Thursday, March 15, 2018
Trump's Tariffs Are a Tax on Americans?
This has been the consensus opinion and in a normal economic environment it is totally correct.
Except it is wrong today. China has been operating prediatory capitalism utilizing the money of the State to use cheap metal to force their competition out of the market. This is actually quite common amoung large USA corporation who do exactly the same thing here.
What is now going to happen is that Trump will manage an active tariff portfolio aimed at forcing these guys to heel. this is not crazy at all, and it promises to be closely managed as well. Another tactic he loves to deploy is to announce that the sky is falling and all imported steel and Alunimum will be heavily taxed. This wakes everyone up and applies real pressure on the miscreants. Then he starts signing the EO and we find immedaitely Canada and Mexico are exempted and the door is open to all the good guys in europe for the same deal. In the meantime China saves face even though they are the only one in the end that is been really cut off.
All this also informs the world that anew sherrif is in town and no deals for crooks.
And yes we need to do this for national defense reasons as well and you must wonder what folks in the past admministration were doing? We know of course but we do not want to shock thechildren.
Trump's Tariffs Are a Tax on Americans
On Thursday March 1, the Trump administration announced plans to impose 25% tariffs on imports of steel and 10% tariffs on imports of aluminum.
The US President is of the view that without the required protection, the US steel and aluminium industries are likely to follow the deteriorating path and this in turn will undermine the US labor market.
The steps announced by the US President raises the likelihood of a global trade war. President Trump seems to believe that war is great and that the US will emerge triumphant.
One would have thought that out of all people, President Trump, who prides himself of placing America first, would never consider imposing tariffs. After all a tariff on any imported good implies curtailing the supply of less costly goods and encouraging the supply to the domestic market of more costly domestically produced goods i.e. punishing the domestic consumers i.e. the Americans.
Furthermore, by raising a protection wall to various inefficient domestic industries, Trump’s policies are going to promote inefficiency, thereby undermining the process of real wealth generation.
Also, the employment data contradicts the logic of Trump’s tariff policy. According to CNBC, while there are about 200,000 workers in the steel, aluminum and iron industries, there are 6.5 million people employed by businesses that use steel. This raises the risk of undermining rather than benefiting the US labor market.1
Given that President Trump prides himself as a successful businessman, he surely must be well aware that the ultimate goal of every business is to make profit. Hence, to succeed in this task as a businessman, Donald Trump will now allow government policies that are going to undermine the net worth of his company.
Yet for some strange reason the President is of the view that this is ok for the economy as a whole.
It did not occur to him that there is no such thing as an economy without individuals. If planned policies such as imposition of tariffs are going to weaken the process of wealth formation and undermine individuals wellbeing, obviously this is going to be bad news for the economy as a whole i.e. for America, which President Trump holds as number one on his priority list.
One could only hope that most countries such as China, the Eurozone and Canada will not retaliate to Trump’s tariffs and start a trade war to feed the ego of politicians.
By lifting tariffs on American imports, these countries will only make things much worse for themselves.
What is the point of punishing your own citizens because of a misguided economic policy of the US President? By curbing imports from the US to the domestic markets, one does not fix the negative side effects of US tariffs.
If all countries in the world were to impose tariffs on imports, this would quickly arrest international trade and lead to massive economic impoverishment.
In the words of Murray N. Rothbard,
The tariff principle is an attack on the market, and its logical goal is the self-sufficiency of industrial producers; it is a goal that, if realized, would spell poverty for all… It would be a regression from civilization to barbarism.