Tag Archives: Tariffs

Protectionism Abroad and Socialism at Home, by Ron Paul

Government gets bigger and more powerful at home and abroad. From Ron Paul at ronpaulinstitute.org:

One of the most insidious ways politicians expand government is by creating new programs to “solve” problems created by politicians. For example, government interference in health care increased health care costs, making it difficult or even impossible for many to obtain affordable, quality care. The effects of these prior interventions were used to justify Obamacare.

Now, the failures of Obamacare are being used to justify further government intervention in health care. This does not just include the renewed push for socialized medicine. It also includes supporting new laws mandating price transparency. The lack of transparency in health care pricing is a direct result of government policies encouraging overreliance on third-party payers.

This phenomenon is also observed in foreign policy. American military interventions result in blowback that is used to justify more military intervention. The result is an ever-expanding warfare state and curtailments on our liberty in the name of security.

Another example of this is related to the reaction to President Trump’s tariffs. Many of America’s leading trading partners have imposed “retaliatory” tariffs on US goods. Many of these tariffs target agriculture exports. These tariffs could be devastating for American farmers, since exports compose as much as 20 percent of the average farmer’s income.

President Trump has responded to the hardships imposed on farmers by these retaliatory tariffs with a 12 billion dollars farm bailout program. The program has three elements: direct payments to farmers, use of federal funds to buy surplus crops and distribute them to food banks and nutrition programs, and a new federal effort to promote American agriculture overseas.

This program will not fix the problems caused by Tramp’s tariffs. For one thing, the payments are unlikely to equal the money farmers will lose from this trade war. Also, government marketing programs benefit large agribusiness but do nothing to help small farmers. In fact, by giving another advantage to large agribusiness, the program may make it more difficult for small farmers to compete in the global marketplace.

To continue reading: Protectionism Abroad and Socialism at Home

Advertisements

Trump’s Fake Fix for a Bad Policy, by Walter E. Block

In classic government fashion, Trump’s “fixing” one mistake with a bigger mistake. From Walter E. Block at lewrockwell.com:

As an economist who shares President Trump’s belief that we should be cutting taxes and shrinking government, one might expect me to be enthralled by his policies. But that is not the sentiment I and many other libertarians feel when it comes to his decision to impose tariffs on steel, aluminum and a host of other products made overseas, particularly in China.

On Wednesday, Mr. Trump and the president of the European Commission, Jean-Claude Juncker, said they had reached an agreement to step back from a trade war and discuss ways to lower tariffs and other trade barriers. But the outcome of those talks are far from certain, and trade tensions between the United States and China remain very high.

What is driving the president’s apparent eagerness to impose tariffs is a simple and wrongheaded idea that plays to a large part of his base: That a trade war will spur job growth in America. He is trying to use tariffs to give a leg up to American industries against countries that manufacture the same products that we do — whether steel, aluminum or cars — but more efficiently. And who could be against that if it creates more jobs?

But in reality simply creating jobs alone does not make for a strong economy. What we really want is to increase production. And to achieve that, we need to allocate labor as efficiently as possible. One way to do that is to make sure that if there are other countries that can create certain goods more efficiently than we can, it is to our advantage to trade with them for these items, rather than manufacture them ourselves. The result is cheaper goods.

But tariffs do nothing to improve this efficient allocation of labor. They also do not increase or decrease employment. They just shift jobs around, and almost always in a manner that hurts the economy.

To continue reading: Trump’s Fake Fix for a Bad Policy

Why Trump Won’t Start a Real Trade War, by Bill Bonner

Another take on the “trade war” with China, and why it really happen. From Bill Bonner at bonnerandpartners.com:

The New York Times reports:

President Trump escalated his trade war with China on Wednesday, ordering his administration to consider more than doubling proposed tariffs on $200 billion worth of Chinese goods to 25 percent from 10 percent, as talks between Washington and Beijing remain at a standstill.

Mr. Trump instructed the United States trade representative to look into increasing tariffs on Chinese imports like fish, petroleum, chemicals, handbags, and other goods to 25 percent, a significant escalation in a dispute that is beginning to take a toll on industries and consumers in both countries. A final decision on the size and scope of the tariffs is not expected before September.

Fake Wars

The Deep State welcomes war. But, especially in the case of a trade war with China, it must be a phony war.

And here is a good test. We’ll see how well, or badly, we have connected the dots.

According to the picture we see, the Deep State – the more or less permanent, but fluid and schismatic, group of insiders that controls U.S. public policies – uses war to gain public support for policies that actually serve only one purpose… to shift power, wealth, and status from the public to itself.

