Tariffs Are A Form Of Theft From Consumers
Economist Veronique de Rugy writes in The New York Times that the US "should drop all tariffs, even if the rest of the world doesn't follow."
Economists since Adam Smith have understood that free trade is the best policy. Studies show that countries with freer trade have both higher per-capita incomes and faster rates of productivity growth. Economists have also long understood that barriers to trade, while pitched as a way to help domestic workers, always heavily penalize domestic consumers. For instance, when Uncle Sam imposes stiff barriers on sugar imports to protect a few hundred producers in Florida and Louisiana from competition, these farmers' gains come at the larger expense of consumers who are obliged to pay more than twice the world price of sugar, on average, each year since at least 1982.The same is true of Mr. Trump's steel tariffs. Claiming that they protect a vital industry and its 140,000 workers, tariff supporters never mention how much harder they make things for the 6.5 million manufacturing workers in steel-consuming industries. Add to that number all of us who consume goods made of steel, and you get an even larger figure.
Consider a domestic company that imports specialty European steel not produced in the United States. Thanks to the tariffs, this company faces an instant 25 percent price increase. It will shift some of that cost onto its customers, making the final product more costly and thus less competitive at home and globally. Or the company might shift manufacturing abroad to gain access to cheaper materials.
And let's take a look at Trump's tariffs on imports from China:
So-called free traders seem to believe that the president's $50 billion of tariffs on imports from China is part of a brilliant strategy to get the Chinese to open their markets to American exports. Similarly, they applaud Mr. Trump for starting a trade war with G-7 countries toward the goal of a tariff-free G-7.Even if Canada never removes its 270 percent tariffs on our dairy products, Americans would gain if Uncle Sam, regardless of Ottawa's trade policies, unilaterally removed not only the steel and aluminum tariffs it just slapped on Americans who buy Canadian metal but also ended all tariffs on imports from Canada.
Don't forget that Canada's dairy tariffs are paid by Canadian consumers. It defies logic for an American president to punish American consumers in order to prompt Justin Trudeau to be kinder to Canadians. We also know that an increase in imports from Canada will expand our exports to our northern neighbor. By contrast, protectionist policies like those supported by the Trump administration may lead to more, not fewer, protectionist policies abroad -- tariff hikes that have been historically ineffective.








Don't be retarded. Under this argument the income tax is theft. You are claiming that all taxes, fees, etc are theft. Tariffs are taxes plain and simple. They may be excessive. They may be foolish and self destructive. But that is true of all taxes. After all you live in California a land with many self destructive tax policies.
Ben at June 23, 2018 5:19 AM
The government and the environmental movement made it ruinously expensive to produce steel, aluminum, and other heavy industry in the U.S.
Ever been in Beijing? Even inside of the airport, you can cut the air with a knife.
No environmental controls and slave labor means cheap crap from other countries.
Tariffs control dumping to some extent. They are a tool of diplomacy and you are deluded if you think unilaterally dropping them on everything would be a good thing.
Some countries and companies we should chose not to do business with but in a world where it is easy to hide the origins of a lot of products that is difficult to do directly.
Isab at June 23, 2018 7:51 AM
Trump's tariffs are an attempt to level the playing field, albeit at this point a seemingly clumsy one.
For example, European companies receive operating subsidies from the European Union and various member governments. Competing American companies do not receive similar operating subsidies from the US government. With those subsidies, European companies have a competitive advantage over their American rivals.
Likewise, Chinese companies benefit from both government subsidies (the Party has a stake in major Chinese business ventures) and lower labor costs. Not to mention, the Chinese are notorious for ignoring intellectual property copyrights.
Isab mentioned "dumping" which is a real economic concern as well. Lower cost countries have all the leverage in today's global economy. It's not a true free trade economy.
Free trade works best when all the players are on a somewhat level playing field, each with a set of competitive advantages over the others. When one set of players is being subsidized while openly stealing the research and development paid for by other players, the field is clearly not level.
Will tariffs level the field? Not likely. They will most likely spark a trade war, driving up prices and creating inflationary pressures, not to mention foment international hostilities.
It's a potentially dangerous game Trump is playing. It remains to be seen if he's enough of a chessmaster to pull it off.
In addition, a lot of the impetus for this policy stems from the politics of resentment practiced by both parties these days. Claims that the Chinese stole jobs drives an unemployed or underemployed public to support punitive measures against them.
Meanwhile the other party talks about the rich not paying enough taxes and stirs resentment against capital investment in this country. As a result, there is little incentive to create new ways of doing things here and lots of incentive to simply keep doing things the old way in a cheaper country.
Another problem is that a tariff policy does not address the main reason companies are able to take advantage of cheaper foreign labor today when they couldn't 50 years ago (the labor was still cheaper back then). That reason is reduced shipping costs.
Up to the '60s, shipping costs were 50-75% of the final consumer price of a foreign-made item, making the foreign item often more expensive than the domestic item. Today, those costs are less than 15%.
The US is still competing on a '50s paradigm. Revamping our economy and education system would go further in the long-run than tariffs.
