Trump and tariffs

Tariffs are simply a bad idea both in theory and practice. They make us poorer, which isn’t the point of this economic game at all.

But then, well, we’re in an election period, aren’t we? So, economic interventions aren’t going to be made on the basis of good economics but mere political calculation.

Which brings us to the most worrying thing of all: of the people running to be president, Trump is the least interventionist. Everyone else insists there should be more politics in economic decisions. Lord, help us all.

13 comments on “Trump and tariffs

  1. Let’s look on the bright side: maybe the French will be obliged to dump their surplus champagne on this side of the channel in time for our Christmas festivities.

  2. Let’s look on the bright side: that the French will be obliged to dump their surplus champagne on this side of the channel in time for our Christmas festivities.

  3. Trump has been using tariffs (threats of and then action) from the get go, so I think seeing them as an election gimmick misses the point, as does regarding them as simply economic actions.

    Trump is using tariffs as foreign policy (surrogate war). His primary target is China, and I suspect he intends to at least heavily damage the commie regime if not bring it down altogether. The Chicoms have been using economics as “foreign policy” for ages, and those that trade security for cheap shit and “investment” are idiots.

    Good on Trump, I say. And hey, look, somehow the economic fool is presiding over a booming economy. In so many areas it’s almost as if he knows more about how things really work than all the supposed experts.

  4. “Tariffs are simply a bad idea both in theory and practice. They make us poorer, which isn’t the point of this economic game at all.”

    No they make the aggregate poorer, which as none of lives in the aggregate means that lots of people lose out considerably from free trade (which of course it isn’t at all, try exporting your goods to China and getting paid, or not having your IP ripped off) while a few gain a lot(for example James Dyson gains a huge amount from making his vacuum cleaners in Malaysia and selling them in the UK, all the people who used to make them here have all lost out) and everyone else gains very small amounts. The benefits and detriments are not equally distributed. And in a democracy telling people their jobs have been outsourced to China and they should just suck it up is not going to fly, especially as the number of people affected grows exponentially, and the company that used to employ them makes ever bigger profits and pays their CEO tens of millions.

    Free traders like yourself need to realise that the benefits of free trade are being tarnished by the way that the political class are implementing it, and all you are doing by supporting the concept of free trade on its own is actually supporting the crony capitalist/Big State system that the Western political class have put in place for their own benefit. There is a massive tidal wave of hatred of political classes and Big Business sweeping the West (rightly so) and by hanging your free trade ideals on their coat tails you risk it being swept away with everything else. You should be saying that free trade is a good idea, but what we have now is not free trade and you don’t support the current system. But as usual you’re all too blinkered (or attached to purity of economic theory) to see what you supporting by supporting free trade as it is currently practised.

  5. So, economic interventions aren’t going to be made on the basis of good economics but mere political calculation.

    Strawman. There is no evidence good economics and political calculation are mutually exclusive. Nor is there a basis for declaring that economic intervention without political calculation serves the greater good. Maybe in theory, but theory isn’t were economies operate, right?

    And the whole “tariffs make us all poorer” argument only makes sense when viewed globally. At the national level it’s pure bullshit. France decides to implement at digital service tax. It is clearly aimed at USA companies. That’s the French extracting cash from ‘Mericans. It makes the French richer and the ‘Mericans poorer. So what does Trump do? He slaps retaliatory tariffs on French products. Now the French are poorer as well. Bad economics? Only if you ignore the interests of ‘Merican businesses and their shareholders, and that is not what Trump was elected to do.

    Trump is using a tariff to put moochers like the French on notice: You will not extract wealth from the USA without incurring a cost. I would argue that in both the long- and short-terms, that is good economics. It makes other moochers (such as the whole of Europe) to think twice about attempting to transfer wealth to their countries at the expense of the USA.

    Similarly, Trump’s selective use of tariffs with China have a sound economic basis: He is attempting to negotiate the best possible trade deal he can. That serves the economic interests of the USA to far greater extent than allowing China undeserved trading advantages.

    As an economist, you are to drawn (as are virtually all economists) to abstract concepts operating in a vacuum. What keeps the economist’s world tidy? Assuming away any part of reality that cannot be easily quantified or defined in purely rational terms (economic terms). The unfortunate fact of the matter is that economics will always operate in a reality defined, more or less, by politics (which is nothing more than the expression of preferences, right?). You ignore this at your peril.

