Understanding President Trump’s Tariffs
Trade protectionism equals tariffs and import quotas, Is what we do in times of peace and what foreign nations do to us in times of war.
Or consider that we impose sanctions on US enemies such as NKorea, Russia and Iran because we want them to feel the economic pain of being deprived of imports.
President Donald Trump genuinely believes that his steel and aluminum tariffs will save thousands of US blue-collar jobs. This is an issue that he truly cares about these workers in Pennsylvania, Ohio and other rust belt states. He/we do not want American factories factories to close down.
Larry Kudlow and Arthur Laffer say,
“…even if tariffs save every one of the 140,000 or so steel jobs in America, it puts at risk 5 million manufacturing and related jobs in industries that use steel. These producers now have to compete in hyper-competitive international markets using steel that is 20% above the world price and aluminum that is 7 to 10% above the price paid by our foreign rivals.
“In other words steel and aluminum may win in the short term, but the steel and aluminum users and consumers lose. In fact tariff hikes – which are really tax hikes.
“Some of those 5-M jobs will be put in harm’s way. And if they sell less to foreigners, the trade deficit goes up, not down. Since so many of the things Americans consumers buy today are made of steel or aluminum, a 25% tariff may get passed on to consumers at the cash register. This is a regressive tax on low-income families.”
They wrote,”Trump should also examine the historical record on tariffs, because they have almost never worked as intended and almost always deliver an unhappy ending.”
The Smoot Hawley tariff of Y 1929 signed into law by President Herbert Hoover (R) gave may have worssened the Great Depression.
Richard Nixon’s 10% import surcharge contributed to the stagflation of the 1970’s.
George W. Bush (43) tried to save the steel industry by imposing tariffs on steel and if those tariffs worked, we might not be writing this now.
We tried to save the color TV industry with protectionist measures and instead they wiped out the domestic production.
Those 2 economists are not persuaded by The Trump Administration claim that we need to impose these tariffs for national security reasons.
Despite stiff competition from imports, many specialty steel producers are doing just fine and actually exporting steel to Mexico and Canada.
Meanwhile, Canada is the number 1 exporter of steel to the United States.
They ask: “Does anyone really believe Canada is a national security threat to the US?”
What worries them is that Canada and Mexico are now both threatening retaliatory tariffs against America. This trade breakdown puts NAFTA in jeopardy. That could inflict economic damage to the nations, and volatility in the financial markets, or maybe not.
President Trump will likely continue to make American producers more competitive in global markets through tax, regulatory, energy, and other pro-America policy changes that bring jobs and capital back to the United States.
That is happening now as President Trump has made America almost overnight the best and most reliable place in the world to invest.
Steel and aluminum import tariffs may look counterproductive. Hang on, Donald Trump is not a politician, he is a pragmatic businessman, a negotiator.
Some of you may recall that in the early 1980’s Ronald Reagan’s invoked anti-dumping provisions against Japanese steel. It was one of his few decisions he later confessed he wishes he had not made.
The difference there is that President Trump knows what’s up, an how to manage his advisors.
The overall effect of The Trump Torpedo, votes from unions in the midterms, the Steel Driving Men and Women in America’s Rust Belt. Plus, hold all of cards in on the trade issues.
Have a terrific weekend.
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