Author Topic: Tariffs are a problem?  (Read 17888 times)

Crunch

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Tariffs are a problem?
« on: March 08, 2018, 08:50:13 AM »
Trump is throwing out steel and aluminum tariffs and some people are freaking out. Is there any reason to?

Keep in mind, the USA currently has more than 12,000 tariffs on imports to America (according to the United States International Trade Commission). These include:

  • 20% tariff on dairy products
  • 20% on most vegetables
  • 30% on apricots, cantaloupe, and dates
  • 130% to 160% on peanuts (depends on if they’re shelled)
  • 350% on tobacco

With more than 12,000 tariffs in force, some of them wholly protectionist, we obviously don’t have a problem with tariffs in general. In fact, the case could be made we really like them since we have so many.

So what’s the problem with steel and aluminum tariffs?

D.W.

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Re: Tariffs are a problem?
« Reply #1 on: March 08, 2018, 10:09:57 AM »
I can't say if an implemented tariff is grounds for freaking out.
I do think it should be obvious by now that no freaking out should occur until and unless something is implemented.  Until such point, it's best to assume Trump is saying something to provoke a reaction.  That reaction may very well be the entirety of the plan and implementation may never be intended in the first place.  Or, he may just be so fickle that he's talked out of it or changes his mind before there is a chance to implement something.

So either way, now is not the time to freak out.  Don't encourage the man.

D.W.

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Re: Tariffs are a problem?
« Reply #2 on: March 08, 2018, 10:11:19 AM »
Being in the architecture field (as opposed to actual fields used for the items on your list), I'd suggest that they are indeed different.  But your point is still valid.

Fenring

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Re: Tariffs are a problem?
« Reply #3 on: March 08, 2018, 10:12:06 AM »
I saw on the news yesterday that Trump might be willing to forget the tariff for Canada if the NAFTA negotiations go the way he wants.

TheDeamon

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Re: Tariffs are a problem?
« Reply #4 on: March 08, 2018, 10:30:41 AM »
Trump is throwing out steel and aluminum tariffs and some people are freaking out. Is there any reason to?

Keep in mind, the USA currently has more than 12,000 tariffs on imports to America (according to the United States International Trade Commission). These include:

  • 20% tariff on dairy products
  • 20% on most vegetables
  • 30% on apricots, cantaloupe, and dates
  • 130% to 160% on peanuts (depends on if they’re shelled)
  • 350% on tobacco

With more than 12,000 tariffs in force, some of them wholly protectionist, we obviously don’t have a problem with tariffs in general. In fact, the case could be made we really like them since we have so many.

So what’s the problem with steel and aluminum tariffs?

"Agriculture is different" it may be a commodity, but the infinite wisdom of the ages has determined that a strong and viable agricultural base is vital to both national and economic security. It is the most fundamental and basic building block of civilization after all, you know? :)

That and a population that is unable to feed itself is vulnerable to all kinds of things.

But then, I'd generally hold to that with a lot of the "tail" that a modern society enjoys. From a Nationalist perspective, declaring most things "national security interests" and raising up barriers to trade is a mixed bag all things considered. Obviously it is in the "best interest" of the industries being protected, but potentially harmful to the customers they serve(who may be using that input stream for their own production--making them unable to compete internationally due to more expensive inputs).

The other side is that the 20th Century also demonstrated the "power of the web" and I don't mean the internet. I mean the web of interconnected interests. Making sure other nations have their economic interests tied almost in lockstep with your own economic interests is a proven effective means of ensuring peaceful relations. (Although China may test that "soon enough" although honestly, their window is closing, their "population bubble" of single men is getting older. Of course, most of the western nations are getting older as well.)

TheDeamon

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Re: Tariffs are a problem?
« Reply #5 on: March 08, 2018, 10:31:58 AM »
I saw on the news yesterday that Trump might be willing to forget the tariff for Canada if the NAFTA negotiations go the way he wants.

When I saw Canada on the list I kind of went "that one isn't happening." The others I wouldn't be so sure of.

Fenring

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Re: Tariffs are a problem?
« Reply #6 on: March 08, 2018, 10:43:59 AM »
I saw on the news yesterday that Trump might be willing to forget the tariff for Canada if the NAFTA negotiations go the way he wants.

When I saw Canada on the list I kind of went "that one isn't happening." The others I wouldn't be so sure of.

It did give Canada a chance to bluster and pretend to offer a return threat. That probably felt good.

NobleHunter

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Re: Tariffs are a problem?
« Reply #7 on: March 08, 2018, 10:47:01 AM »
I saw on the news yesterday that Trump might be willing to forget the tariff for Canada if the NAFTA negotiations go the way he wants.

