Trump’s Tariffs Are A Lose Lose

One can understand why President Trump thinks trade terms with other countries is like what he has done, negotiating a private deals. If the other partner is in a weaker position one can take advantage. Trade is different.

While trade in economics is explained by the theory of comparative advantage, there is a simpler way. Tariffs hurt both countries. Think of having tariffs between our states. So far as I know, no country in the world allows states or provinces to charge tariffs for goods passing from one to another. Tariffs on goods passing from ND to MN would harm sides of the Red River.

Our Constitution came about because the 13 colonies were charging tariffs at their borders. George Washington and some others could see the harm and called for the famous Constitutional Convention in 1779 to stop it.

The link discusses an article in the New York Times today about North Dakota. The reporter interviewed farmers and politicians in ND for their reaction to Trump’s tariffs. Farm prices, especially soybeans and pork bought by China, have fallen. China reacted to Trump by putting import tariffs on those two products. Chinese leaders knew exactly how to harm Trump.

Trump is trying to help our less efficient industries, aluminum and steel, and he has hurt those most efficient, soybeans and pork. It is harder for U.S. consumers to buy things China can make more cheaply than we can.

The Times reporter concluded farmers will support Heitkamp and turn against Trump if he runs again.

30 Responses

  1. Jinx II

    I completely agree with you Jon. My family and my children’s family is full of farmers who have hung on to their family farms. Right now, they are worried sick about the tariffs on Ag products and the impact on their bottom line.

    I guess people will have to return to their roots and pick eggs, milk the cow, grow, mill and bake the grain for bread/toast, feed and slaughter the hog before they can have breakfast. We devalue the family farms to the point where they can barely stay in business.

  2. If China goes down, we go down. If we go down, China goes down. They hold $2T in U.S. debt and we have a $500B trade deficit much of which is recycled into U.S. T Bonds keeping out interest rates near historical lows. Their economy is export dependant as is Japan’s. If we can no longer afford to buy all their manufactured goods those economies crash. Up go our rates and we crash. And forget Trumps’s promise to bring all those manufacturing jobs home. Those rustbelt factories will have to be rebuilt, retooled, and workers hired and trained. That will take years and cost $billions. And American workers will not work all day for a bowl of rice as they do. They will expect a living wage wich will drive up prices and there will we no discretionary spending. We should have corrected these problems 30 years ago when the reset would have been survivable.

    1. Michael–Good post. I didn’t have space to explain lose, lose. We sell fewer goods and are worse off. The goods we used to buy for one price now cost more.

  3. As Paul Harvey would state, ” … and now you know the rest of the story.”

    On the face of it, tariffs, aka import taxes, are barriers to free trade.

    The rest of the story lies in the details. When Japan wanted to dominate certain electronics markets in the USA, they subsidized their electronics industry such that Japanese companies could undercut USA companies in the USA. The process destroyed certain USA manufacturers who could not compete in this unfair situation. Once USA companies were driven from the market, i.e. destroyed, Japanese companies could then charge more for their products. Name a manufacturer of TVs that are made in the USA. 30-40 years ago, the USA had a thriving TV manufacturing base. Now, it is Sony, LG, Samsung, Vizio.

    In this latest trade war that affects USA farmers in ND and MN, the Trump administration has already announced price supports and/or subsidies to aid American growers affected by the Chinese tariffs. Trump has a long-term vision for this trade war that has stated goals of ultimately balancing the current unfair trade practices of China. This is Trump’s strong suit and I say let him run his game plan.

    After Obama gave away the store, it’s nice to see a business savvy President negotiate better trade deals, even if it means getting tough on trade for a limited period of time.

    1. Matt 9:30 Let’s follow along. Japan subsidized its electronic industry. That was unfair. Now Trump is going to subsidize farm prices. That is fair.

      An entertaining post.

      1. If those were the only facts, you would be correct. However, as you know, China has imposed tariffs on certain USA agricultural products. To offset the short term loss of market opportunities for USA products, Trump is bolstering those producers affected by the tariffs. As I stated in an earlier post this is temporary.

        In the example of electronics, the USA did little or nothing to fend off the unfair “free” market strategy of Japan to gut USA competition and drive it out of business.

        I simply suggest that America should defend its citizens against unfair trade practices so that “free” markets actually be allowed to work, even it means using short term tactics that are meant to balance external forces in the market that tip the scales in favor of one country. Not all wars are military wars. Some are economic.

        1. Matt 4:20 To offset the short term losses of market opportunities for USA products, Trump is bolstering those producers affected by the tariffs.

          And, pray tell, where did you come up with that “short term losses”. South America can fill in the soybean and pork business lost by U.S. producers and if China keeps the tariffs on our grain there is no customer to replace it. The losses will be permanent, not short term.

          If Trumps move was smart, it would be smart for ND and MN to put high tariffs on goods from the other state. Tell me, do you thing the standard of living in MN and ND would both be higher if they did not trade with each other???

  4. Schurkey

    The best possible situation would be to outlaw trade with Communist China, along with all other Communist countries.

    Failing that, taxing their finished goods so they’re price-competitive with domestic production would be an ENORMOUS “win” for the USA. When our own economy is in the toilet, why are we sending billions of dollars to the hateful Chinese? Why do we allow them to affect–hell, dominate–key aspects of the economy of the USA?

    Our crooked politicians and corrupt business owners–the folks I call “Communist Collaborators” are killing the economy and the country as a whole.

    NAFTA, CAFTA, and all the other “Trade Deficit Agreements” should be rejected. AT MINIMUM, trade agreements should throttle imports to the dollar value the other country spends buying our products. But better to not have trade agreements in the first place.

