Lone Candle
Champion of Truth
“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.”
“The Trump administration was able to reshape America’s trade policy in large part because it simply decided to ignore anything that punctured its manufactured reality about how tariffs work.
Economic data show that American businesses and consumers—not China—are overwhelmingly paying the cost of the tariffs? Send Peter Navarro out to do some television hits where he baselessly claims otherwise.
Thousands of American companies are lining up at hearings to explain why the tariffs would hurt their bottom line? Give Wilbur Ross a can of tomato soup and let him explain that those added costs are actually no big deal.
Farmers are getting gutted by the trade war? Send them fat checks, deny that your policies were to blame, and inadvertently create a new, expensive aid program that will be politically difficult to unwind.”
…
“the Biden administration seems determined to keep the circus going a while longer. Take, for example, Commerce Secretary Gina Raimondo doing her best Navarro impression during an interview earlier this month with MSNBC. Asked about whether the Biden administration would roll back the Trump tariffs on steel, aluminum, and other goods from China, Raimondo argued that “the data shows that those tariffs have been effective.”
Have they? Raimondo was careful to avoid saying exactly what the tariffs have been “effective” at accomplishing, but the actual data would suggest the answer is not much—except, of course, raising prices for American businesses and consumers.”
…
“The fundamental problem is the same one that Trump, Navarro, Ross, and others spent the past few years trying to hand-wave away: Tariffs simply create more losers than winners. The U.S. steel industry, for example, employs about 141,000 workers. But there are more than 6 million workers in manufacturing businesses that consume steel. The tariffs are meant to protect the former group by imposing higher costs on the latter, much larger group.”
…
“Through its first 50 days in office, the Biden administration has given no indication that it is interested in providing relief to American businesses beset by Trump’s tariffs. If anything, Democrats in the White House and Congress appear to be entrenching those policies.”
“President Donald Trump’s declaration on March 2, 2018, that a trade war with China would be “good and easy to win” remains one of the defining moments of his four years in the White House.
That’s only because of how wrong the claim turned out to be. It deserves to live on in infamy alongside George W. Bush’s “mission accomplished” speech and Barack Obama’s “if you like your doctor, you can keep your doctor” promise. Like those, it oversold a complex, messy policy as simple and straightforward. Trump naturally took that presidential hubris to another level, and he paired it with unprecedented policy naivety. If winning a trade war were as simple as tweeting victory into existence with fake statistics, faulty economics, and the veneer of toughness, Trump likely would have succeeded. Unfortunately, that didn’t work.”
…
“Trump deserves some credit for reorienting America’s economic and foreign policies to recognize the threat posed by the Chinese Communist Party to freedom around the world. But his approach—which amounted to little more than levying higher taxes on $460 billion of imports and forcing Americans to foot the bill—was an abject failure.”
…
“China, of course, did retaliate. It drastically reduced agricultural imports from the United States. In 2017, the last year before the trade war began, China imported more than $19 billion in American farm goods, which fell to $9 billion in 2018 and rebounded weakly to $13 billion in 2019. Exports to other countries have been unable to make up the difference, leaving American farmers in the lurch.
The Trump administration responded by spending more than $28 billion in new farm subsidies to mitigate the totally predictable mess it made. By the end of 2020, federal payments accounted for one-third of all American farm income—as Trump’s trade war bailout was piled atop existing subsidies. Rolling back those payments will be politically difficult for future administrations, so they might be here to stay.”
…
“During his first week in office, Trump signed an executive order withdrawing the United States from the Trans-Pacific Partnership (TPP), a proposed 12-nation trade agreement that was a work-in-progress holdover from the Obama administration. In 2018, Trump launched his trade war by nonsensically declaring that steel and aluminum imports from places like Canada and Europe were somehow threats to U.S. national security.
All of that made a difficult confrontation with China more complicated than it otherwise would have been. A go-it-alone strategy was meant to project America’s toughness but a multilateral approach that lowered tariffs on imports from countries that compete with China would have been more effective.
Ironically, Trump also left America less capable of standing up to China in other ways—the president was reportedly hesitant to condemn China’s takeover of Hong Kong and was unwilling to speak out against China’s abuse of Uighurs because doing so might hurt trade negotiations.”
“When a Missouri-based power tool manufacturer was facing the prospect of higher costs due to new tariffs on imported saw blades, it turned to friends in high places for help—including Sen. Josh Hawley (R–Mo.).
Hawley has been an outspoken supporter of President Donald Trump’s destructive trade policies. In fact, he’s suggested that the president should have done more to dismantle the system of global trade. But Hawley was one of four members of Missouri’s congressional delegation to sign onto a letter sent in September 2019 asking the U.S. trade representative to grant a special exemption for SM Products, which is based in Kansas City.”