Since his authority to impose this tariff requires it to be an issue of national security, doesn't this admission undermine Trump's ability to do this without Congress? If it's a matter of getting leverage in negotiations then how can it be an issue of national security? Unless Trump is willing to trade national security for a new market for dairy farmers?

yossarian22c

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Re: Tariffs are a problem?
« Reply #8 on: March 08, 2018, 10:47:11 AM »
There is also the fact that steel and aluminum are inputs into a lot of US manufactured goods. So these tariffs have the potential to cause more job losses than gains even if other counties don't retaliate. The last time Bush tried even more targeted tariffs than Trump has proposed it was estimated to cost more jobs than the entire number of people employed in steel and aluminum production.

https://www.npr.org/2018/03/08/591384442/as-u-s-steelmakers-cheer-tariffs-a-michigan-factorys-future-looks-bleak

Fenring

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Re: Tariffs are a problem?
« Reply #9 on: March 08, 2018, 10:51:06 AM »
Since his authority to impose this tariff requires it to be an issue of national security, doesn't this admission undermine Trump's ability to do this without Congress?

I don't exactly know the answer, but if we're looking at the balance of trade and debts owed to other countries, I would argue that as a long-term proposition it is indeed a matter of national security if American wealth is being exported over time. It is perhaps possible to combat this with a tariff, but perhaps also possible to do so by revisiting trade treaties (which Trump notoriously has a problem with). I don't see the scenario as being inherently inconsistent, but in the particulars I don't know the answer.

NobleHunter

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Re: Tariffs are a problem?
« Reply #10 on: March 08, 2018, 11:11:18 AM »
I don't exactly know the answer, but if we're looking at the balance of trade and debts owed to other countries, I would argue that as a long-term proposition it is indeed a matter of national security if American wealth is being exported over time. It is perhaps possible to combat this with a tariff, but perhaps also possible to do so by revisiting trade treaties (which Trump notoriously has a problem with). I don't see the scenario as being inherently inconsistent, but in the particulars I don't know the answer.

If I understood how the law was presented, Congress delegated to the President the authority to set tariffs on goods in order to promote national security. While it is true that trade in general is an issue of national security, making the argument that Congress has therefore given the President full authority over tariffs seems like a violation of the separation of powers. I don't think one could make the argument that Congress intended to give the President unrestricted authority over tariffs with the law.

ETA: I expect Trump's comments on using the tariffs to influence negotiations with Canada to be the subject of a lawsuit alleging he doesn't have the authority to impose tariffs over trade disputes.
« Last Edit: March 08, 2018, 11:13:56 AM by NobleHunter »

Wayward Son

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Re: Tariffs are a problem?
« Reply #11 on: March 08, 2018, 01:57:03 PM »
I think "freaking out" is not quite the right term for the reaction.  Strongly expressing grave concerns that this may be an ill-conceived plan is probably more appropriate.

After all, with both Republicans and Democrats criticizing this move, along with many in the business community and even Trump's own National Economic Council Director Gary Cohn, who apparently is quitting over the decision, it seems to be more of a studied consensus rather than an emotional reaction.  I find it highly unlikely that large groups of Republicans, Democrats and businessmen all are reacting irrationally to just another tariff. ;)

TheDrake

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Re: Tariffs are a problem?
« Reply #12 on: March 08, 2018, 02:26:54 PM »
It's not the fact that its a tariff, it is the fact that it is a tariff that:

* hurts US businesses that would have to pay more for steel and aluminium, like major users Boeing and Toyota
* violates WTO rules just like the one that Bush had to abandon, which by the way, didn't work
* invites retaliation
* comes with no real plan or substance, and seems to have taken cabinet members and advisors by surprise
* adds volatility to the stock market rather than keeping it calm


Crunch

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Re: Tariffs are a problem?
« Reply #13 on: March 08, 2018, 07:48:10 PM »
I find it highly unlikely that large groups of Republicans, Democrats and businessmen all are reacting irrationally to just another tariff. ;)

Well, if enough people say it, it must be true .... right?

Crunch

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Re: Tariffs are a problem?
« Reply #14 on: March 08, 2018, 07:49:53 PM »
It's not the fact that its a tariff, it is the fact that it is a tariff that:

* hurts US businesses that would have to pay more for steel and aluminium, like major users Boeing and Toyota
* violates WTO rules just like the one that Bush had to abandon, which by the way, didn't work
* invites retaliation
* comes with no real plan or substance, and seems to have taken cabinet members and advisors by surprise
* adds volatility to the stock market rather than keeping it calm

Couldn’t the same kind of be said of all the other tariffs to one degree or another? I really don’t see much difference between this one and the others.

TheDrake

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Re: Tariffs are a problem?
« Reply #15 on: March 09, 2018, 02:16:27 PM »
Yes, other tariffs hurt businesses by raising costs, but steel and aluminium are particularly widespread and have no substitute.
Most of those other tariffs are allowed under elaborate WTO rules.
A tariff already in place doesn't threaten retaliation, it is the status quo.
The tariffs you talk about MOSTLY don't apply to Australia, Canada, Mexico: you know, allies?
And the "surprise!" nature of it led to way more volatility in foreign policy and economic markets than other tariffs.