We need to turn out high school graduates who can handle coding and math to run automated production lines. We need high school graduates who can handle high-tech artisanal production processes. And for that, we need better teachers, ones highly skilled in their subject areas. We need a curriculum that goes beyond college-prep and we need cooperation between corporate America and our education system.
Not to mention, but we also need better lawmakers, ones that don't spend their time investigating the Microsoft monopoly accusations by asking its chairman how to send an e-mail.
We need a revised corporate tax code, both at the federal and the state level, that emphasizes productivity and encourages investment and modernization. We need a less-adversarial relationship between management and labor.
Globalization upset may long-standing pillars of economic thought and everyday life we took for granted. Most schools of economics have not adjusted yet, either still espousing theories developed in a less global economy or spouting utopian theories with little basis in fact or research, celebrating a gig economy as if driving for Uber or renting out the spare bedroom on AirBnB are career options instead of a desperate attempt to stay out of foreclosure.
Tariffs are old-world solutions. We need new world solutions.
Conan the Grammarian at June 23, 2018 8:04 AM
Aside from tariffs, some states have prohibited Chinese steel in some manufacturing processes due to falsifications of pedigree.
I'm sure every tree-hugger wants a factory built "somewhere else", but any student of the Civil War will easily show you what happens if you do not have native manufacturing/industry...
Radwaste at June 23, 2018 8:19 AM
“Aside from tariffs, some states have prohibited Chinese steel in some manufacturing processes due to falsifications of pedigree.”
All of them should.
This is a huge problem. Trust me, you dont want your personal firearms, and ones for our military, never mind ships, tanks or howitzers, built out of low grade Chinese steel.
Dangerous, and ruinously expensive when it fails.
I pretty much dont eat seafood from the grocery stores in the US anymore. I dont trust the provenance or the handling in foreign ports. You shouldnt either.
The sheer volume of stuff coming in from countries with poor quality control, and outright fraud means that we catch very little of it. We don't have any where close to enough inspectors to check even five percent of it.
Isab at June 23, 2018 8:43 AM
This is a huge problem. Trust me, you dont want your personal firearms, and ones for our military, never mind ships, tanks or howitzers, built out of low grade Chinese steel.
I remember the health problems involved with Chinese drywall.
Kevin at June 23, 2018 10:15 AM
President Trump, Deal Maker? Not So Fast
Of course, bear in mind this piece is by Peter Baker in the NY Times so, to Trump supporters, it's just a hit piece on someone who is truly a fantastic -- and beautiful! -- dealmaker.
JD at June 23, 2018 10:56 AM
“His 17 months in office have in fact been an exercise in futility for the art-of-the-deal president. No deal on immigration. No deal on health care. No deal on gun control. No deal on spending cuts. No deal on Nafta. No deal on China trade. No deal on steel and aluminum imports. No deal on Middle East peace. No deal on the Qatar blockade. No deal on Syria. No deal on Russia. No deal on Iran. No deal on climate change. No deal on Pacific trade.”
And boy, am I happy about this........since the democratic party never negotiates in good faith.
Isab at June 23, 2018 11:20 AM
"That reason is reduced shipping costs." Conan
I remember a few years back there were a flurry of articles on how US, Canadian, and Mexican producers of chicken and fish were shipping the carcasses to china for processing to be shipped back to North America for distribution.
It is now cheaper to ship food via truck over the entire Continental US, across the ocean to China and back again than it is to pay workers here to do the job
lujlp at June 23, 2018 12:36 PM
Amazing! Now the NYT is a fan of Adam Smith's laissez faire: what can political hate do!
But of course, if Trump wants tariffs, then tariffs are the devil's shit and the opposite must be the way of truth.
Paolo Pagliaro at June 23, 2018 6:05 PM
"It's a potentially dangerous game Trump is playing. It remains to be seen if he's enough of a chessmaster to pull it off."
Chessmaster? Nope. Lucky is what I would have used. He may get lucky enough things work out. Then again he may not. But I don't have any good ways to level the playing field so I can't suggest a better way than the status quo.
And JD you don't have to think Trump is some deal-o-matic to recognize that Times piece is a pile of junk. Just give up your crazy hatred for the man and you'll see it. There are plenty of legitimate complaints about the man but that article didn't touch any of them.
Ben at June 23, 2018 6:15 PM
Actually, there is another way to handle this before using the tariff sledgehammer and that is to avail ourselves of remedies through the WTO. As long as we belong to that gaggle of globalist goofballs, we should try them first and see how useful they are before risking grave harm to the American economy.
mpetrie98 at June 23, 2018 7:43 PM
We already have Mpetrie. Sometimes we won. Sometimes we lost. In the end the WTO has been fairly ineffective at leveling the playing field.
Ben at June 24, 2018 7:01 AM
There's a lot of moving parts here. I'm a free-trader, but I have become convinced that there is no such thing as free trade with a nation that has a non-free economy. China's economy is manipulated six ways to Sunday: from favored deals for insiders to widespread currency manipulation, China's economy is anything but free. And as pointed out, China's government specifically supports the exploitation of other nations's property rights as a weakness. I know that in the electronics industry, parts markets are absolutely flooded with Chinese-made counterfeits of name-brand parts. It's a major problem, not only because of abuse of the trademarks, but also because the knockoffs are nearly always of inferior quality and don't meet published specifications.
