“In an op-ed for The New York Times published Friday, Hawley uses the temporary supply chain problems as an excuse to push for a permanent expansion of federal power over the affairs of private businesses. We must “fundamentally restructure our country’s trade policy,” Hawley demands, and that means injecting both the Pentagon and Commerce Department bureaucrats into companies’ purchasing decisions. Under the terms of a bill that Hawley is proposing, any product determined to be “critical for our national security and essential for the protection of our industrial base” would have to have at least 50 percent of its value made in the United States.
Why is it necessary for the government to get significantly more involved in the system of global trade that’s allowed Americans to enjoy unparalleled prosperity in recent years? Because “the global pandemic has exposed this system for what it is—a failure,” Hawley writes.
One must assume that if the lights in his home went out due to a storm, Hawley would respond by declaring electricity to be a mistake and demanding that the government require homes to be lit with candles and gas lamps. After all, what is the electrical grid but a complicated supply chain that leaves Americans woefully dependent on production and distribution systems (power plants, substations, and lines) that they do not fully control? Better to produce your own lighting, right? If that means you have to live without television or the internet, well, those are just the trade-offs required to achieve self-sufficiency.
A storm—or a pandemic—can create temporary problems in the highly complex systems that run so much of the modern world. That’s hardly a reason to abandon them. If Hawley is imagining a world in which the United States is wholly self-sufficient, then he’s asking you to accept a scenario in which the United States is significantly poorer than it is today.”
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“Hawley says the supply chain crisis is the result of “a crisis of production.” Wrong again. American manufacturing is stronger than it has ever been, in part because outsourcing low-level production has allowed companies here to focus on higher-value goods (which means higher wages for the people who make and sell them). The true cause of the current mess is a disconnect between supply and demand—supplies have been constrained by a number of pandemic-related issues like temporarily closed factories and worker shortages, while demand has shifted in unexpected ways.”
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“If his thesis is correct, then items that are already mostly produced domestically should be exempt from the problems with foreign supply chains, right? Except, no, that’s not true. As Scott Lincicome, a senior fellow with the Cato Institute, points out, the vast majority of food consumed in the United States is grown, raised, and otherwise produced here. And yet Americans are seeing higher prices and supply issues at the grocery store too.
“That a mostly‐domestic U.S. food supply chain hasn’t protected American consumers from recent shortages and price increases is unsurprising,” Lincicome writes. “For starters, many of the same things that stress global supply chains—COVID-19 outbreaks; supply‐demand imbalances; labor shortages in the trucking and warehousing industries; misguided trade, transportation, and immigration policies; etc.—stress domestic ones too.””
“The Biden administration has reached a deal with the European Union to withdraw tariffs imposed by President Donald Trump on European-made steel. Unfortunately, the agreement likely won’t translate into lower costs for American manufacturers and consumers.
That’s because the Biden administration is replacing Trump’s tariffs with a new form of protectionism that will continue to artificially inflate the cost of steel imported from Europe. Instead of charging 25 percent tariffs on all steel imports, as Trump did, Biden’s deal includes a so-called “tariff-rate quota” that will allow 3.3 million metric tons of steel to be imported annually without tariffs. Once that threshold is met, the 25 percent tariffs will apply to subsequent imports. For reference, the U.S. imported nearly 5 million metric tons of steel from Europe in 2017—the last full year before Trump’s tariffs caused imports to fall sharply.”
“Former President Donald Trump hiked tariffs on a wide range of imported goods, President Joe Biden has refused to cut them, and that bipartisan opposition to free trade means Americans are now paying higher import taxes than ever.
The federal government collected more than $7.6 billion in tariffs during the month of August, according to recently released figures from the U.S. Census Bureau, which tracks economic data. That’s an amount that exceeds even the highest single-month total during the Trump administration and one that dwarves monthly tariff revenue from earlier years.”
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“It can be a mistake to make too much out of a single month’s economic data, but these numbers provide some small insight into the failures of the Trump administration’s trade policies. Higher tariffs did not reduce Americans’ desire to buy imported goods. They did not reduce the trade deficit (quite the opposite, in fact). They were not paid for by China or other foreign nations, but by American companies importing those goods (and the costs are passed along to other buyers and consumers down the supply chain).”
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“Revenue extracted by the federal government is not the only cost imposed by tariffs, of course. They also warp supply chains, change investment decisions, and encourage more spending on lobbyists and lawyers.”
“At the core of former President Donald Trump’s aggressive trade policies was a relatively simple—perhaps overly simplified—promise: Tariffs on Chinese-made products would drive manufacturers out of China.