To avoid a freakout, the President might have simply said up front "applying to certain nations" rather than crowing "No Exceptions!" only to roll back on it. He also might have studied the identical failed policy of the Bush administration, and perhaps he could get his own cabinet on board.


Wayward Son

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Re: Tariffs are a problem?
« Reply #16 on: March 09, 2018, 02:43:14 PM »
I find it highly unlikely that large groups of Republicans, Democrats and businessmen all are reacting irrationally to just another tariff. ;)

Well, if enough people say it, it must be true .... right?

So you're saying that if everybody says it, it must be wrong ... right? ;)

You realize that that is the exact same fallacy, standing on its head. :)

What I'm saying is that you'd better take into account when a large group of educated people happen to disagree with your conclusion.  Because, although you may be right, there's a pretty good chance that you may be wrong, because usually any given person (including you) (and me) isn't any smarter than the majority of well-educated, smart people.  Any person who believes he is always smarter is either Donald Trump or a damned fool.  (Of course, being one does not mean you aren't the other. :) )

Having a large number of educated people disagree is not proof that you're wrong, but it is an indication that you might be missing something and should look very carefully at your reasoning.  And believing that everyone else is simply being irrational because they disagree is a good indication that you're not looking carefully, and instead are practicing the Dunning-Kruger effect.  :P

Seriati

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Re: Tariffs are a problem?
« Reply #17 on: March 09, 2018, 02:47:03 PM »
It's not the fact that its a tariff, it is the fact that it is a tariff that:

* violates WTO rules just like the one that Bush had to abandon, which by the way, didn't work

You should check again, it actually seems likely this won't violate WTO rules, and retaliation may in fact do so.

Quote
* invites retaliation

Which if the prior is correct will be illegal and justify legal retaliation by the US.  Again though, you need to explain how if a tariff imposed by the US really hurts the US, "retaliation" tariffs would be a good idea.  There is something missing in the logic here.

Quote
* comes with no real plan or substance, and seems to have taken cabinet members and advisors by surprise

There's plenty of analysis on this in the market. It's directly derivative of his campaign promises.  It's literally something that blue collar workers have been demanding for years.

In a nut shell, most analysts think of him as a negotiator rather than a politician.  This is the opening bid in a negotiation, something to trade on.

Quote
* adds volatility to the stock market rather than keeping it calm

This is true.  Helps the financial sector, but I agree probably not great for the rest of us.  On the other hand, if he gets trade concessions?  Then I think this ends up a big win.

TheDrake

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Re: Tariffs are a problem?
« Reply #18 on: March 09, 2018, 03:19:44 PM »
You should check again, it actually seems likely this won't violate WTO rules, and retaliation may in fact do so.

They are going to try a new approach with WTO under the national security rule, but they are already putting that argument at risk if they carve out exceptions for allies, and the SecDef already undermined that argument by saying it is harmful to security.

Quote
Which if the prior is correct will be illegal and justify legal retaliation by the US.  Again though, you need to explain how if a tariff imposed by the US really hurts the US, "retaliation" tariffs would be a good idea.  There is something missing in the logic here.

If retaliation is justified through WTO as a response to a violation, it is legal under WTO rules. And the logic is simple and obvious - it hurts the US AND foreign producers.

Yes, it was no surprise that Trump favored such a tariff, but it was a surprise that it happened that day, and the substance of it was about 140 characters worth of campaign rhetoric. As a negotiating tactic, its similar to an enforcer threatening to break somebody's merchandise if they don't pay up. Which countries will have to do one at a time to get exemptions like Canada and Mexico. Meanwhile, it won't take long for those WTO cases to be filed. Although who knows, an avowed hater of "globalists" might just withdraw from WTO and undo 70 years of trade precedent and predictability.

Seriati

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Re: Tariffs are a problem?
« Reply #19 on: March 09, 2018, 04:39:59 PM »
Well that's interesting point on the WTO claim being undermined.  I'll have to think on that some more. 

I've never said I agree with the tariff, but I do think its the kind of negotiation and negotiating tactic that Trump has a lot more experience with than our other politicians have had.  I have a lot more confidence in Trump doing it that I did in Bush doing it, or I would have if Obama had done it, specifically because I believe that Trump is doing it for economic reasons (negotiation) rather than for purely protectionistic ones.  But I could be wrong.

Wayward Son

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Re: Tariffs are a problem?
« Reply #20 on: March 09, 2018, 05:08:22 PM »
Except, of course, he can't legally do it for economic reasons. :)  He is using a law that allows the President to impose tariffs for national security reasons.  Otherwise, it's legally in Congress' purview.

If the President can negotiate away the tariffs, that means he's negotiating our national security. :)

Gaoics79

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Re: Tariffs are a problem?
« Reply #21 on: March 09, 2018, 07:28:53 PM »
I saw on the news yesterday that Trump might be willing to forget the tariff for Canada if the NAFTA negotiations go the way he wants.

