cawacko
Well-known member
Great (opinion) piece in today's Journal. It's sounds so tempting "these tariffs show we're standing up to China and will bring back American manufacturing jobs". I get why people fall for it. Unfortunately, it doesn't work that way. And we have two really old men running for President who both support this. (Not to offend the Boomers on the board Vance isn't as old and he supports this as well)
Joe Biden and Donald Trump can agree on at least one thing: Free trade is out, and protectionism is in. Although the Biden administration has ramped up the use of tariffs against China, the bipartisan momentum for ditching America’s postwar commitment to trade liberalization has come from the right. Mr. Trump isn’t the first self-proclaimed “Tariff Man” to serve as president—that title belongs to William McKinley—but on this score, he has nevertheless remade the Republican Party in his own image.
As recently as 2016, it was unthinkable that any president would propose a 60% tariff on all goods from China and a 10% tariff on all imports from every U.S. trading partner. That proposition is now very much a possibility should Mr. Trump be sworn in on Jan. 20.
Mr. Trump’s decision to make J.D. Vance his running mate underlines the seriousness of the former president’s effort to reverse U.S. trade policy, which began when he withdrew the U.S. from the Trans-Pacific Partnership in 2017. Mr. Vance represents a Midwestern state where, today’s protectionists insist, manufacturing jobs and factories have evaporated thanks to trade liberalization.
Never mind that nearly 90% of such job losses during most of the “China Shock”—the 12-year surge in Chinese imports that began in 2000—are attributable to technological change and process improvement. Never mind that America recently ranked second in the world for manufacturing in value-added terms. Contrary to economic nationalist mantras, America makes plenty of “stuff,” it isn’t devoid of factories, and many former manufacturing towns, like Pittsburgh, have successfully upgraded their economies.
Highlighting these details hasn’t caused protectionists to reconsider their position. Such -disregard is worrying, not least because the consequences of ring-fencing the U.S. economy with higher tariff walls are very predictable. Among those who would suffer disproportionately are the Americans whom Messrs. Trump and Vance wish to protect.
Foreigners don’t bear the costs of U.S. tariffs. A tariff is a tax charged to American importers whenever a product they have purchased from abroad enters the U.S. economy. The goal is to raise the price of imports for producers and nudge them toward domestic alternatives.
Mr. Trump’s 10% tariff, its advocates argue, would encourage American producers to switch to U.S.-made goods and inputs, bolstering American jobs. If a 10% tariff raises the average price of, say, machinery imports by $1,000, protectionists hold that American domestic producers could charge $1,000 more for their machinery products and minimize their risk of losing customers.
Unfortunately for Team Trump, and even more so for blue-collar Americans, tariffs don’t work this way. Confronted with a 10% tariff, many American manufacturers would continue to import foreign goods but cover the increased expenses by automating more of their production. That means fewer American jobs.
Other businesses would simply pass the extra costs on to consumers. Wealthy Americans could absorb these with little fuss. But according to a May 2024 Peterson Institute for International Economics brief, Mr. Trump’s proposed tariffs “would reduce after-tax incomes by 3.5 percent for those in the bottom half of the income distribution.”
Many low- and middle-income Americans would experience the brunt of the retaliation a Trump-Vance protectionist policy would provoke. Here, the lessons of the Trump administration’s March 2018 decision to impose import tariffs of 25% on steel and 10% on aluminum are instructive. The primary target of those increases was China, on account of what the Trump administration rightly identified as Beijing’s unfair trade practices.
But as a 2019 White House report acknowledged, these tariffs didn’t elicit any beneficial changes in China’s policies. Instead, Beijing retaliated by inflicting its own tariffs, their target being American farmers, whom the U.S. government subsequently had to compensate at taxpayers’ expense.
It wasn’t only farmers who suffered. A December 2019 Federal Reserve analysis revealed that Mr. Trump’s tariffs were “associated with relative reductions in manufacturing employment and relative increases in producer prices.” The reason was that any American steel- and aluminum-making jobs saved by the tariffs were “completely offset in the short-run by reduced competitiveness from retaliation and higher costs in downstream industries.”
In other words, the higher steel prices generated by the tariff increases meant that U.S. steel-using manufacturing firms had to cut costs to remain competitive in international and domestic markets. In many cases, these businesses chose to cut jobs to compete—again, meaning blue-collar Americans lost out.
A 10% tariff on all imports combined with a China-specific 60% tariff would magnify these effects on prices and employment throughout the economy. At a time when blue-collar Americans are already struggling with inflation, the last thing they need is a new administration hiking their daily expenses.
When he was president, Mr. Trump made excellent progress in such areas as taxes and regulation. If in a second term he and Mr. Vance choose to steer America away from its present protectionist path, they could replicate those achievements without undermining their benefits to blue-collar Americans through futile tariff games.
The former president has a reputation for unpredictability. For working Americans’ sake, let’s hope trade policy is one area in which, if elected again, he keeps that streak alive.