“Many tariffed companies will be leaving China for Vietnam and other such countries in Asia,” Trump claimed in May 2019, about a year after his tariffs were first imposed. “China wants to make a deal so badly. Thousands of companies are leaving because of the Tariffs,” he tweeted a few months later, suggesting that the outflow was already underway. “If you want certainty, bring your plants back to America,” Robert Lighthizer, Trump’s U.S. trade representative, lightly threatened in a New York Times op-ed in May 2020, as the trade war’s second anniversary arrived.
But the tariffs failed to achieve that primary policy aim, according to a new paper published by researchers at the University of Kansas and the University of California, Irvine. Roughly 11 percent of multinational companies exited China in 2019, the first full year in which tariffs were in place—a significant increase from previous years. But the overall number of multinational firms operating in China actually increased during that same year, as foreign investment continued to flow into China even as the trade war ratcheted up costs.
In fact, the number of U.S.-based multinationals in China actually increased from 16,141 in 2017 to 16,536 in 2019. Non-U.S. companies were more likely to exit China during 2019 despite not being subjected to Trump’s tariffs.
“We estimate that less than 1 percent of the increase in U.S. firm exits during this period was due to U.S. tariffs. And U.S. firms were no more likely to divest than firms from Europe or Asia,” researchers Jiakun Jack Zhang and Samantha Vortherms wrote in The Washington Post this week.”
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“Trump is no longer running U.S. trade policy, but his failed tariffs on Chinese imports are still in force. Lighthizer’s replacement in the Biden administration, U.S. Trade Representative Katherine Tai, has said the tariffs provide “leverage” over China.
But that perspective is no more grounded in reality than Trump’s promises that his tariffs would cause companies to flee China. American consumers are bearing nearly 93 percent of the costs of the tariffs applied to Chinese goods, according to a recent report from Moody’s Investors Service. How is this giving the White House leverage over China?”
“Even the mere prospect of new trade restrictions has prompted solar installers, who are already facing supply issues and higher labor costs, to pull back on some projects. At the same time, Biden wants to avoid being seen to be weak on China — another centerpiece of his campaign pitch and early policy agenda.
The conflict pits parts of the solar industry against each other. American solar panel manufacturers are petitioning to expand existing tariffs on Chinese products to those coming from Malaysia, Thailand and Vietnam. Backers of the tariffs and trade restrictions say they would allow panel makers in the U.S. to expand production. Added duties would also accomplish another of Biden’s goals: punishing China over the use of forced labor.
But the Solar Energy Industries Association, which represents developers that install panels and build solar projects, says imposing tariffs on those three nations would hit more than three-fourths of imports and about half of the total solar panel supply in the U.S. “That would have a pretty devastating impact on the solar industry,” said Abby Hopper, CEO of the trade group.”
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“Other trade issues before the administration could also hamper solar build-out. Commerce is weighing whether to extend separate Trump-era tariffs on Chinese solar for another four years, and the Department of Homeland Security is considering whether to increase trade restrictions on Chinese panel components, like it did this summer.
In June, the Biden administration blocked the import of products containing silicon materials from a key Chinese supplier, Hoshine, over concerns it uses forced labor in its manufacturing. The company operates in the northwestern Chinese region of Xinjiang, where the ruling Communist Party has interned hundreds of thousands of ethnic Uyghur Muslims.
The policy has resulted in Customs and Border Protection detaining some shipments of solar panels coming in from China.”
“The bureaucratic process established by the Trump administration to determine which American companies should be exempted from paying tariffs on imports from China is a black box of “inconsistencies” and poorly documented decision-making, according to a new audit.
In a report published last week, the Government Accountability Office (GAO) cast a critical eye on the so-called “tariff exclusion process” created in 2018 as part of the Trump administration’s efforts to slap tariffs on a wide range of imports from China. The process, overseen by the Office of the U.S. Trade Representative, allowed American businesses to appeal to the federal government for permission to not pay tariffs if they could demonstrate that a given product was not available from other sources, or if a business faced “severe economic harm” due to the tariffs.
Between 2018 and 2020, American businesses submitted more than 53,000 exclusion requests. The vast majority—87 percent—were denied, and most of the denials were on the grounds that the company failed to demonstrate sufficient economic harm to the Office of the U.S. Trade Representative, the GAO found.
In other words, federal bureaucrats reviewed tens of thousands of statements from companies pointing out how the Trump administration’s tariffs would cause economic harm—because, yes, Americans paid for the tariffs—then discarded most of those requests because the harms were not “severe” enough.