Since his authority to impose this tariff requires it to be an issue of national security, doesn't this admission undermine Trump's ability to do this without Congress? If it's a matter of getting leverage in negotiations then how can it be an issue of national security? Unless Trump is willing to trade national security for a new market for dairy farmers?

China would be the national security problem, not Canada. They control what? Half the world's steel manufacturing? Without steel no military.

TheDeamon

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Re: Tariffs are a problem?
« Reply #22 on: March 09, 2018, 07:47:46 PM »
I saw on the news yesterday that Trump might be willing to forget the tariff for Canada if the NAFTA negotiations go the way he wants.

Since his authority to impose this tariff requires it to be an issue of national security, doesn't this admission undermine Trump's ability to do this without Congress? If it's a matter of getting leverage in negotiations then how can it be an issue of national security? Unless Trump is willing to trade national security for a new market for dairy farmers?

China would be the national security problem, not Canada. They control what? Half the world's steel manufacturing? Without steel no military.

Don't forget a lot of "rare earths" and a number of other things as well at this point.

There is a definite "national security" concern with regards to trade with China, and that's been known for years. But that one cuts both ways. The more dependent they are on trade with us, the less likely they are to try to start a war against us.

But at the same time, we need to be careful not to become so reliant on trade with China that we become incapable of going to war against something they're doing without destroying our own economy/(military/domestic) supply chains to do so.

TheDrake

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Re: Tariffs are a problem?
« Reply #23 on: April 02, 2018, 09:27:12 AM »
Quote
China's commerce and finance ministries said in statements late Sunday that authorities are imposing tariffs of 15% on 120 American products — such as fruits, nuts, wine and steel pipes — and 25% on eight other products, including pork and recycled aluminum.

Those products make up just a tiny portion of the hundreds of billions of dollars of goods shipped between the two countries each year. But the tariffs are alarming news for the affected industries.

The US National Pork Producers Council warned last month that the measures would "have a significant negative impact on rural America." It said the US pork industry sold $1.1 billion worth of products to China last year, making it the third largest export market.

Good thing trade wars are easy to win.

Seriati

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Re: Tariffs are a problem?
« Reply #24 on: April 02, 2018, 09:34:37 AM »
TheDrake, did you note that the 3rd largest export market to China is $1.1 billion?  The trade deficit is $375 billion.  China has way more exposure and to lose here.

EDIT - 3rd largest pork export market, not 3rd largest export to China.  If you take a look at the largest exports, even the largest - soybeans - is only $15 billion.
« Last Edit: April 02, 2018, 09:36:42 AM by Seriati »

TheDrake

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Re: Tariffs are a problem?
« Reply #25 on: April 02, 2018, 10:35:37 AM »
I know it is small, which was part of my own quote. That's how these things start. And, the tradeoff will be X amount of steel workers vs Y amount of pig farmers.

Another way to look at it, is that Chinese exports of steel to the US were $2B which makes the soybean exports to China 7x larger than the steel.

Having "more to lose" doesn't mean much in the potential global recession. We don't "win" if our GDP drops by 5% and China's drops by 10%.

Seriati

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Re: Tariffs are a problem?
« Reply #26 on: April 02, 2018, 10:39:51 AM »
TheDrake, my point is, that no business wins a "trade war" with their largest customer.  Why do you think WallMart can destroy their suppliers at will?  Have you ever worked for a company where their major customer expressed displeasure and didn't get what they wanted?

This is just basic logic, we are literally the largest customer in the world.  If they play "tit for tat" they're going to suffer at a ten to one ratio.

TheDrake

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Re: Tariffs are a problem?
« Reply #27 on: April 02, 2018, 10:42:51 AM »
Rubbermaid doesn't have national pride at stake, which is how trade wars happen even when they hurt both countries.


D.W.

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Re: Tariffs are a problem?
« Reply #28 on: April 02, 2018, 11:26:33 AM »
Just a question.  What is the worst case scenario of a trade war?  We suddenly start manufacturing things here (at a significantly higher price)?  Other than maybe our appetite for delicious gadgets we cannot wait for what's at stake for the US? 

You know, besides the whole global economy and instability abroad thing?  :P

TheDrake

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Re: Tariffs are a problem?
« Reply #29 on: April 02, 2018, 11:38:34 AM »
At stake - jobs as exports drop and imports get expensive, tax revenue from decreased commerce, increased expenses.

The Economist predictions of a US-China trade war


D.W.

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Re: Tariffs are a problem?
« Reply #30 on: April 02, 2018, 11:55:32 AM »
I know for me, steel prices going up significantly would suck.  (architecture field)  As construction costs go up, projects get scaled back or put off.  When they do move forward, owners/developers look to shave that cost out elsewhere, such as your architectural fee, which is bid most often as a percentage of the overall project cost. 

