“”Contrary to conventional wisdom, imports are not a drag on the U.S. economy or the price we pay to sell goods and services abroad. In fact, rising imports coincide with stronger economic growth,” Scott Lincicome and Alfredo Carrillo Obregon write in The (Updated) Case for Free Trade, a Cato Institute study published in May. “The payoff to the United States from expanded trade between 1950 and 2016 was $2.1 trillion, increasing GDP per capita by around $7,000 and GDP per household by around $18,000.”
“Higher imports are also correlated with higher private‐sector employment in the United States, as numerous industries and workers depend on trade,” they add.”
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“Could high tariffs and “buy American” policies compel firms to find domestic suppliers? Well, maybe. But foreign sources were chosen for a reason; replacing them with domestic suppliers will require compromises. “Subsidising electric cars assembled in North America will make them more expensive and lower-quality,” The Economist cautioned of protectionist policies. And since politicized policy tends to breed yet more politicization, tariffs and subsidies will inevitably be further burdened with conditions. “The red tape will raise costs to consumers and taxpayers still further.””
“The Buy American program created by the Inflation Reduction Act gives Americans tax credits for purchasing electric vehicles (EVs) manufactured in the United States, Canada, or Mexico. However, these tax credits will not only be paid for by taxpayer dollars, they also stand to ignite a trade war with the European Union.
The majority of EVs are manufactured in China, followed by Germany and the United States. Regarding the minerals used in lithium batteries, the U.S. is at a disadvantage. In 2020, the U.S. ranked 15th in supplying battery materials, with the top three countries being China, Australia, and Brazil. The International Energy Agency notes that “the top three producing nations control well over three-quarters of global output.” Biden’s corporate welfare policy requires batteries to derive 40 percent of their mineral components from a mine in the U.S. or a country with which the U.S. has a free trade agreement. However, only five countries among the top 25 producers of minerals used in EV batteries have a free trade agreement with the U.S.
The U.S. could conceivably increase its mineral output with regulatory reform, says Scott Lincicome, director of general economics and trade policy at the Cato Institute. “The big problem is on the regulatory side, particularly on the permitting side of state-level equivalents….this makes mining and processing rare-earth materials here very difficult.”
The Buy American program also risks trade conflicts. E.U. French President Emmanuel Macron went so far as to say, “We need a Buy European Act like the Americans. We need to reserve [our subsidies] for our European manufacturers.” With the U.S. and Europe trending towards protectionism, Lincicome says restrictions will inherently “reduce adoption and consumption of whatever is targeted.”
Another fear that comes with protectionism is the retaliatory environment it creates. “Protectionism gets nasty, it gets political, and it spirals, and it’s very difficult to stop the cycle,” says Lincicome. Should a trade war begin over EVs, it could expand to other products, driving up prices.”
“Petroleum shipments are still relatively stable for Russia, as nations like China and India have picked up some slack from EU countries weaning themselves off oil, and Russia still has LNG, coal, and nuclear energy to help the economy float, too.
In order to make petroleum products more appealing to customers like India and Indonesia, Russia has offered fairly steep discounts — an average of $30 per barrel — against Brent crude oil, which has also been a benefit for Sri Lanka, Pakistan, Bangladesh, and Cuba, all emerging economies struggling with inflation, as Business Insider reported. Although according to S&P the discounts on Russian crude oil are decreasing, some analysts believe they’ll persist, making Russian crude oil imports highly palatable for poorer countries.”
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“Countries like China, India, and Turkey are proving eager partners for the Russian fuel industry, with Turkey doubling Russian oil imports this year and vying to become a hub for Russian LNG transfers into Europe after damage to the Nord Stream pipelines.”
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“Even with the Nord Stream 1 pipeline out of commission — and setting aside the transfers to China, now Russia’s biggest natural gas buyer — European countries are importing record amounts of Russian LNG at market prices, according to Bloomberg. France has purchased about 6 percent more Russian LNG between January and September of this year than it did all of last year; Spain has already broken its record for Russian LNG imports this year, and Belgium is on track to do the same.
The stakes for natural gas imports are somewhat different than they are for Russian petroleum, in a number of different ways; for one, the EU hasn’t imposed sanctions against it as it has against petroleum products, though the bloc does intend to eliminate its reliance on Russian fossil fuels by 2027. Second, Russia has already used Europe‘s reliance on its natural gas as a weapon; Russia cut access to many European countries which refused to pay for LNG in rubles, and cut total output to Europe by 60 percent in June and by 80 percent in July, Reuters reported last month.”
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“Russia continues to invest heavily in its nuclear technology, and nuclear facilities in many nations are dependent on Russian technology and cooperation to function, even if they’re not directly importing Russian nuclear fuel, according to a report by Robert Ichord for the Atlantic Council.”
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“Russia has several illicit strategies to evade western sanctions on its energy products and financial system. Because these transactions are, by their nature, often difficult to track, it’s hard to know how effective and how widespread they are — not to mention how much the Russian economy is benefiting from them.”
