In Tariff-Driven Trade Wars, It's The Little Guy Who Dies
Trumps tariffs are only a good idea to those who lack even the slightest command of economics and human psychology.
At Reason, Peter Suderman has a piece on how a threatened 100 percent Trump Admin tariff on European wines could all but wipe out the U.S. wine industry:
The new tariffs haven't gone into effect yet, and it's possible that they never will--or that they will be implemented in some lesser form. But if they were to go into place in full, they would represent something close to an existential threat to the American wine trade. The likely result would be significant job losses amongst sellers and importers, a sizable reduction in the domestic availability of European wines, and massive price increases for imported wines that would still be available.The wine business is, by all accounts, a small and tightly knit community of producers and importers and sellers; many importers are small, family-run businesses that would have to lay off staff or even close entirely. Job-loss estimates run anywhere from 10,000 to 17,000, with heavy losses falling on distributors. Americans would lose access to a huge array of wine offerings from Europe, as winemakers would simply stop selling in the U.S. market. Affordable wines in the $15 and under range that appeal to more casual drinkers would probably be hardest hit.
Once supply chains break down, as European producers take their business elsewhere and domestic importers and sellers close their doors, they can be very hard to repair. Even if the tariffs were eventually lifted, there's no guarantee that the wines, or jobs, would come back. The tariffs might not be a death blow to imported wine, but they could cripple the industry for years.
This is the stupid and entirely predictable reality of how trade wars inevitably play out across the economy: A long-standing international fight over airplane subsidies, exacerbated by a mostly unrelated squabble over the foreign taxation of Facebook, threatens to raise prices for American consumers, limit their choices, and destroy domestic businesses and jobs in the process--all in the name of protecting American businesses.








You’ve got to stop quoting Reason. It just hasn’t been the same since they’ve went full TDS.
Isab at January 12, 2020 11:38 PM
Meh.
1. The wine industries of Europe benefit from "growers associations" and government sponsored trade organizations. And the farmers get direct subsidies.
2. Plenty of small American vineyards will step up to fulfill the demand.
Ben David at January 13, 2020 1:01 AM
This is like claiming that if you banned Heineken, nobody would drink Budweiser… Hard to believe American production would not step up .
Show that American exports go away.
This isn’t as simple as it seems, and isn’t a good example of other trade battles.
Radwaste at January 13, 2020 3:16 AM
Have you been wine shopping recently? It's all California wines now. Where the local wine shop used to have a wide selection of European wines, now it's all California varietals. The European wines are relegated to a special section, a small section.
Those of us who enjoy the subtlety of a nice Bourdeaux are now stuck trying to find subtle in California-inspired fruit-forward wines with "big, bold" taste. The concept of terroir no longer matters in wine production and consumption as vintners mix grapes from several vineyards to get that bold fruit flavor that consumers are demanding.
Besides wine and beer are dying as Millennials, thanks to restrictive drinking age laws, prefer cocktails and spirits, the result of having to hide their alcohol consumption in soda bottles for so long. Very few of them were allowed to develop a palate for fine wine or even a nice microbrew.
Without the US market, the European wine industry is kaput. Importers and distributors would definitely suffer if European labels were to become unavailable or double in price.
They need us more than we need them. Now, does that mean we need to impose tariffs on imported wines? Well, not in the aggregate, but to compel certain behaviors, tariffs might prove useful.
The tariffs would be on an industry very important to the Europeans (namely, the French) and imposed in order to compel the European Union to stop subsidizing Airbus and let it compete freely with Boeing. That Boeing has recently shot itself in the foot should cool some of the ardor for leveling the playing field through trade war tactics, but it probably won't.
Most of Trump's tariffs have been imposed more to compel free trade than to restrict it. However, his free-trade brinksmanship may have consequences he has not foreseen and should be undertaken with a caution not usually seen in his policies.
Trump is more Jacksonian than isolationist. He's not seeking to isolate America from the world but to insulate it, to overturn trade deals and military alliances that weighed heavily on Americans, but lightly on the partners. One cannot have free trade where one's partner is able to take advantage of one without something to balance the scales - i.e., China and it's disdain for intellectual property; Europe and its subsidized industries competing with unsubsidized American competitors; Mexico with its lower labor rates in assembly-line manufacturing.
To paraphrase Victor Davis Hanson, I don't know if the US can withstand a second Donald Trump assuming office, but this one might be exactly what we needed to correct a trend in our politics that has our politicians sacrificing US needs to pacify the rest of the world, that has them sacrificing the US economy on the altar of identity politics.
If nothing else, Trump has done what Leftist activists claim is a very important thing to do, he's "started a conversation." People are discussing economics and the proper role of government in a nation's economy.
Conan the Grammarian at January 13, 2020 4:37 AM
World ending, women and children hit hardest.
It is always the little guy getting wiped out. Implement tariffs he gets wiped out. Don't implement them and some other little guy gets wiped out. Considering that the labor participation rate is increasing and wages are rising this isn't persuasive at all.
Ben at January 13, 2020 5:25 AM
> You’ve got to stop quoting Reason.
"Cancel Culture," they call that.
Crid at January 13, 2020 6:12 AM
Did you know that when Chinese goods got hit with tariffs, more than a few manufacturers moved their production to other, more friendly countries like Thailand and Vietnam?
You know what else hurts the little guy? Corporate taxes. While corporations make efficient points of taxation and collection, they're not actually paying the tax. They simply add it to the cost of the product or service. Anyone who can not adequately price their product or service is not going to last very long.