As when the economy slowed down, a firm survives by cutting costs internally and by taking the slimmest of percentages possible. 

I suppose what I'm wondering is, from a long view perspective, if we want the rest of the world's workers to achieve a better standard of living, then getting use to actual cost of products based upon sourcing them from home, isn't a bad thing (taken by itself).  Our reliance on cheep products imported from under paid (by out standards at least) workers abroad, seems to me to be a system that can't be sustained forever. 

Not that a trade war is necessarily the path I'd pick to correct the global wage and living condition imbalance.  :P

NobleHunter

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Re: Tariffs are a problem?
« Reply #31 on: April 02, 2018, 12:08:43 PM »
Another risk is some other economic crisis compounding the disruption before supply chains and labor issues are sorted out. Even assuming the protectionists are right about how the long term benefits of a trade war, the short term is likely to be unpleasant as existing arrangements are disrupted. While free markets are good at sorting themselves out eventually, until they do bad things can happen.

Fenring

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Re: Tariffs are a problem?
« Reply #32 on: April 02, 2018, 01:36:27 PM »
People have been trained to look at things on the spur of the moment with no delay or consideration. This is almost entirely the media's fault, in tandem with politicians who monopolize on ignorance. A bad policy can have an effect that looks good short-term and is very bad long-term, and they can sell it as a win. By the time the next election rolls around it's so long forgotten that they don't have to deal with the reality that they lied or were wrong about the real effects. De Tocqueville actually predicted this and spelled it out in his book, which is that when election cycles are so close together you basically have (a) constantly shifting priorities in government, which means no follow-through, and (b) and inability to hold anyone to anything since after each election it's almost like blank slate. You can't be upset at a Congress person if you just voted for them, right? That's cognitive dissonance at its best, and currently the system is designed for just that effect. And the reason you voted for them is because the other side is the devil, so you had to.

In terms of tariffs what this amounts to is that when jobs were initially exported and the cheap goods rolled in, it seemed like a huge win. It took a decade or more to fully realize how much of the American middle class was being decimated. If a tariff war initiated a halt of certain amount of importing, there would be a significant lag between the goods suddenly drying up, and people who work for importers perhaps losing their jobs, and between when the local production begins again and people are hired to work for them. The gap can be years between those, and even if (and this is the big question) this is far superior long-term there's nearly zero chance the populace will see it that way when the media thunders about how the tariff killed the economy. It's never going to be a real free market result, meaning getting to see the real results of a market decision, because the news and the politicians will brainwash everyone that it's bad far quicker than the result can ever be observed. And *that* is one of the reasons that economics isn't a science and why 99.9999% of economics theory is bunk and pseudo-science armchair wind. Because in the real world economics is actually the study of psychology as it applies to resource management, and we don't have any kind of science of psychology that can make predictive statements. Therefore in terms of economic planning the quarterly results will trump real long-term strategy, and the election cycle and it's reset button will prevent any kind of long-term testing on what really works and what doesn't. There is no possibility of staying power for that. And so in the long-term the policies that will prevail will tend to be the ones espoused by parties that aren't subject to elections; think tanks, powerful lobbies, and consortiums. They will always press for what advantages them and in the long-term they'll get it on average. This has been the trend for 120+ years and will likely continue on until the s**t hits the fan.

Until Americans are willing to back strong leadership that doesn't back away from lofty goals I don't think we'll see real experiments in economic planning that can be tested properly. For now the partisan bent is such that beating the other side is more important than picking a plan and sticking to it for 10-15 years to see how it works out, and that's how long it takes to truly test a plan. Right now no one either side trusts the people on the other, and so no Democrat is going to go to bat for a Republican President, and vice versa. Until a Republican citizen is willing to say of a D Pres "I didn't vote for him but he's my President, and I'll back his plan 100%!" we won't see any sense in monetary and fiscal policy. The entire economy and political system is basically swallowed up in a maelstrom of the never-ending election cycle, and it never stops so that we can just have governance. So good luck with ever determining whether tariffs are good or bad.
« Last Edit: April 02, 2018, 01:38:31 PM by Fenring »

TheDrake

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Re: Tariffs are a problem?
« Reply #33 on: April 02, 2018, 03:32:15 PM »
It is always about good and bad for whom. The average citizen, the poorest, the richest? Steelworkers or pig farmers? Boiling all of that down to "good" vs "bad" on any timeline is a herculean task.

Now, globalists like me say that any tariff is bad because it works against equilibrium and flow of production to those best able to produce it.

So if you take a really long time frame, like a century, then we are easily better off with fewer and fewer tariffs - at least humanity is, versus Philadelphians, Iowans, or Americans. This is what played out in Japan, Korea, Vietnam, Eastern Europe, and will play out in China and India. They just have a much bigger sink to grow their middle class. The global middle class is growing, and this creates markets like the one in China for American wine and other high end, luxury, finished goods, services. These are the ones Americans need to be making and they are more about functionality and quality.