    Simply stating that economics and “mere politics” should be viewed separately – with economics ascendant, of course – is an invitation to self-marginalization.

  6. “Tariffs are simply a bad idea both in theory and practice.”

    That’s the kind of statement which makes reasonable people wonder what goes on in the heads of “Free Traders”. Tariffs are a tax — that’s all.

    From the perspective of the customer in the UK, what is the difference between putting a tariff on plastic models of Big Ben imported from China and putting VAT on the same plastic model? The British purchaser pays the same final price. The evil UK government takes its money from the Chinese manufacturer instead of directly from the poor British purchaser (who incidentally used to have a good-paying job in a plastic gee-gaw factory).

    Because taxes have impacts on human behavior, the choice between VAT or a tariff can affect other choices — such as whether to build your vacuum cleaners in the UK or in Malaysia. Much might be said on both sides, but there will definitely be consequences — winners and losers.

    Most of what economists call “Free Trade” is anything but free — it is Managed Trade, which is why it took the EU 8 long years to negotiate an agreement with Canada. But trade within the EU itself is indeed free. That genuine free trade has benefitted German manufacturers, but how has it worked out for, say, Greece?

    Tim’s statement really should read: ‘Tariffs, like any form of taxation, can have good and bad consequences.’

  7. “Tariffs are simply a bad idea both in theory and practice.”

    Dear, dear! Comment disappeared. So here is the short version — A tariff is a tax, that is all.

    The UK government could choose to have a tariff on imported Malaysian vacuum cleaners, or it could choose to put a VAT on vacuum cleaners. Either way, the final British purchaser pays the UK government its vigorish. But choosing between a tariff or a VAT could influence other decisions, such as whether to manufacture the vacuum cleaner in Malaysia or in the UK, which could in turn affect the magnitude of the Multiplier Effect in the UK.

    Tariffs, like any other form of tax, influence behavior in ways that can have positive or negative consequences.

  8. Labour Tariffs on Supermarkets etc:

    Increase low wages by 25%

    Ferrari correctly says “They’ll close” – net profits of 2-3% will not cover this increase

    Pidcock: “Nobody would lose their job. Some people might buy more to cover the cost” – whut

  9. @PJF December 3, 2019 at 11:56 am
    @Dennis December 3, 2019 at 4:11 pm

    Spot on. Trump wants free trade and is using USA economic power in war against protectionism

  10. Dennis – “economics will always operate in a reality defined, more or less, by politics”

    Good point.

    The dismal science isn’t about graphs and stats, it’s about humans making choices. And humans are a funny bunch.

    Like, if you told Genghis Khan he’d get richer by easing off on the raping and pillage and starting one of them gig economies instead, he’d probably have you measured against the lynchpin.

    There’s probably a bestselling book yet to be written about Mongolnomics.

  11. The evil UK government takes its money from the Chinese manufacturer instead of directly from the poor British purchaser…

    No, the tariffs are paid by the domestic companies importing the goods – who naturally pass the cost on to the consumer (who then pays VAT on the higher price). Tariffs are not paid by the foreign exporter.

    The consumer does not have to buy the import, of course. He can forego the type of good altogether (poorer) or pay more for a domestic version (poorer).

  12. PJF — Remember the limitations of this medium, where required brevity necessitates approximate language.

    In principle, a government could raise a certain amount of money by either (a) putting a tariff on imports, or (b) putting on a VAT/sales tax. In either case, you are usually correct that the final consumer pays the government’s vigorish — although in the recent case of US tariffs on China, there are indications that Chinese manufacturers & China’s tax authorities have absorbed the tariff by reducing their own revenues, thereby keeping the landed price to the US consumer the same. And of course the evil UK government does both — sticking its peons with tariffs and imposing VAT on them too.

    The point that “Free Traders” seem to miss is the one made so eloquently by Jim above. Cheap imported “Free Trade” goods bring benefits to some people and create costs for other people. Similarly, tariffs (or any taxes) result in benefits for some people by creating costs for other people. To make a good decision about taxes (including tariffs), governments and the people they serve should look at costs along with benefits, and long term as well as short term.

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