That’s why the trade war has to be fake.

Real wars threaten the Deep State’s survival. The wars in the Middle East (now also in Africa), for example, help justify trillions of dollars of wealth transfers to the military/industrial/surveillance complex.

But the U.S. has nothing really at stake in these fights; no matter what happens, it will not be invaded, bombed, or humiliated.

Likewise, the wars at home – against poor people and drug users – go on for decades. And no one is better off – except the Deep State industries engaged in the wars themselves (welfare agencies, prisons, police, drug pushers, etc.).

The Donald’s new trade war is a delight, too; already, the sidewalks are slick with greasy swamp water; lobbyists line up around the block to ask for special favors and dispensations. The insiders gain power and money by controlling crony trade deals.

But neither the president nor his crackpot advisors may realize the danger. And here is where it gets interesting: They mustn’t allow this war to get out of hand.

To continue reading: Why Trump Won’t Start a Real Trade War

Here’s Why Trump Is Hiking Chinese Tariffs To 25%, by Tyler Durden

China is counteracting Trump’s tariffs by allowing the its currency, the yuan, to depreciate. So Trump is raising tariffs some more. From Tyler Durden at zerohedge.com:

One of the cited reasons behind today’s market slide which started in Asia and promptly swept the rest of the globe, is a belated appreciation of Tuesday’s news that the Trump administration is now considering more than doubling proposed tariffs on a further $200 billion worth of Chinese goods to 25%, up from an original 10%.

But what exactly prompted Trump to push for the sharp reset in Chinese tariffs?

The answer was actually first given by Trump himself three weeks ago, when in a candid CNBC interview the president said that he was not only watching the US trade deficit with China, but also its currency, which was “dropping like a rock”, suggesting that trade war was morphing into currency war after he berated the Fed for hiking rates and pushing the dollar higher (when, as we explain below, Trump should be commending Powell for doing just that).

Fast forward to today, when the WSJ gives some further color, noting that while “the administration didn’t spell out a particular rationale for increasing the tariff…. the reasons include anger over the Chinese government’s failure to approve the merger of U.S.-based Qualcomm Inc. and Dutch chip maker NXP Semiconductors, which forced the companies to scrap a deal aimed at boosting Qualcomm’s reach into new markets.”

The WSJ also cites “industry officials who have discussed the move with the White House” and who said that another, perhaps far more important reason for the tariff increase “is to compensate for the decline in the value of the yuan by about 6% over the past two months.

“It’s important countries refrain from devaluing currencies for competitive purposes,” a senior administration official said, and although he didn’t accuse China of acting in that fashion, the implication was clear.

Yet another reason that forced Trump’s hand is that as several banks have recently pointed out, the Yuan devaluation to date has effectively offset the adverse impact to Beijing from the $34 billion in tariffs enacted on Chinese goods, mainly machinery and components (to which China retaliated with tariffs on the same amount of U.S. exports, especially farm products).

To continue reading: Here’s Why Trump Is Hiking Chinese Tariffs To 25%

Why Americans Are About To Experience Sharply Higher Prices, by Tyler Durden

Tariffs are about to bite. From Tyler Durden at zerohedge.com:

A few weeks ago, SocGen asked what is arguably the most important question relating to the global trade wars: are tariffs inflationary or deflationary? While there were various nuances, its conclusion was simple: “Inflationary short term, disinflationary medium term.

It appears that the “short-term” part has now arrived, because after several rounds of tit-for-tat tariffs and retaliations between the US and China, American consumers are about to be hit with sharply higher prices as tariffs on industrial metals put pressure on U.S. manufacturers.

In May, President Trump imposed steel and aluminum tariffs on the EU, Canada, and Mexico to help preserve America’s manufacturing base. The response: steel and aluminum prices have risen 33% and 11% respectively since the beginning of the year, as manufacturers began to price in the tariffs.

Moreover, tariffs on additional imported products from China have added even more costs for producers, which are now being aggressively passed through to the consumer.

“You’re going to see higher prices passed on to consumers…almost immediately” Matt Gold, a former deputy assistant U.S. Trade Representative for North America under former President Barack Obama, told CNBC. “A lot of goods are already warehoused that were imported months ago, so it takes a bit of time to catch up, but prices catch up pretty fast,” he added.

“The way it works is that a U.S. importer pays the taxes to the customs duties or customs tariffs to the U.S. Treasury,” Gold explained. “Of course, that’s going to effect the sale price [and] whatever price at which the exporter sells to the importer is going to lower, because the importer has to pay duties in addition to paying the purchase price.”