I decided to run down the scoreboard of the list that JD reproduced from the Times article:
* No deal on immigration.
-- The Left's negotiation position for 25 years has been "completely open borders; nothing less is acceptable". Given that, it has been impossible to negotiate in good faith; the Left sees any compromise as not a solution, but merely a foot in the door. The Right hasn't yet worked out what its position is; they just know that the can't trust the Left. So right now things are at an impasse. But watch this space.
* No deal on health care.
-- Actually, it seems that the immediate problems are being solved incrementally. The longer term problems remain unsolved, though. Trump has not done a particularly good job here. Neither has anyone else, though.
* No deal on gun control.
-- There is no deal to be made. The Left's position is absolutist; they will settle for nothing less than complete nullification of the Second Amendment. Other than fighting the Left's efforts, there is no reason for Trump to address the issue.
* No deal on spending cuts.
-- True, but there's lots of blame to go around. Nearly everyone in Washington is responsible here.
* No deal on Nafta.
-- NAFTA was never what it was cracked up to be. It did not significantly open the Canadian or Mexican markets for the U.S. One example that I'm aware of: During both the W and Obama administrations, U.S. trade negotiators proposed an "open skies" agreement between the U.S. and Canada, that would allow Air Canada to fly unlimited routes in the U.S., and U.S. airlines to fly unlimited routes in Canada. Both times, the Canadian government turned it down cold.
* No deal on China trade.
-- Don't be so sure. A lot of international pressure is being put on China.
* No deal on steel and aluminum imports.
-- This one has been a mess so far. But consider: it has been reported this week that Germany has come back to the U.S. and proposed a bilateral elimination of tariffs on auto imports between the two countries. If negotiations succeed, it will be the first time since WWII that any European market has been open to American auto imports.
* No deal on Middle East peace.
-- Actually, there has been progress under the radar. Fracking in the U.S. has lowered oil prices to the point that some of the Middle Eastern nations, Saudi Arabia in particular, are realizing that the oil gravy train is coming to the end of the line. Saudi is taking some steps towards modernization, and they are working under the table with Israel on regional security. This is far more progress than has occurred under any previous President.
No deal on the Qatar blockade.
-- Not very familiar with that, so I won't comment.
* No deal on Syria.
-- My first reaction is "meh, who cares". I daresay there is almost no support from any political viewpoint in the U.S. to intervene in Syria. Yes, there is a humanitarian crisis happening there. But the reason it's happening is because of bad actors in the region, one of which is Russia. Which leads us to...
* No deal on Russia.
-- Granted. But no deal is going to be possible until Putin is disabused of the idea that he's still dealing with a feckless Administration that will let him operate in America and around the world as he pleases. The disabusal is in work. One might wish it to go faster, but I'm not sure that's possible right now. There is a lot of damage to be undone.
* No deal on Iran.
-- Iran cannot be dealt with. They can only be defeated. The government there is showing weakness, and the previously mentioned work with Saudi Arabia, and other actors in the Middle East who are seeing that resolving the problem is in their own best interest, is putting the pressure on. The most optimum would be for the government to fall from within, and be replaced by a reform-oriented group backed by the larger coalition.
* No deal on climate change.
-- No deal needs to be made. There is literally nothing that needs to be done here. It's a non-issue, from the scientific standpoint. We're not buying what they're selling. Especially not at that price.
* No deal on Pacific trade.
-- On the contrary, lots of overtures are being made and some progress has been seen. Trump's opening to North Korea is getting South Korea firmly in our corner, and Japan has significantly increased its involvement in regional defense. Those aren't trade issues specifically, but closer relations is bound to improve trade relations, given that both nations are heavily dependent on international trade. Related to both things is China's militarization of the South China Sea, which Trump has not addressed yet, as far as I know.
Cousin Dave at June 24, 2018 10:30 AM
“There's a lot of moving parts here. I'm a free-trader, but I have become convinced that there is no such thing as free trade with a nation that has a non-free economy.”
Bingo. Me too Cousin Dave.
Remember all the economists screaming about how the economy was going to tank when Trump got elected? Starting to believe that all the chicken little ism about tariffs is part of the same old progressive hysterics.
There are desperately afraid that Trump is going to negotiate better trade deals.
Isab at June 24, 2018 10:46 AM
"* No deal on climate change."
Of all people, John Stossel is supporting withdrawal from the Paris climate talks.
Radwaste at June 24, 2018 1:30 PM
Under this argument the income tax is theft. You are claiming that all taxes, fees, etc are theft.
Well yes, taxes are indeed theft. Some level of taxation (far, far less than what we now have) may be necessary for society to function, but it's still theft.
As for fees, they're not theft unless they're mandatory. In that case they're really just taxes by another name.
Rex Little at June 24, 2018 8:11 PM
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