…
“The tariff costs facing SM Products were also hitting many other American manufacturers since much of American manufacturing is dependent on the ability to import low-cost inputs from China and elsewhere. But while some companies were able to find members of Congress willing to lobby on their behalf before the unelected board of trade officials who get to decide which tariff exemptions to grant and which requests to ignore, most other American businesses were less fortunate.”
…
“Once the tariffs were in place, the Trump administration set up a murky, confusing process for companies to request exemptions. It was, and is, a system that almost seems designed to be exploited by politically connected firms and individuals. Indeed, right from the start of the Trump trade wars, some major American steel manufacturers appeared to be exercising undue influence over the exemption process. Members of Congress have warned that the process lacks “basic due process and procedural fairness” and that it could be “abused for anticompetitive purposes.” After two years, the government’s own data suggest that’s exactly what has happened.”
…
“businesses that could afford to do so started hiring lobbyists to navigate the new tariff regime. The amount of money spent on lobbying work related to tariffs increased 900 percent as the trade war was getting started.”
…
“Most businesses, however, can’t afford to hire lobbyists and don’t have easy access to a sitting senator. They just have to pay the tariff bill.
These are all unintended but completely expected consequences of Trump’s trade war and his poorly thought-through plan to use higher tariffs as a cudgel against China. Not only did Trump’s trade policies run directly counter to his promises to “drain the swamp” by creating opaque bureaucracies that can decide the fates of small businesses all over the country, but they actually created incentives for the swamp to get even swampier.
In the warped reality the trade war helped to create, a company in Kansas City might not succeed or fail based on the quality of the power tools it is manufacturing, but on whether its owners know the right men in Washington.”
“Early on in his administration, Trump raised tariffs. The Cato Institute’s Scott Lincicome describes the president’s trade war as having “implemented five different tariff actions on almost $400 billion in annual U.S. imports (as of 2018) under three different laws with different rationales: ‘safeguards,’ ‘national security,’ and ‘unfair trade.'” We were promised ever-more jobs thanks to the tariffs. But as numerous academic studies have shown, the people who shouldered nearly all of the burden of these import taxes were not foreigners but, rather, Americans.
Protectionism reduces the overall wealth of the nation. Aside from a few favored and protected producers, Americans, in general, are made poorer. Consumers have to spend a higher share of their incomes to buy goods that they could otherwise get for less. As a result, ordinary Americans save less and have less to spend—even on nontariffed goods and services. The American producers of goods that use tariffed foreign inputs also see their production costs driven up, which drives their ability to compete down.
Unsurprisingly, the administration’s belligerent trade policies disturbed our trading partners. They retaliated with their own tariffs on American exports (to the detriment of their consumers). Adding insult to injury, the president’s erratic behavior, threats, and contradictory tweets about his trade policy likely spooked investors. The overall uncertainty and negative effects of the trade disputes surely dampened the beneficial effects of the president’s few good fiscal policies and regulatory reforms.
Take, for instance, the corporate income tax reduction as part of the Tax Cuts and Jobs Act of 2017. This reform should attract to the United States much foreign direct investment, or FDI. Yet, FDI flows into the United States were 10 percent lower in 2019 than during the two previous years. Simeon Djankov and Eva Zhang of the Peterson Institute for International Economics recently looked into the fall of FDI flows into the United States. “It is likely that the positive effect of the corporate tax cut in attracting FDI to the US,” they concluded, “was outweighed by trade disputes and threats of withdrawal, as well as actual withdrawals, from international treaties and organisations, which may have scared investors away.”
As for trade treaties, the Trump experiment is one that I hope we won’t repeat. First, he impulsively withdrew the United States from the Trans-Pacific Partnership, a multilateral trade agreement designed to oblige China to behave better on trade while opening up a large free-market zone with other Asian nations.
Trump renegotiated the North American Free Trade Agreement with overall negative net impacts, thanks to an anti-growth minimum wage and increased domestic content requirements. And he moved to extend high tariffs on Korean trucks as part of the one-sided reform of the George W. Bush-era U.S.-Korea Free Trade Agreement, to the detriment of U.S. consumers.
Finally, the president inflicted serious damage to the World Trade Organization—the great arbitrator of all international trade disputes—on the specious claim that the organization wasn’t sufficiently deferential to the United States. Here’s how Lincicome sums it up: The administration chose “to shut down the organization’s appellate body (basically the supreme court of trade dispute settlement) instead of negotiating new and necessary reforms in good faith (e.g., by teaming up with like-minded countries while offering actual concessions on longtime irritants like U.S. agricultural subsidies and ‘trade remedy’ rules).””
