating tactic. Chill out.”

I concede the possibility that it is a negotiating tactic. However, that doesn’t make it an intelligent or wise negotiating tactic.

One problem is that lying about the economic effects of tariffs encourages Americans’ economic ignorance; which is already a yuge, yuge problem.

If Trump was insisting global warming is caused by humans and that female pay is 75% of male pay, how would that work out? Those are economic negotiating positions, too. And they are lies.

Trump Doesn’t Understand How Tariffs Work, Brags About Making Up Trade Stats

Update 5:50PM
Edits for clarity