“Buy American provisions ensure we won’t get nearly as much infrastructure for the money as we otherwise could.
That’s because domestically manufactured materials and products often cost more than foreign alternatives. Otherwise, you wouldn’t have to require that project sponsors use them.
Buying American steel for infrastructure projects costs around twice as much as importing it from China, according to a 2019 Congressional Research Report. That requirement cost American roadbuilders an additional $2 billion from 2009 to 2011, back when then-Vice President Biden was overseeing the spending of stimulus dollars on infrastructure projects.
Procuring American-made buses means that we pay twice as much as Japan and Korea do for their rolling stock. Our train cars cost as much 34 percent more because we insist on buying domestically.
Because these requirements can be so onerous, federal departments often grant exemptions to Buy American rules when they make projects economically infeasible. Biden is making sure fewer projects get those cost-saving exemptions.”
“If concentration in the marketplace was somehow to blame for rising prices, then it would make sense to attack that problem by expanding competition. Give consumers more choices and they will naturally flock to lower-priced alternatives, putting pressure on other sellers to keep prices down.
The problem, for Biden, is that so much of his economic agenda is pointed in exactly the opposite direction. In one breath, he complains about the lack of consumer choice driving up prices. With the next, he proposes to further restrict consumer choice.
“We will buy American to make sure everything from the deck of an aircraft carrier to the steel on highway guardrails are made in America,” Biden said, before promising that his administration would make some of the “biggest investments in manufacturing in American history” to bring about “the revitalization of American manufacturing.””
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“”Shifting demand to American producers with ‘Buy America’ polices [sic] that stop firms and consumers from buying at the lowest cost, no matter how politically attractive, are inflationary. This is something all economists should agree on,” Summers tweeted. “Blaming inflation on corporate greed or holding out the prospect that capacity can be expanded rapidly is at best diversionary.””
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“Tariffs are also contributing to inflation by artificially raising the prices of imported goods, including products like raw steel, aluminum, and lumber that are necessary inputs for American manufacturers and home builders.”
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“The two researchers found that costs imposed by trade barriers were passing along nearly in full to consumers. For every 1 percentage point increase in the cost of imported construction materials caused by tariffs, for example, they found domestic price increases of 0.9 percent after six months.”
“The US is not a major consumer of Russian crude oil, which makes up less than 4 percent of US consumption, so banning imports shouldn’t have a huge effect; the US doesn’t import any Russian gas. The US can make up the oil gap with imports from other countries, and the Biden administration already is pursuing that path by opening talks with Venezuela. Nor is Russia all that reliant on the US, because US purchases account for about 9 percent of its exports.
The bigger impact on the price of oil comes from what Biden’s announcement portends. Global oil prices have been fluctuating wildly in recent days, reflecting that there is a wide range of uncertainty over what could happen next. One of the uncertainties is whether more countries will follow the US’s move to ban imports, taking Russian oil off the table for a number of foreign markets. Cutting out Russia makes oil more expensive, because it upends the existing network of pipelines and makes countries’ paths to getting oil longer and more expensive.”
“The so-called “phase one” trade deal inked in December 2019 by former President Donald Trump and Chinese President Xi Jinping might have put an end to the spiraling trade war between the two countries, but the agreement did not result in China buying more American goods, as both leaders promised it would. In fact, during the two years covered by the deal, China imported fewer American goods than before the trade war began—meaning that the deal did not even succeed at patching up the damage caused by Trump’s bellicose trade policies.”
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“We now know that the promised benefits did not materialize. But the costs certainly keep adding up. Auto manufacturers, for example, shifted supply chains to avoid the cost of tariffs and economic uncertainty created by the trade war—by relocating some American manufacturing jobs to China, which has become a large and growing market for auto sales. BMW, for example, shifted much of the production of its X3 sport-utility vehicle from Spartanburg, South Carolina, to China after reporting that tariffs had cut the company’s American profits by about $338 million in 2018. The higher costs imposed by the trade war caused Tesla to announce that it was “accelerating construction” of a new plant in Shanghai.
Overall, Bown estimates, exports to China would have been $26 billion higher in 2020 and $39 billion higher in 2021 if not for the impact of the trade war and subsequent trade deal. That doesn’t account for other losses sustained during the trade war, like the increased farm subsidies paid for by American taxpayers and the run-of-the-mill cost increases created by tariffs.
Aside from some positive developments with regard to China’s treatment of intellectual property and financial services, probably the only good thing about Trump’s “phase one” trade deal is that it has now expired.
“President Trump’s trade war and phase one agreement did little to change China’s economic policymaking,” Bown concludes. “Beijing seems intent on becoming more state-centered and less market oriented.””
“Dozens of countries across the Middle East, South Asia, and North Africa that already suffer from food insecurity rely on Russia’s and Ukraine’s bountiful supplies of wheat, corn, and vegetable oil, and experts say the conflict could send food prices rising and
“Behind the rude awakening on energy security lies an even more unsettling realization for many German elites: That a decades-long goal of bringing Berlin and Moscow closer together through mutually beneficial trade seems to have failed.”
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“The idea that growing trade links with other nations would help to gradually embed Western democratic standards in those countries has already taken a hit when it comes to China, which has only become more and more repressive despite growing economic links. Still, leading German politicians have long held out hope that “Wandel durch Handel” might still work with Russia, and defended Nord Stream 2 as a tool to also influence Russia for the better.
“Obviously, this policy has totally failed when it comes to Russia,” said Marcel Dirsus, a non-resident fellow at the Institute for Security Policy at Kiel University. He argued that instead of influencing Moscow by making Russia more dependent on Germany, the policy had the opposite effect.
“Right now, when push comes to shove, Berlin is dependent on Moscow when it comes to energy, and that influences the way it positions itself,” he said, referring to Berlin’s initial reluctance to include Nord Stream 2 in potential sanctions against Russia in the case of further aggression against Ukraine.
It took weeks of internal bickering and harsh international criticism before Scholz’s Social Democrats agreed to put the pipeline on the sanctions table.
“Now, they are coming to this realization [that they are too reliant on Russia] and now they are also admitting it in public, but now it’s too late,” Dirsus said.”