People pay taxes, not corporations.
I R A Darth Aggie at January 13, 2020 6:18 AM
To add to what Conan said, the EU has a habit of using environmental and food-safety laws as pretenses to block or tariff imports. It's a backdoor around WTO agreements. Trump is trying to make a point about that. (It's worth noting that not only does the EU do that sort of thing to non-EU imports, but individual EU nations also do it to each other. France is notorious for using environmental laws to shield its agriculture industry, even as they impose ruinous taxes and energy costs on farms. France, man.)
Cousin Dave at January 13, 2020 7:56 AM
The millenials were hardly the first ones to have a drinking age... Gen X drinks plenty of wine.
NicoleK at January 13, 2020 11:15 AM
The Wall Street Journal today reported a study showing that, overall, the negative effects of Trump's tariffs have been minimal on the U.S. economy.
Jay R at January 13, 2020 12:04 PM
Nicole, Millennials were the first to run up against one in college.
Until the 1984 highway funding law, states set their own drinking ages (a relic of the deal that ended Prohibition). Most used 18 as a barrier, meaning almost all incoming freshman in college could drink something alcoholic. The 1984 law mandated all states set their drinking ages for any alcohol to 21 or lose federal highway funds.
Many states were slow to comply (e.g., 18 for beer and wine, 21 for spirits), but all eventually did comply. That meant that Millennials and Gen-Z have always faced a 21-yo drinking age limit while Gen-X did not.
Even if we use the arguable 1965 beginning age for Gen-X, that means many of the earliest X-ers came of age with an 18-yo drinking age, depending upon their state laws.
The deadline to meet the 21 yo drinking age was October 1986 - giving a portion of Gen-X at least some experience being of legal drinking age before the federal law made it 21.
In addition, X-ers hit the drinking age as it changed - not enough time to adopt the pre-gaming culture Millennials and Z-ers would later adopt. Big campus-wide parties or smaller beer-and-wine mixers were still normal then.
I remember college and high school friends upset that they just missed being grandfathered in under the law. Florida staggered the age increase, so if you were of legal age when it was raised to the next stage, you got grandfathered.
Conan the Grammarian at January 13, 2020 1:50 PM
I like you because you've done the reading.
Crid at January 13, 2020 2:51 PM
Re: Gatorade, I saw a Twitter video a few years ago showing young people eagerly mixing vodka into their Emergen-C.
As if to party.
Crid at January 13, 2020 2:57 PM
I mean, just imagine taking something like that in your body.
Crid at January 13, 2020 3:00 PM
This always seems like some version of squeezing a water balloon.
Back around 1968 the gubmint decided to stop importing cheap pocket guns, and Southern California immediately began making cheap pocket guns.
Bingo bango bongo, the market wins again.
Emphasis on the bango.
Gog_Magog_Carpet_Reclaimers at January 13, 2020 3:40 PM
(Gog, have you heard this? It was released last month. I'd never heard the expression BBB before.)
(It's a new playout of two takes, not the actual track used for the final piece. Note the platform shift in the drums at 2:24; in the actual mixdown, 2:15-2:33 is excised.)
(This is, by the way, the melody which will herald my eagerly-anticipated arrival in Hell.)
Crid at January 13, 2020 4:48 PM
Interesting Conan. I've always been on the younger side in school. It was annoying when my classmates would go to the bar after a test and I couldn't get anything. Though money was as much an issue as age.
I'm guessing the stats will show millenials didn't drink any less than the generations before them. But yes I do think it is normal to take a coke bottle, dump 1/3 of the coke, and fill it up with your alcohol of choice. Plenty of people did that in high school and the habit still endures to today. Not for me personally but for plenty of my friends. I've also been told when I was drinking wine at a party that wine is for the well educated. For me it was just ease (no mixing) and taste at the time. Making skittle infused vodka may taste nice but it is far too much work for me to bother with.
Ben at January 13, 2020 6:25 PM
While corporations make efficient points of taxation and collection, they're not actually paying the tax. They simply add it to the cost of the product or service.
It's not quite that simple. You're correct that the corporation doesn't pay the tax, but the people who do are not only their customers. The cost of the taxes "paid" by any given corporation falls on that corporation's customers, suppliers, employees (including management) and stockholders. How it's divided among these entities is determined by a constantly changing complex of market forces.
Rex Little at January 13, 2020 7:45 PM
I went to an event held at huge restaurant/wine shop about 5 years ago and I would estimate that only 10% of their selection was European. They had CA, Washington, Oregon and from all over the US...even one from Alaska. Lots of Australian and Chilean.
When my brother went off to college he went to a college in a state where the drinking age was 21, but 20 minutes away was the state line to a state that was still 18,but then almost immediately switched it to 21 but my brother was grandfathered in -- just barely.
I was always one of the oldest in school. In college my "big brother" was a grade ahead of me and 3 days younger than me.
As far as wine drinking goes, I don't see many of my friends drinking wine. Much more of my brothers friends are wine drinkers. In college it was vodka or beer -- maybe rum -- beer was so much cheaper than wine.
I think it might be a family taught thing. When I was really little the older teenagers were expected to drink watered down wine at the big family get togethers. By the time my brother was that age it was strictly forbidden.
The Former Banker at January 13, 2020 10:11 PM
"It was released last month"
No but it makes me realize how much the rest of the band was doing behind Frank.
BBB was just an old saying. Vishnu only knows where I originally heard it!
Gog_Magog_Carpet_Reclaimers at January 14, 2020 7:57 AM
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