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Notes -
Trump tariffs McDonald's:
BBC article for a more detailed overview.
Highlights or lowlights include:
I'm not an economist, but I don't think it's a good idea to throw out tariffs with such clear absence of rigor. The only saving grace is that Trump is fickle, so if enough people yell at him from his in-group, he might pivot in a week. If not, bloody hell.
I'm sure posters here could provide a reasonable steelman for Trump's position if asked, but forget about providing arguments for a second: are there any Trump supporters here who genuinely believe this is a good set of policies, or even a not-disastrous set of policies?
I can't imagine this will be the final thing to break support for Maga types, but I would give strong odds that this goes down as a major black mark on Trump's eventual record, and a potential torpedo for any future Maga candidates
There are plenty of benefits.
Makes domestic manufacturing more competitive. The US economy can't be based on finance and a tech. Wall street and silicon valley simply don't employee anywhere near enough workers to satisfy a country with 340 million people. Having a few people make vast fortunes in the medical industry and insurance while a hundred million people sell services won't be sustainable. The US has rising income inequality and the fracture between wall street and average Joe has become way too large. If pollution happened in the same area as the consumers live we would have a far greener world.
Outsourcing increased the distance between owners and workers. American oligarchs have no connection to their workers in Vietnam. If they lived in the same city the connection would be a lot stronger. Boeing workers working at the same complex as the bosses in Seattle will be treated better than workers in Mexico.
Sovereignty: Being dependent on long international supply chains is a major risk. The world risks a bronze age style collapse if global supply chains break down. Imagine a war in Taiwan, a serious pandemic, a tactical nuclear war or a meteor shutting down a few key factories. It could upend our entire civilization. We could quickly find out that farms are dependent on some supply chain for some component we never have heard of but keeps us all fed and this factory has been knocked out. The number of suppliers that supply key components to medical care, the electrical grid, oil and similar is shockingly small. Many companies are dependent on numerous supply chains and if one of them broke down it could cause cascading effects. It may be more efficient to have 1-4 global suppliers of key components than to have dozens. However, it is far more anti fragile.
But then, are these benefits greater than the costs? That was the question, do you believe this will be good or at least not on-net bad?
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This might be more credible if Trump were not also planning to reinstate his wildly lop-sided tax cuts. Inequality is mostly downstream of fiscal policy, not trade policy - the period of major growth in inequality came in the 80s, then it stagnated in the 90s and 2000s which doesn't really match up with free trade/decline of manufacturing timelines, what it very obviously matches up with is 12 years of Republican control of the Presidency up to 1993. Inequality at the moment is roughly where it was in the early-mid 1990s.
This makes no sense as rationale for the tariffs when one looks at where and how they have been applied. I think chips have even been exempted from Taiwan's tariff rates!
As @The_Nybbler said, this makes no sense at all. How could insulating domestic manufacturers from foreign competition make them more efficient and dynamic? The very reverse process is part of what destroyed British industry. Higher tariffs barriers in the post-war period meant that, because they were not exposed to global competitive forces, British companies never kept up with the technologies and efficiencies developing all over the world, and so when firms like British Leyland arrived in the 70s and 80s they were still producing cars at the speed and quality of decades prior and were inevitably destroyed. For a developing country this logic is more reasonable because pure Geschenkron-style copying is enough for domestic industry to grow fast from a very low base, but in the position of a first-world nation this stops working because you're at the forefront of technologies and efficiencies. Hence why Chinese tariffs have come down every year for decades, because they're slowly wearing out the possibilities of copying manufacturing techniques from the rest of the world and the competitive advantage offered by low wages.
At the end of the day you have to believe Trump when he speaks. He is simply an idiot who thinks that the US should not run a trade deficit with literally any country in the world and doesn't understand anything about anything. This is not a piece of masterful grand strategy to reduce inequality and strengthen the resilience of American supply chains, Trump is just thick.
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You can't tax your way to prosperity. If you want to make domestic manufacturing more competitive, you need to stop burdening it, not protect it -- protecting it just makes the manufacturing companies and unions rich at the expense of the customers. And if you tariff raw materials too, you don't even get that; you just have what amounts to a massive tax increase.