What’s even worse is that there’s very little in the way of objectivity or due process afforded to companies that had their exclusion requests denied. Soon after the tariffs were imposed, members of Congress warned that the exclusion process lacked “basic due process and procedural fairness” and that it could be “abused for anticompetitive purposes.” As Reason previously reported, business owners have complained that simply getting a decision one way or the other can take months. And there is no way to appeal the rulings.
The new GAO report confirms some of those concerns.”
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“tariffs are always about protecting certain industries, and protecting certain industries always invites influence-peddling.”
“During his first presidential visit to Europe, President Joe Biden and his European Union counterparts..hammered out an important agreement to suspend pointless retaliatory tariffs targeting a host of foods. The Washington Postcalled [the] agreement, which suspends the tariffs for five years, “a significant step in calming trade relations after the fury of the Trump years.””
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“It leaves some non-food tariffs still in place. And the agreement could evaporate after five years—or sooner if the E.U. violates the terms of the agreement, notes senior Biden administration official Katherine Tai. This..agreement also doesn’t impact equally lousy Trump-era tariffs on Chinese goods. And, in the wake of Brexit, while the E.U. and the United Kingdom are busy playing tariff games that hurt members of each bloc—including Irish dairy and whiskey producers—there’s always the chance new tariffs could arise and target the United States.”
“American consumers are bearing nearly 93 percent of the costs of the tariffs applied to Chinese goods, according to a new report from Moody’s Investors Service. Just 7.6 percent of the added costs of the tariffs are being absorbed by China, the investment firm found.
And it gets worse. When China responded to Trump’s tariffs by slapping new tariffs on many American goods, American firms paid a significant price. That’s because “U.S. exporters, unlike China’s exporters, lowered by roughly 50 percent the prices of goods affected by foreign retaliatory tariffs, carrying a much higher cost burden than foreign importers of goods under U.S. tariffs,” writes Dima Cvetkova, an associate analyst at Moody’s and author of the report.
In other words, American companies ended up on the losing end of the trade war both going and coming. Importers absorbed most of the cost of the Trump tariffs, and American businesses that export to China got hit by the retaliatory tariffs worse than Chinese exporters to the U.S. did.”
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“More than half of the goods traded between the world’s two largest economies are now subject to tariffs, according to PIIE data, up from less than 1 percent before the trade war began. The so-called Phase One trade deal inked by the Trump administration and Chinese government in December 2019 (there never was a second phase) barely had any impact on those figures.”
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“According to the American Action Forum, a free market think tank, Trump’s tariffs (and retaliatory tariffs imposed by other countries) have increased annual American consumer costs by about $57 billion. The Tax Foundation estimates that Trump’s tariffs amount to an $80 billion tax increase on U.S. businesses. And researchers from Columbia University, Princeton University, and the Federal Reserve Bank of New York concluded that the tariff costs “have been passed on entirely to U.S. importers and consumers.”
More than three years after Trump launched his trade war and four months after President Joe Biden inherited it, the consequences of the tariffs should no longer be subject to debate. The evidence is overwhelming and one-sided: American consumers are being hammered.”
“Steel prices are surging and American manufacturing is paying the price—literally, thanks in part to the ongoing consequences of former President Donald Trump’s tariffs, which President Joe Biden has not removed.”
“”Amid surging lumber prices that are already adding an average of $36,000 to the construction cost of new homes, the Biden administration is moving forward with plans to double tariffs on lumber imported from Canada,” Reason’s Eric Boehm reported last week.
While former President Donald Trump is often rightly criticized for his protectionist policies, and did, in fact, impose a 20 percent tariff on Canadian softwood lumber in 2017, his administration slashed that duty to 9 percent last year as lumber prices soared. The Biden administration, on the other hand, proposes to hike tariffs once again, to over 18 percent for many firms, based on the premise that Canadian producers “made sales of subject merchandise at less than normal value” (we should be so lucky).
“It is a particularly egregious move, seeing as how lumber prices are still near multi-decade highs (still, despite a recent dip, up over 300% from one year ago) and US timber firms remain unable to sate demand,” points out Peter C. Earle of the American Institute for Economic Research. “The increased costs will ultimately fall upon American citizens in the form of higher prices and decreased availability of goods and services.”
That is, in the midst of soaring prices and short supply of lumber in the United States, the federal government is doing everything in its power to choke off other sources of the stuff that might fulfill demand and help to bring down costs.”