Assuming free trade is good; a trade war or tarrifs designed to punish anti-free trade practices are probably good if they encourage free-trade in the medium to long-term. Tarrifs designed to artificially protect domestic workers are probably bad.
Hm…you know, maybe they ARE good. This one might just be the straw that breaks the Trump administrations back. This has been (yet another) clusterfuck for the administration, and I read today that Gary Cohn resigned over this directly, with a lot more in the White House unhappy over this whole mess. Investors are taking this as a sign that Trump is going to follow through with his ridiculous tariffs, and the DOW is reflecting that.
The US is taking almost constant hits to our image, our soft power and even our real power, internationally. Trump has done more than any past president (I thought Bush II was the gold standard for this, but now I look back almost fondly compared to this idiot) to drag this country down, and he’s succeeded in doing real, lasting damage. If this latest self inflicted wound to the country actually manages to bring the man down, it will be worth it.
But there are dispute settling mechanisms in place to deal with anti-free trade practices. Going rogue and starting a trade war still isn’t good.
I was not saying that you would use tariffs exclusively, just that they are part of that tool chest of economic sanctions. For instance, China, they don’t exactly use slave labor, but their humanitarian record is a bit spotty, and they also don’t have very good environmental regulations. Putting tariffs on their goods to compensate for working conditions and environmental conditions that we would not allow can help to prevent them from profiting from those conditions, while still allowing them to have trade to build up trade in order to work their way into prosperity and better conditions.
And that was my point, in the first place. Tariffs do not make any sense to do to protect domestic production, as even if it does boost the production of that commodity, it will cost the economy overall. They only make sense as part of economic sanctions to pressure other countries to reform.
There are times when some domestic industries should be protected for national security. We do need the ability to produce our own steel and aluminum, in case other countries start trade wars (or military wars) with us and cut out foreign supply. But, I feel that if that is the case, such industries are better being subsidized, rather than “protected”, and they largely are through defense contracts that have to source materials from US suppliers.
There you go, and I thought that the Canucks where such friendly folk, and clever 'cause they can produce metal products in grades and price points the US can’t, and surely you can forgive them for that bit of youthful enthusiasm in 1812, its been over 200 years they’ve been pretty good neighbours and isn’t the US the ones starting this trade war?
You think that a subsidy isn’t industry protection of the same order and consequence as tariffs? Would you have a High school Economics 1.01 primer lying around you could read?
So? That doesn’t come close to addressing, much less refuting, what I said.
What are you going on about? Your petty insults aside, a subsidy is not the same thing as a tariff.
Different mechanisms in protectionism in that who collects the money, who gets levied and how the charge is calculated.
But whether a 10% tariff is applied on imports or a 10% subsidy is applied to local production they have the same effect on the market from the consumers perspective.
You were advocating that the US is justified in starting a trade war with Canada over steel & aluminium products just in case Canada starts a trade war with the US over steel & aluminium products .
Yeah, I got nuthin’.
So I thought I’d give irony a burl.
Didn’t work either.
How so? A tariff would directly cause a rise in the cost of the single good it is placed on, while the subsidy would lower the cost of national products to match the imports. If the subsidy is paid out of general tax revenue, the cost would be spread around the entire economy, it would not be focused on a single product.
If the amounts of imported and domestic steel were the same, it would end up costing the same/similar amount of money overall, but that’s not the same thing as “the same effect on the market”. If domestic steel was a smaller fraction of the overall steel market, though, the overall costs would be lower (10% of 25%, vs. 10% of 75%, as an example).
The mistake in your assessment is assuming Trump is the one they are going after. What I saw people saying early on is that they are tariffs that would affect a bunch of red states. They’re going after Congress, to try to get them to handle it, up to actually removing Trump’s ability to impose tariffs at all.
Remember, the President only has this power because Congress willed it. And while I can see being afraid that Trump would hold a grudge, it’s not going to hurt them with their constituents. And they have to know their grasp on the presidency is weak.
The only real threat is Trump refusing to sign any more bills out of spite. But then all you’d need to do is have him talk to someone who thought that was a bad idea, and he’d agree with them.