“Commerce Secretary Wilbur Ross, one of the few members of President Donald Trump’s cabinet to serve the full four years, memorably made a fool of himself by promising that tariffs on steel and aluminum imports would hardly be noticed by most businesses and consumers. It was an argument that undermined itself—the tariffs were intended to force businesses to make different purchasing decisions and thus would have to be noticed in order to work. Worse, Ross approved the vapid “national security” rationale for imposing those tariffs, then oversaw the development and operation of an opaque, confusing, and easily corrupted process to determine which American businesses could dodge those tariff costs.
Ross also led Trump’s unsuccessful effort to exclude undocumented immigrants from the 2020 census, which would shift the once-per-decade redrawing of congressional districts and politically disenfranchise parts of the country with high immigrant populations.
In short, the Commerce Department for four years has been a tool for expanding bureaucratic control of the economy under the false premise that federal officials know how to run businesses better than the people who actually do—and for politicizing the normally rote functions of the government.
And that was before Democrats took charge. Thankfully, Raimondo seems like an unlikely candidate to double down on the past four years of economic foolishness.”
“President Joe Biden’s first major trade policy move will be disappointing for anyone who hoped his inauguration would put an end to the presidential practice of unilaterally imposing expensive, unnecessary tariffs for vacuous national security reasons.
Biden’s decision last week to reimpose 10 percent tariffs on aluminum imports from the United Arab Emirates (UAE) contains all the major hallmarks of former President Donald Trump’s misguided trade policies. Biden even sounded downright Trumpian as he announced the renewed tariffs—which Trump had lifted during his final days in office. “The available evidence indicates that imports from the UAE may still displace domestic production, and thereby threaten to impair our national security,” says Biden’s executive order announcing the policy.
The idea that aluminum imports are a threat to national security was a bunch of nonsense when Trump did it, and it’s still bunk when Biden says it. It was, and is, nothing more than a cheap excuse for a trade barrier that ultimately inflates costs for businesses that buy and consume aluminum. Since 97 percent of American jobs in the aluminum industry are downstream of production, these tariffs create far more losers than winners.”
“With the presidential election now just over two weeks away, President Donald Trump has mounted a frantic effort to ensure America’s farmers, a key Trump voting bloc, will support his flagging re-election campaign. In short, he’s shoving piles of cash their way.
The New York Times details the “gush of funds” Trump has promised U.S. farmers—with more on the way. Some say total farm subsidies could top $40 billion this year. The Times says the figure may be as high as $46 billion. Either figure would be a record.”
…
“Non-partisan observers have also labeled them political handouts. “The Government Accountability Office found last month that $14.5 billion of farm aid in 2019 had been handed out with politics in mind,” The Week reports. The Times, citing the same GAO report, also highlighted by some Democrats, shows farm subsidies last year appeared to be directed to “big farms in the Midwest and southern states,” mirroring at least some segments of Trump’s farm base.
That same base has been hit hard by tariffs championed by Trump. In 2018, I predicted (as did many others) that Trump’s international trade tariffs would spur retaliatory tariffs and harm U.S. farmers and consumers in the process. They did just that.
But because Trump’s tariffs hurt U.S. farmers, and because he wants them to vote for him again, he’s sending them cash. That cash even has a name. Last year, one farmer NPR food-policy writer Dan Charles spoke with says he and his fellow farmers have taken to referring to the tariff-induced subsidies as “Trump money.””
“The case for repealing Trump’s tariffs is a strong one. The tariffs on Chinese imports have largely failed to bring about any of the benefits Trump promised, and both America and China seem to have already disregarded what little progress was made with the signing of a limited trade deal last year. The White House promised that tariffs would help rejuvenate American manufacturing, but the added costs from tariffs on industrial inputs were one of the chief reasons why the manufacturing sector had fallen into recession even before the COVID-19 pandemic hit. America’s trade deficit with China, which Trump promised to reduce, is now larger than it has ever been.
When you add them all up, the tariffs are one of the biggest tax increases in recent American history, and the cost is borne—despite what Trump and his allies like to claim—entirely by American consumers and businesses. The administration has spent $28 billion just to fix some of the messes these policies have created for American farmers.
And while trade issues will probably never swing as many voters as culture war battles, people have noticed that the trade war isn’t going well. Nearly 70 percent of Americans say they are “concerned” about how tariffs are adding to the cost of household products—a cost that could be as high as $1,200 annually for an average household.”
…
“Meanwhile, Biden is pushing a dubious “Buy American” policy that would translate into a series of expensive and ineffective regulations in the name of economic nationalism. Over and over again, Biden and Harris have been happy to point out the many failures of Trump’s anti-trade policies, but they don’t seem willing to apply those lessons going forward.”