These tariffs are the biggest risk of such a collapse. The rest of it... well, lots of it has happened. We had a serious pandemic (and a disastrous government response) and the system survived. We've had major factories shut down due to natural disasters (e.g. floods in Thailand) and the system survived. Breaking down global trade makes the system less resilient, not more.
US companies are forced to comply with EPA, OSHA, ACA, ADA, Civil rights act, unions and minimum wage.
Tariffs could be used to make the playing field equal to account for those costs. And probably we don't want more pollution and work accidents. If US company has to buy filters for their chimney - make sure that all the factories that want to import goods into US also have filters. And if they don't tax them the cost of the filter. And that they pay their labor at least as what US do.
And if they do and make a better product - well it is US problem then.
I’m skeptical of this because heavily unionized euro countries with strict environmental protection and safety laws have been able to be manufacturing powerhouses.
European manufacturing is suffering. Also Europe is largely a lot cheaper than the US. Engineers in Milan made on average 35 000 Euro last year. French electricians make around 25000 Euros a year.
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The top producers in Europe look to be Germany, Italy, France, the UK, and Ireland. Per capita their output compared to the US is about +38%, -18%, -41%, -43%, ... and +379%??!?!?!
Okay, I was looking up numbers to make a joke about how Germany is carrying the EU, but forget what I was intending to say. What the heck is going on in Ireland? They barely made the European top 5 since they've got such a low population, but they're still outproducing Spain with like a tenth of the population. They're even outdoing Switzerland, which I would have thought would be the world leader in the low-population high-value-manufacture combo. Is this just on paper somehow, some remaining accounting artifact of how they used to be incredibly popular for multinational corporate tax avoidance? I suppose their stats office does say their output is 40% "basic pharmaceuticals", plus around 20% "food products" and 10% "chemicals", but there's still ~20% composed of metal/rubber/plastic/wood/silicon stuff that we might call "stereotypical" manufacturing, and it's not like US output is all steel burnished with blood and sweat either.
It's tax dodging. You want to arrange your EU supply chain and associated transfer pricing so that most of the value added shows up in Ireland and is taxed at Irish rates. So imports of intermediate goods into Ireland are underdeclared and exports of finished goods are overdeclared.
Ireland has the highest ratio of GDP to Actual Individual Consumption of any medium or large country in the world - the Irish people are not seeing this money.
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All your suggestions for the utility of tariffs directly attack the basis for international trade -- that some countries have some sort of advantage in producing some goods over others, which makes both sides of the trade better off if it happens compared to it not happening. Tariffing the advantage so instead of the parties getting it, the government gets it, probably means the trade simply doesn't happen.
Cheap labor is not an advantage. Better technology is.
There is nothing that prevents you from making better mixer than Hobart while playing by even stricter rules than USA as Electrolux professional series shows.
Cheap labor is certainly an advantage. If I can make something with 8 hours of $5 labor that takes you 8 hours of $50 labor, I've got an advantage in making things. Yes, if you can instead make 100 of them with 8 hours of $50 labor and better manufacturing technology, the advantage shifts again, but ceteris paribus, cheaper labor gives an advantage.
Neither one does a bit of good if I just want to make a frozen margarita now and then.
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That's the example I always use with libs.
An evil polluting capitalist owns a concrete factory on the US side of the Mexican border. He needs to sell concrete to pay for his real goal of killing as many cute dolphins as possible with pollution. Captain Planet forces Congress to pass a law banning pollution forever, and mandating that only nice green dolphin-safe concrete is made in the US.
But the evil capitalist just moves his factory to the Mexican side of the border, and keeps selling cheap concrete to the US to pay for his dolphin murdering pollution!
If only there was some sort of "trade policy" to restrict the sale of evil concrete from Mexico to stop the capitalist's evil plot!
It doesn't help obviously: they agree wholeheartedly and then just forget the next day. But it's funny to watch it happen.
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Agreed. And I’m all for some level of mercantilism, but to do that you have to actually control a manufacturing base — and the US doesn’t have much of one, especially in key sectors. I agree with criticisms of NAFTA and Chinese manufacturing, but that damage was already done, and it’s insane to try and fix it by applying taxes. You have to have the manufacturing base before you can protect it.
Trump’s gambit here is equivalent to setting up an automatic turret to protect your house, but the camera pans out and what you thought was a house is actually just the still-standing facade of a house that was shelled into ruins.
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