If tariffs are such a good idea, then we might as well pass a Constitutional amendment so our states can do the same. California can tax imports that they think add to Co2 emissions, Vermont can tax Wisconsin cheese, and Utah can tax full body underwear. Whee!

To me, it is almost axiomatic and self-evident that going from fewer to greater tariffs is going the wrong way. I do take some of that on faith. I'm not willing to do a 15 year experiment, plus we already have Smoot-Hawley as an example and don't need to try it again.

Fenring

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Re: Tariffs are a problem?
« Reply #34 on: April 02, 2018, 04:00:04 PM »
It is always about good and bad for whom. The average citizen, the poorest, the richest? Steelworkers or pig farmers? Boiling all of that down to "good" vs "bad" on any timeline is a herculean task.

No, in context of what I was saying this doesn't even matter. Take an arbitrary "for whom" and you still don't have acceptable metrics to say what the effects for this group are unless you allow a long-term test. Regardless of whom the policy is geared towards, if there is any result at all you are seeking one still must have an acceptable grounds to try it out. That you may debate who the 'for whom' should be is another important, but completely separate issue, from being able to even verify that *any* plan is succeeding or failing on its own terms.

TheDrake

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Re: Tariffs are a problem?
« Reply #35 on: April 02, 2018, 04:11:52 PM »
That's fair Fenring. In which case we can decide on "gut feeling" of what feels like it might be good in the long run for any defined group? If it is truly unmeasurable in the long term, then what's wrong with focusing on more measurable short term outcomes? This is a general problem with macroeconomics and public policy, and probably why many economists call any restrictions a distortion and undesirable. Unraveling and controlling for other variables is why there are everlasting and unsolvable debates on whether FDR's policies mitigated the Depression or exacerbated it.

Seriati

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Re: Tariffs are a problem?
« Reply #36 on: April 02, 2018, 05:08:32 PM »
It is always about good and bad for whom. The average citizen, the poorest, the richest? Steelworkers or pig farmers? Boiling all of that down to "good" vs "bad" on any timeline is a herculean task.

Our current free trade policies are bad for the middle class and excellent for the wealthy class.  Tariffs that effectively subsidize the creation of middle class jobs will be the inverse.  Whether the poorest benefit more from cheap goods, or better opportunities is debatable, particularly in an environment where they receive heavy governmental benefits.

Quote
Now, globalists like me say that any tariff is bad because it works against equilibrium and flow of production to those best able to produce it.

Well then you should favor a trade a war, because the current system has built in house advantages in every country that are worse than tariffs to manipulate that allocation.  Every country on earth has pursued deliberate policies to create a trade imbalance with the US, including non-equivalent tariffs, direct manipulation of regulatory requirements, local ownership requirements, competition restrictions, and many others.

If you really want open markets - you know because they are a global good - then you should be willing to take the short term pain to get them.

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If tariffs are such a good idea, then we might as well pass a Constitutional amendment so our states can do the same. California can tax imports that they think add to Co2 emissions, Vermont can tax Wisconsin cheese, and Utah can tax full body underwear. Whee!

If those other countries played on a level field like Vermont and South Carolina vis a vis us, then you'd be correct, tariffs would be a horrid idea.  When they manipulate the system and we just let them, it's not the same thing.  Would you think Vermont should consider a tariff if CA passed a law that required Vermont to buy $2 of their products for every $1 that VT imports?  Or that say, required that a Vermont company open a local business that is majority owned by CA before they could import a produce?  Or how about, if they required that VT companies paid taxes to CA on their global revenues?

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To me, it is almost axiomatic and self-evident that going from fewer to greater tariffs is going the wrong way. I do take some of that on faith. I'm not willing to do a 15 year experiment, plus we already have Smoot-Hawley as an example and don't need to try it again.

Fewer to Greater is the wrong way.  However the goal of these policies is to get from 20:1 ratio(total 100) to say 10:1 ratio (total 75).  Or even from 200:10 (total 210) to 100:20 (total 120, even though ours doubled).

Let's try this a different way.  Explain to me how its a good idea to let your trading counterparties impose trade constraints, steal your products and erode your production capacity, and not respond?  Is it really "free trade" when it's only free in one direction?

DJQuag

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Re: Tariffs are a problem?
« Reply #37 on: April 02, 2018, 05:25:58 PM »
People have been trained to look at things on the spur of the moment with no delay or consideration. This is almost entirely the media's fault, in tandem with politicians who monopolize on ignorance. A bad policy can have an effect that looks good short-term and is very bad long-term, and they can sell it as a win. By the time the next election rolls around it's so long forgotten that they don't have to deal with the reality that they lied or were wrong about the real effects. De Tocqueville actually predicted this and spelled it out in his book, which is that when election cycles are so close together you basically have (a) constantly shifting priorities in government, which means no follow-through, and (b) and inability to hold anyone to anything since after each election it's almost like blank slate. You can't be upset at a Congress person if you just voted for them, right? That's cognitive dissonance at its best, and currently the system is designed for just that effect. And the reason you voted for them is because the other side is the devil, so you had to.