“Sen. Marco Rubio (R–Fla.) led a bipartisan group of lawmakers—all of them from Florida—in submitting a petition to U.S. Trade Representative Katherine Tai seeking “an investigation” into what the lawmakers call “the flood of imported seasonal and perishable agricultural products from Mexico.” They ask Tai to invoke Section 301 of the Trade Act of 1974 to impose “trade remedies” that will protect American growers from the scourge of…low-priced produce.
While they don’t come out and say it directly, it’s obvious from the letter that Rubio and his colleagues are seeking tariffs on Mexican produce. Section 301 is the same mechanism the Trump administration used to impose wide-ranging tariffs on goods imported from China. It’s a law that grants the executive branch broad, unilateral power over trade.
Rubio and the other lawmakers say the Mexican government is subsidizing its domestic agricultural infrastructure as part of a scheme to undercut the prices charged by U.S. growers. “Mexico poses a direct threat to Florida’s seasonal and perishable agricultural industry,” they conclude.”
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“Anyone who has taken a basic economics class should be able to explain what’s happening there. A high level of supply tends to push prices downward. Whether grown in Mexico or Florida, it makes sense that cucumber prices would be at their lowest when there are a lot of cucumbers in the market.
But that’s not how Rubio and his colleagues see it. Instead, the petition describes this minor pricing difference as “a clear attempt to displace Florida cucumbers from the U.S. market.”
Take a moment to enjoy the fact that some of the most powerful men and women in the U.S. government are freaking out over the idea that American consumers might get to save a few cents on their next cucumber purchase. Then amuse yourself with the optics of American agricultural special interests—which are, of course, pulling Rubio’s strings here—complaining about subsidies, as if “direct government aid” doesn’t account for nearly 40 percent of American farmers’ annual income.
“These Florida politicians are following a time-honored tradition of trying to help their local constituents at the expense of Americans in other states, who benefit from low-priced fruits and vegetables regardless of where they are grown,” says Bryan Riley, director of the free trade initiative at the National Taxpayers Union Foundation. “
“tariffs of all kinds are regressive taxes that hike costs for consumers and make it particularly difficult for poorer households to afford basic goods.
Eliminating many tariffs that serve little purpose “would ease financial burdens in a small but real way for American low-income and minority workers and their families, helping to raise their living standards without intensifying competitive pressure””
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“Trump’s tariffs have contributed to inflation and helped to artificially inflate the cost of everything from appliances to housing. About two-thirds of all imports from China are now subject to tariffs when they enter the United States, with the average tariff being 19.3 percent. That’s six times higher than the average tariff on Chinese-made imports before Trump’s haphazard trade war began. That’s certainly not helping poorer Americans improve their standard of living.
But, as Gresser points out, other aspects of the U.S. tariff code are also to blame for imposing regressive taxes on poorer Americans. Under the “Most Favored Nation” (MFN) system of tariffs that are applied to imports from countries with which the U.S. does not have a specific trade deal, many common consumer goods are subject to higher tariffs than their luxury alternatives. Stainless steel spoons are tariffed at a much higher rate than far more expensive sterling silver spoons, for example, and cheap sneakers are charged a tariff more than five times higher than leather dress shoes.”
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“For months, we’ve been treated to headlines promising that the Biden administration is considering lifting Trump’s tariffs. In June, administration officials told The New York Times that lifting tariffs might reduce inflation by a quarter of a percentage point—even though independent studies suggested the effect could be greater. Yet nothing was done, even after Biden promised that corralling inflation was his “top domestic priority.””
“Tariffs aren’t merely making summer fun more expensive—they are also making it potentially more dangerous too.
“Life Saver is not a misnomer,” writes Neil Mooney, an attorney representing Life Saver Pool Fence Systems, Inc., in testimony submitted earlier this month to the U.S. International Trade Commission (USITC), which later this week will hold a hearing on the economic impact of the multitude of tariffs imposed by the Trump administration in 2018.
For a company like Life Saver, which manufactures fencing meant to keep children away from unsupervised pools where they might accidentally drown, the tariffs have hiked the cost of raw materials imported from China. In his written testimony, Mooney estimates that the company has paid about $1.2 million in tariffs over the past four years—and has twice had to raise prices “specifically because of the tariffs.”
“The imposition of the Section 301 tariffs has forced Life Saver to raise its prices which inevitably has led to lower sales volume and therefore fewer protected pools,” writes Mooney. “The economic impact of the Section 301 tariffs is not only felt by Life Saver and other similar businesses and their employees, but also by the end consumers—American families.”
Are higher taxes on Chinese-made imports worth leaving American children marginally less safe?
Apparently so, at least for the past two presidential administrations. Former President Donald Trump used Section 301 of the Trade Expansion Act of 1974 to impose tariffs on a wide range of goods imported from China in several phases during 2018 and 2019. As a result, the average tariff rate applied to goods from China effectively doubled. Cumulatively, Americans have paid about $136 billion in higher costs as a result of those import taxes—that’s about $1,000 per household, according to research by the National Taxpayers Union, a nonprofit that opposes the tariffs.