    If it were up to me, there’d be an import tax on all products except raw- or minimally-processed materials. The lowest tax rates would go to our border neighbors. The highest rates would be reserved for Communist and other hostile countries. The rest of the world would be assessed something in-between. This tax would be paid at point-of-purchase similar to a sales tax.

    The import tax could REPLACE the Federal Personal Income tax. No more personal tax, no more record keeping, no more filing, no more paperwork. No more April 15 nightmares. No more IRS intimidation. No more H&R Blockhead conspiring with Congress to keep tax filing as complex as possible.

    Transfer a heap of IRS employees to Customs. Listen to America breathe a sigh of relief.

    1. Schurkey Why do we allow them to affect–hell–dominate key aspects of the USA economy?

      Because our standard of living is higher because of trade. So is China’s. We produce wheat cheaper. The mouse I bought yesterday was made in China and is super cheap. So, we trade grain and can buy more goods like computer parts than we could if they were made here.

      So, I’ll as the same question I posed in the blog. Would ND and MN each have higher standards of living if there were no trade between them?

  5. Juan Ruiz

    I’m not going into the fact that American farmers are already subsidized. The family of the former governor of ND received millions over the years. As has a potato farmer who recently was a candidate for the House.

    My question really is: Why do you have a picture of Mary Kathryn Laine heading the story?

      1. Juan Ruiz

        ” lots of other individuals and industries are subsidized in one way or another.”

        I’m not even going into property tax exemptions to people like Burgum and others. Fargo offered one to FedEx and they were moving there anyway. Newark is offering $7 billion to Amazon for HQ2. Everyone else pays for that.

    1. Juan Ruiz

      “During Beltane the feeling of ‘to heck with the consequences’ and declarations of love are encouraged,”

      I believe an old Wiccan friend once told me that Beltane is highlighted by people running around naked under the moon. At my age I’d be lucky to walk. But would be chary about revealing my shortcomings 😉

  6. Trump’s tariffs are a win, win. American steel is strategic to America’s defense. If we ever go to war with a country that sells us a lot of steel, we would be in trouble. That is why America must have a strong steel industry. We must also manufacture our own defense electronics, even if it costs more than getting it from another country. We must also manufacture our own airplanes, even it if costs more … you get the point.

    On the other hand, we can afford to import avocados from Mexico, bananas from wherever we get bananas, etc.

    What is fairly interesting is that we have a huge dependence on iPhones from China and Android phones from South Korea (even though most Android phones are manufactured elsewhere in Asia).

        1. And your war, like your religion and politics is 70 years out of date. It’s not about jeeps and tanks anymore. The recent drones were probably flown by someone at a computer terminal in the Pentagon. Every President of the U.S. starting with JFK has endorsed free trade. They all knew the defense argument.

          1. My religion is 70 years out of date? That’s it? Your atheism is thousands of years behind the times.

            I’ll take Romqn Catholicism from 1948. Same now as it was then.

          2. Roman Catholicism has been about the same Faith for 2000 years, minus the disciplines and organization. The underpinnings (dogmas, teachings) of the Faith have never changed.

          3. Catcher 5:53 What is significant about 1948

            There must be something. 🙂 It’s just around my earliest recollection of how things were. I recall preoccupation with having rubber, steel, etc available for wars. It was the same in the Korean War, somewhat in Vietnam as I recall. Seems to me finding enough steel and rubber to fight a war is a thing of the past.

            There used to be another argument used for tariffs, the “infant industry” argument. It was that new industries needed protection from imports until they were big enough to compete. No one talks about this any more.

            Interesting to me is that one innovation made trade so big its really hard to stop now, the ocean ship container. Just think how different is made things, load and unload those puppies with machines. Remember the dock workers?

          4. One of the complicated political issues surrounding with Trump’s anti trade obsession are perceptions. He blows off farmers’ low price problems by claiming he will help a little with some kind of government money. This first runs into trouble with the anti government wing of his own party. Then, farmers themselves mostly don’t like direct government bailouts because it puts them in the same category as welfare recipients. Then will always say they want good prices. So, in past decades the government bought commodities like grain to drive up the price and farmers could pretend they were getting paid by selling grain instead of government handouts. The government, then, had to get rid of all the stuff they bought. Free cheese handouts and whatever. The attached explains how complicated it is for Trump to “make it right” to farmers.

            The trade imbalance with China was never an economic problem. It’s always been a tiny part of the economy and is made up by the prosperity it generates. The smarter economic and political policy is reduced tariffs. As Sen. Heitkamp says, “We need more trading partners, not fewer.”

            https://www.nbcnews.com/politics/politics-news/gop-faces-rural-rebellion-over-trump-trade-agenda-n866456

        2. Catcher

          @ 4;38; I have it ! ! . 1948. formation of the state of Israel The birth of the true RCC. Hal Lindsey must have been a believer of the RCC, and the Rapture. Interesting convergence. All the ensuing Catholics are Jewish. Whoda thunk it.
          Next up–circumventing. No fish without scales on Fridays or during Lent.

          1. Catcher

            @ 8;03 I bet that one thousand years is purgatory. Is this where the 1948 comes from ? Lindsey said the rapture comes 40 years after 1948. We must already be in the rapture, or is it purgatory. No one left to pay for indulgences to get us out. That would be the eternal waiting room. Concupiscence included.

  7. Catcher

    Re. 1948; Or could 1948 be the year of Mat’s birth.? A high holy year in the calendar of the RCC for sure.

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