In terms of tariffs what this amounts to is that when jobs were initially exported and the cheap goods rolled in, it seemed like a huge win. It took a decade or more to fully realize how much of the American middle class was being decimated. If a tariff war initiated a halt of certain amount of importing, there would be a significant lag between the goods suddenly drying up, and people who work for importers perhaps losing their jobs, and between when the local production begins again and people are hired to work for them. The gap can be years between those, and even if (and this is the big question) this is far superior long-term there's nearly zero chance the populace will see it that way when the media thunders about how the tariff killed the economy. It's never going to be a real free market result, meaning getting to see the real results of a market decision, because the news and the politicians will brainwash everyone that it's bad far quicker than the result can ever be observed. And *that* is one of the reasons that economics isn't a science and why 99.9999% of economics theory is bunk and pseudo-science armchair wind. Because in the real world economics is actually the study of psychology as it applies to resource management, and we don't have any kind of science of psychology that can make predictive statements. Therefore in terms of economic planning the quarterly results will trump real long-term strategy, and the election cycle and it's reset button will prevent any kind of long-term testing on what really works and what doesn't. There is no possibility of staying power for that. And so in the long-term the policies that will prevail will tend to be the ones espoused by parties that aren't subject to elections; think tanks, powerful lobbies, and consortiums. They will always press for what advantages them and in the long-term they'll get it on average. This has been the trend for 120+ years and will likely continue on until the s**t hits the fan.

Until Americans are willing to back strong leadership that doesn't back away from lofty goals I don't think we'll see real experiments in economic planning that can be tested properly. For now the partisan bent is such that beating the other side is more important than picking a plan and sticking to it for 10-15 years to see how it works out, and that's how long it takes to truly test a plan. Right now no one either side trusts the people on the other, and so no Democrat is going to go to bat for a Republican President, and vice versa. Until a Republican citizen is willing to say of a D Pres "I didn't vote for him but he's my President, and I'll back his plan 100%!" we won't see any sense in monetary and fiscal policy. The entire economy and political system is basically swallowed up in a maelstrom of the never-ending election cycle, and it never stops so that we can just have governance. So good luck with ever determining whether tariffs are good or bad.

Our system is like capitalism. Immensely flawed, but ultimately the least crappy option.

No vision will ever get 15 years to come to fruition. We had 8 years of Clinton undermined by 8 years of Bush undermined by 8 years of Obama. And now we've got Trump gutting Obama's initiatives.

It's even worse when you take into account that the House changes every two years.

Fenring

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Re: Tariffs are a problem?
« Reply #38 on: April 02, 2018, 06:30:19 PM »
Our system is like capitalism. Immensely flawed, but ultimately the least crappy option.

No vision will ever get 15 years to come to fruition. We had 8 years of Clinton undermined by 8 years of Bush undermined by 8 years of Obama. And now we've got Trump gutting Obama's initiatives.

It's even worse when you take into account that the House changes every two years.

Functionally our system is a pure oligarchy. The reason for this is that we don't have the long-term fortitude that controlled economies have to see plans through to the end, and on the other end of it don't have the actual market freedom capitalism is supposed to have to self-correct and reach equilibrium. The result is that the economy is controlled, but only in short-term jerky movements that often lack purpose or coherence. And as you say, the plan changes so often that there may as well not be one. But this incoherence devolved into oligarchy because, as I mentioned above, the one constant in all this as the interest groups who very consistently over time push and push and make headway in their own agendas. Over time thing inevitably shift towards what suits them, even if in the short term they have wins and losses. But the mere fact that these groups have long-term fortitude to stick to their agenda already gives them an insurmountable advantage over the quickly shifting public policy on the one hand and on the inability for the market to ever settle into real equilibrium on the other hand.

So what we have isn't merely like capitalism; it's not even being allowed to be that. It has much of the machinery of capitalism but that machinery is never allowed to function properly. Not that I'm advocating for a total free market system; but to whatever extent the market is free it's still not allowed to even profit from its own freedom. It's like hopping on one leg and then shooting yourself in the foot. I don't see an immediate remedy until some fundamentals are changed, and most of this goes back to the same old issue of special interests in politics. As long as those interests always have a leg up they will always win. The tariffs vs no tariffs argument becomes moot if neither strategy is treated as economic planning and it devolves instead into which side of the politics game wins at a given time. It was just like the TPP business, which despite any type of negative press and arguments, kept coming back and back because those behind it were persistent and weren't ever going to let it drop until forced to. Trump seems to have killed it in the end, and even though some people like Justin Trudeau seem intent to resurrect it somehow, maybe it will stay dead. The only way to stop these initiatives is to shoot them in the head like in a zombie movie. You can't just beat them back, you have to burn them and make sure the ashes are scattered. This kind of long-term vigilance can never be maintained so long as the interest groups always have legs to keep pushing. Remove their means of action and *then* we'll see whether tariffs advantage the middle class or not.