Gold added that for American consumers, those soaring costs would be spread “really across the board. With Chinese retaliatory tariffs, we’ve imposed those on $34 billion of different goods coming from China. It’s a very broad array of consumer products, industrial products.”

To continue reading: Why Americans Are About To Experience Sharply Higher Prices

Did Tariffs Make America Great? by Patrick J. Buchanan

Patrick Buchanan makes the historical case for tariffs. From Buchanan at buchanan.org:

“Make America Great Again!” will, given the astonishing victory it produced for Donald Trump, be recorded among the most successful slogans in political history.

Yet it raises a question: How did America first become the world’s greatest economic power?

In 1998, in “The Great Betrayal: How American Sovereignty and Social Justice Are Being Sacrificed to the Gods of the Global Economy,” this writer sought to explain.

However, as the blazing issue of that day was Monica Lewinsky and Bill Clinton, it was no easy task to steer interviewers around to the McKinley Tariff.

Free trade propaganda aside, what is the historical truth?

As our Revolution was about political independence, the first words and acts of our constitutional republic were about ensuring America’s economic independence.

“A free people should promote such manufactures as tend to render them independent on others for essentials, especially military supplies,” said President Washington in his first message to Congress.

Have something to say about this column?
Visit Pat’s FaceBook page and post your comments….

The first major bill passed by Congress was the Tariff Act of 1789.

Weeks later, Washington imposed tonnage taxes all foreign shipping. The U.S. Merchant Marine was born.

In 1791, Treasury Secretary Alexander Hamilton wrote in his famous Report on Manufactures:

“The wealth … independence, and security of a Country, appear to be materially connected with the prosperity of manufactures. Every nation … ought to endeavor to possess within itself all the essentials of national supply. These compromise the means of subsistence, habitation, clothing, and defence.”

During the War of 1812, British merchants lost their American markets. When peace came, flotillas of British ships arrived at U.S. ports to dump underpriced goods and to recapture the markets the Brits had lost.

Henry Clay and John Calhoun backed James Madison’s Tariff of 1816, as did ex-free traders Jefferson and John Adams. It worked.

In 1816, the U.S. produced 840 thousand yards of cloth. By 1820, it was 13,874 thousand yards. America had become self-sufficient.

To continue reading: Did Tariffs Make America Great?

Trump’s Farm Bailout Is Win-Lose, by Bill Bonner

What Trump taketh away from farmers in trade he’s trying to give back to them in subsidies. From Bill Bonner at bonnerandpartners.com:

What a spectacular summer!

People may be frying eggs on the sidewalks of Algiers and fighting forest fires in Sweden, but here in Ireland, the heatwave is a delight.

Farmers are grousing, of course, but we are enjoying daytime temperatures in the mid-70s and beautiful, clear skies.

Farmers are grumbling in the U.S., too. The weather is always a favorite subject. And this year, they have something more to kvetch about – the trade war.

Casualties are beginning to pile up. This from Bloomberg:

Harley-Davidson Inc. on Tuesday cut its profit margin forecast, citing tariffs. The iconic motorcycle maker was caught in the crossfire of the trade war last month when it announced plans to shift some U.S. production overseas, prompting attacks from Trump.

Dutch electronics firm Royal Philips NV Chief Executive Frans van Houten says an escalation of tariffs may mean it has to pass on costs to customers, and Whirlpool Corp. said rising raw material costs hurt results in some of its markets in the second quarter.

Farm Bailout

Out on the Great Plains, the bodies lie especially thick. The damage estimate so far: $11 billion.

But U.S. farmers are not locking arms like Londoners during the Blitz, or going on short rations like Soviets during the Siege of Leningrad. If anyone is going to make wartime sacrifices… it’s not going to be them.

They’ve got two senators per state… and a Republican Party that needs their money and their votes.

As expected, America’s president proposed yesterday to bail out the farm sector with $12 billion in welfare payments.

Naturally, the president feels some responsibility in the matter, since it was he who put the hayseeds under water.

He also looks ahead to the midterm election season, when the fellows with the big tractors make a big impression on the politicians.

The Donald has replaced win-win with win-lose. But the $12 billion won’t come out of Donald Trump’s pocket.

Nor will it come from the U.S. Treasury. The feds don’t have any money; they’re already projected to run a trillion dollars in the hole for fiscal year 2019.

So where will the money come from?

Will taxes be raised on consumers, also hurt by the trade war? Will the steel producers… or steel workers… or steel buyers – similarly damaged – pony up the money? Which group will get the rewards? Which will be punished?

To continue reading: Trump’s Farm Bailout Is Win-Lose