Mr. Gregg is Friedrich Hayek Chair in Economics and Economic History at the American Institute for Economic Research and author of “The Next American Economy.”
Tariff Men Won’t Help America’s Workers
A 10% levy on all imports would reduce jobs, hike prices, and prompt other countries to retaliate.
Joe Biden and Donald Trump can agree on at least one thing: Free trade is out, and protectionism is in. Although the Biden administration has ramped up the use of tariffs against China, the bipartisan momentum for ditching America’s postwar commitment to trade liberalization has come from the right. Mr. Trump isn’t the first self-proclaimed “Tariff Man” to serve as president—that title belongs to William McKinley—but on this score, he has nevertheless remade the Republican Party in his own image.
As recently as 2016, it was unthinkable that any president would propose a 60% tariff on all goods from China and a 10% tariff on all imports from every U.S. trading partner. That proposition is now very much a possibility should Mr. Trump be sworn in on Jan. 20.
Mr. Trump’s decision to make J.D. Vance his running mate underlines the seriousness of the former president’s effort to reverse U.S. trade policy, which began when he withdrew the U.S. from the Trans-Pacific Partnership in 2017. Mr. Vance represents a Midwestern state where, today’s protectionists insist, manufacturing jobs and factories have evaporated thanks to trade liberalization.
Never mind that nearly 90% of such job losses during most of the “China Shock”—the 12-year surge in Chinese imports that began in 2000—are attributable to technological change and process improvement. Never mind that America recently ranked second in the world for manufacturing in value-added terms. Contrary to economic nationalist mantras, America makes plenty of “stuff,” it isn’t devoid of factories, and many former manufacturing towns, like Pittsburgh, have successfully upgraded their economies.
Highlighting these details hasn’t caused protectionists to reconsider their position. Such -disregard is worrying, not least because the consequences of ring-fencing the U.S. economy with higher tariff walls are very predictable. Among those who would suffer disproportionately are the Americans whom Messrs. Trump and Vance wish to protect.
Foreigners don’t bear the costs of U.S. tariffs. A tariff is a tax charged to American importers whenever a product they have purchased from abroad enters the U.S. economy. The goal is to raise the price of imports for producers and nudge them toward domestic alternatives.
Mr. Trump’s 10% tariff, its advocates argue, would encourage American producers to switch to U.S.-made goods and inputs, bolstering American jobs. If a 10% tariff raises the average price of, say, machinery imports by $1,000, protectionists hold that American domestic producers could charge $1,000 more for their machinery products and minimize their risk of losing customers.
Unfortunately for Team Trump, and even more so for blue-collar Americans, tariffs don’t work this way. Confronted with a 10% tariff, many American manufacturers would continue to import foreign goods but cover the increased expenses by automating more of their production. That means fewer American jobs.
Other businesses would simply pass the extra costs on to consumers. Wealthy Americans could absorb these with little fuss. But according to a May 2024 Peterson Institute for International Economics brief, Mr. Trump’s proposed tariffs “would reduce after-tax incomes by 3.5 percent for those in the bottom half of the income distribution.”
Many low- and middle-income Americans would experience the brunt of the retaliation a Trump-Vance protectionist policy would provoke. Here, the lessons of the Trump administration’s March 2018 decision to impose import tariffs of 25% on steel and 10% on aluminum are instructive. The primary target of those increases was China, on account of what the Trump administration rightly identified as Beijing’s unfair trade practices.
But as a 2019 White House report acknowledged, these tariffs didn’t elicit any beneficial changes in China’s policies. Instead, Beijing retaliated by inflicting its own tariffs, their target being American farmers, whom the U.S. government subsequently had to compensate at taxpayers’ expense.
It wasn’t only farmers who suffered. A December 2019 Federal Reserve analysis revealed that Mr. Trump’s tariffs were “associated with relative reductions in manufacturing employment and relative increases in producer prices.” The reason was that any American steel- and aluminum-making jobs saved by the tariffs were “completely offset in the short-run by reduced competitiveness from retaliation and higher costs in downstream industries.”
In other words, the higher steel prices generated by the tariff increases meant that U.S. steel-using manufacturing firms had to cut costs to remain competitive in international and domestic markets. In many cases, these businesses chose to cut jobs to compete—again, meaning blue-collar Americans lost out.
A 10% tariff on all imports combined with a China-specific 60% tariff would magnify these effects on prices and employment throughout the economy. At a time when blue-collar Americans are already struggling with inflation, the last thing they need is a new administration hiking their daily expenses.
When he was president, Mr. Trump made excellent progress in such areas as taxes and regulation. If in a second term he and Mr. Vance choose to steer America away from its present protectionist path, they could replicate those achievements without undermining their benefits to blue-collar Americans through futile tariff games.
The former president has a reputation for unpredictability. For working Americans’ sake, let’s hope trade policy is one area in which, if elected again, he keeps that streak alive.
Mr. Gregg is Friedrich Hayek Chair in Economics and Economic History at the American Institute for Economic Research and author of “The Next American Economy.”