Tariffs are adding to inflation, too. A study by the Peterson Institute for International Economics, a trade-focused think tank, found that repealing tariffs could reduce overall inflation by about 1 percentage point. Despite that, the Biden administration has so far been unwilling to do more than talk about repealing the tariffs imposed by Trump.”
“Tariffs on seafood have hit Alaska in particular, Alaska’s fishing industry generates over $5 billion dollars in economic activity and creates nearly 70,000 jobs in the state, making it a vital lifeline for the state. Over 40 percent of U.S.-caught Alaskan salmon and one-third of all seafood from Alaska is exported to China each year. Much of it is processed in China and then re-imported to the United States for sale in grocery stores.
As the National Fisheries Institute points out, this split processing stream has contributed to rising seafood costs for U.S. consumers, as China’s retaliatory tariffs hit seafood when imported for processing and the original U.S. tariffs hit products upon their return to American shores.”
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“For consumers, meanwhile, these costs are discouraging consumption of fish, according to a February study published by data analytics firms IRI and 210 Analytics. That month alone, sales of frozen seafood products decreased by 9.4 percent, while fresh seafood sales decreased by 12 percent.”
“My son was born with severe heartburn and cried constantly—and the baby formula on the shelves only caused him more pain. At the suggestion of our pediatrician, we turned to a European goat milk formula that we hoped could soothe my son’s stomach until he grew out of his condition. But recently our orders were canceled, thanks to the Food and Drug Administration (FDA).
America’s baby formulas are incredibly standardized. The FDA claims that that’s safer, but those regulations mean that most formulas have multiple ingredients that could be allergens or irritants. Milk-based formulas in the U.S. also have soy ingredients like soy oil, as well as palm oil. And most American formulas have higher than average levels of iron, which can cause constipation. While many European brands are similar to American ones, you can find brands there that don’t contain so many possible irritants to a child’s sensitive stomach. We used Nannycare, and my son found it much more tolerable than its stateside competitors.
It’s impossible to say for sure why my English supplier suddenly decided not to sell formulas to a buyer in the U.S. But the timing of the cancellation provides a clue: It happened shortly after the FDA blocked a large amount of European formula from being sold, declaring that they did not meet the agency’s standards.
We are far from the only family that relies on European baby formula. Yet the free flow of perfectly safe goods into the United States is still extremely restricted. The agency’s strict rules about how formulas can be made limit options for children with medical issues and leaves parents with products that can cause their little ones pain.
Worse yet, these regulations are more driven by bureaucratic and political interests than by science. These products, after all, have not caused a wave of problems for European babies.”
“When the Trump administration implemented tariffs on Chinese chemical companies in 2018, administration officials said tariffs would make American chemical companies more competitive. But industry groups told regulators last week that it’s had the opposite effect.
At a Thursday hearing on the impact of the Trump administration’s tariffs against China, the American Chemistry Council (ACC), an industry group representing over 190 U.S. chemical companies, informed the International Trade Commission that imports of Chinese chemical products have instead grown continuously since the tariffs took effect in June 2018. Over $35 billion worth of chemicals were imported from China in 2021, and Chinese companies now make up a larger share of U.S. chemical imports than they did when former President Donald Trump took office in 2017.
Per the ACC, the Trump administration failed to account for American manufacturers’ reliance on intermediate products exclusively produced in China. “China is the primary source of many valuable inputs to U.S. chemical manufacturing processes, and for which few or no alternatives exist,” an ACC representative said. “It would take years, and billions of dollars, to build manufacturing capabilities for these inputs in the United States or other countries.”
Dyes stand out as some of the most notable examples of vital Chinese imports impacted by chemical tariffs. For U.S. manufacturers to produce Red 57, a red pigment commonly found in many cosmetic products, they must import 3-hydroxy-2-naphthoic acid, also known as BONA, from China. BONA is exclusively produced in China, forcing American manufacturers to bear the higher costs associated with importing these critical Chinese-made inputs for their final products.”
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“Despite the attention given to the industry by the federal government in recent years, chemical companies are warning that tariffs are hurting their ability to invest new capital in their supply chains and innovate on issues like climate change. They also worry that it will slow job growth and hinder the Biden administration’s broader efforts toward restoring resilience in the supply chain while only contributing to higher costs for consumers.
“[T]ariffs are clearly not working for the chemicals and plastics sector,” the ACC said in their testimony. “[They] are making the United States a less attractive place for jobs, innovation, and plant expansion.””
“The Declaration of Independence is probably best known for the panache of its opening and closing stanzas. Those bits about “the course of human events” and the pledging of “our lives, our fortunes, and our sacred honor” suggest that the authors and signers understood the political and historical significance of the moment—and, after all, you can’t have a revolution without a little linguistic dancing.
But the bulk of the document—it’s just 1,330 words; take a moment to read it today—is dedicated not to grand statements about self-evident truths or sweeping philosophical claims.
Mostly, it’s a laundry list of complaints about how the government really sucks.”