Or, since the managed economy of China might be less focused on short-term profits than the US, China cuts their price further so the post-tariff price is 9 dollars. I understand that part of the problem is that Chinese has excess capacity for steel production and imposition of a US tariff doesn’t do a thing to their capacity, particularly in the short term. Reducing the price of Chinese steel still undercuts the US source price at home and abroad, damaging any residual foreign market for US steel as part of the process.
So it depends in part on China’s response to the tariff and their level of patience. Sort of like Amazon.com on a national level.
The only similarity is that they are a fiscal policy enacted by the govt. In every other way, they are completely different.
In a tariff, imports are taxed, which moves money from the consumer to the govt, and increases demand for local production by increasing the cost of foreign.
In a subsidy, money moves from the govt to the industry, lowering the cost of the item, and increases demand for local production by having a lower cost.
Do you get that at all? A tariff increases the cost to the consumer, while a subsidy decreases the cost to the consumer?
Ummm, no, I was not, not at all. Please try re-reading what I posted, as it is clear that you didn’t understand any of it if that is the accusation that you are making.
You are making even less sense here.
QED.
Sure, that’s the tag line and consequent populism.
But if subsidies lower consumer prices, you need to ask just one question: where’s the money coming from?
Because somewhat akin to Newton’s 3rd Law, every action has an equal & opposite reaction, though in economics there’s no restriction on over-reaction.
Take a stylised, isolated example.
US flat product steel is being beaten in the market by Canadian flat product steel.
The US steel industry lobbies the Congress for market support.
A 25% tariff is applied to all imports of Canadian flat product steel.
Who pays the tariff? Certainly not the Canadian producers.
The 25% is assessed on the USD FOB value of the imported product, is paid by the US importer to the US Customs collections agency. The US importer passes the cost on to their US customers.
US Internal Revenue can do with the revenue whatever what the Government requires but let’s close the circle and suppose that the value of the tariffs collected is paid as price support to US producers on an appropriate volumetric basis.
Who pays for this price support US producers? Either the US consumers of flat product steel or the customers of these consumers, in reality both.
So you have kicked off a trade war and US consumers of flat product steel are funding both sides.
I seen this in action quantitatively through 4 decades of working in import/export and trading businesses.
But I learnt it in an Economics 1.01 primer.
To start with, I never advocated for any sort of trade war, I instead said a trade war was stupid. I did bring up that, in the hypothetical situation where you have an industry that is necessary for national security, it is better to protect it with subsides than with tariffs. But, I did say, “if”, not that we should.
Secondly, the example you just used, you brought up tariffs, which, even in the hypothetical where it is an industry that is worth protecting, would not be used, only subsidies, which are paid for by the taxpayer, not the consumer.
I have no idea what you are trying to argue about here, but you are doing a very poor job of responding to anything I have actually said.
With that in mind, please rethink your posting. Thank you.
Amen.
His claim of national security importance was another totally unsupportable bit of garbage.
We get our steel from strong allies. And, raising the cost of steel through tariffs means making national security more expensive.
Or, does he think that aircraft carriers are somehow aware of where the ore was smelted?
Defense contractors are aware. So is the DoD.
I think everybody is aware.
So, I’m not sure where you’re headed with this post.
You’re just not playing that “3-dimensional chess” we keep hearing about from the Trumpeteers.
They way he’s been smack-talking Canada and Mexico, we might not be “strong allies” for much longer, then BAM! National security problem, baby!
Dumping, as a strategy, can only work if the industry you are suppressing can’t rebound - so the dumper can later jack up the price and enjoy their monopoly. If the industry can rebound, it’s economically pointless as a tactic - you are just giving money to the foreign consumers.
Of course, it may have other purposes (like acting as a subsidy, direct or indirect, to some group of domestic importance to the dumper). But as a tool of trade war, it rarely makes any sense: you are subsidizing other nations as well.
As my old law and economics prof liked to quip:
-
If you sell for less than your competitors in other nations, you must be ‘dumping’;
-
If you sell for more than your competitors in other nations, you must be ‘abusing a functional monopoly’;
-
If you sell for exactly the same as your competitors in other nations, you must be ‘in collusion with them’.
More like 1930. I am recalling the Smoot-Hawley tariff act, the one that made the Great Depression even worse.