TheDrake

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Re: Tariffs are a problem?
« Reply #39 on: April 02, 2018, 07:35:39 PM »
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If those other countries played on a level field like Vermont and South Carolina vis a vis us, then you'd be correct, tariffs would be a horrid idea.  When they manipulate the system and we just let them, it's not the same thing.  Would you think Vermont should consider a tariff if CA passed a law that required Vermont to buy $2 of their products for every $1 that VT imports?  Or that say, required that a Vermont company open a local business that is majority owned by CA before they could import a produce?  Or how about, if they required that VT companies paid taxes to CA on their global revenues?

You think the states have a level playing field?

29 states have a higher minimum wage, states on the federal minimum have an unfair labor cost advantage, that would be for starters. You know, like other countries have a lower wage than our minimum.

States employ heavy tax subsidies to lure industries away from other states. Just watch the clamor over Amazon's new headquarters.

States have different environmental rules, fuel tax, and tons of other government policies that favor one versus another. But we live with it because it is a net benefit.

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Let's try this a different way.  Explain to me how its a good idea to let your trading counterparties impose trade constraints, steal your products and erode your production capacity, and not respond?  Is it really "free trade" when it's only free in one direction?

It's imperfect, but it automatically trends in the right direction. Again, we saw this play out with Japan. O Terrible trade imbalance! O loss of automotive manufacturing! Until they got rich also, their expenses went up, and auto manufacture moved on to Korea, Mexico, and other cheap labor pools. Eventually the cheap labor pools dry up, and manufacturing returns to countries that lost it. Long term.

Complaints can be brought appropriately to WTO to address imbalances under a set of rules that made it possible to have that mechanism. Over time it can improve.

US median income since the introduction of trade agreements blew up from 92 to 98. NAFTA was 93, and median income went from 52k to 58k throughout the dot com. From 12 to 16, from 54 to 58k. I can't think of a better definition of "the middle" than median. Now if you mean people who work in manufacturing rather than "the middle class" then you have more of a point.

TheDrake

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Re: Tariffs are a problem?
« Reply #40 on: June 21, 2018, 08:49:56 AM »
Oh those easy to win trade wars.

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(Turkey's) Ministry of Economy said Thursday that it's imposing tariffs worth $267 million on US goods, targeting items such as coal, paper, walnuts, tobacco, rice, whiskey and cars.

India said this month that it plans to move ahead with retaliatory tariffs, too.

So let's see how this is going to work. All or most of our exports will be hit with tariffs. But every other country only gets hit with tariffs for exports to the US. Explain how that math doesn't cause more pain to the US than to all the other countries?

Seriati

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Re: Tariffs are a problem?
« Reply #41 on: June 21, 2018, 10:00:20 AM »
TheDrake I was just reading yesterday, that the tariffs on US cars going into the EU is a flat 10%, while the reverse is just 2.5% (there is an effective 25% tariff on trucks and SUVs, however).  How does the pre-existing fact of tariffs fit into your view of this?  If all Trump had done was raise tariffs to match the otherside's tariffs, or anti-competitive practices (what's the "tariff value" of requiring a local operation, majority owned by natives?), would it be "starting a trade war"?

Honestly, the illusion is the lie that Trump is starting the trade war, it's always been going on and the other side has been far more punitive without cause.

TheDrake

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Re: Tariffs are a problem?
« Reply #42 on: June 21, 2018, 10:59:05 AM »
BATNA - torching an agreement if it is unfair that leads to worse outcomes is not a good move

I suppose the best way to objectively evaluate tariffs would be to find the net tariff percentage on all goods and services bilaterally. I've not been able to get close to that number. You can always pull out Canada's high tax on dairy, or Europe's high tax on something else. You could look at US tariffs on footwear with an average rate of 12%.

There is this article, which I don't find terribly reliable or compelling, based on World Bank data. Partly this is because the data is not bilateral (a country could have high tariffs vs the US, low with other countries, and balance out low)

highest tariffs

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27 of the European Union's 28 members, for example, have an applied tariff rate of 1.6%

That's the same rate as the US according to World Bank data.

Of course that's just tariffs, I know you can start to drag out subsidies, rules, and everything else people complain about, and that we've discussed. It may well be that in the aggregate, we're doing poorly.

The point is rather that it is unlikely to get a better deal than the status quo, due to the relative strength of a united world front against the United States. Justified war and conflict can be started and lost by the initiating party. It is ill advised to start a fight that you can't win, or that is more costly to win than to avoid. In the extreme, sometimes it makes sense to pay protection money to local gangs rather than have them burn your business to the ground.

Fenring

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Re: Tariffs are a problem?
« Reply #43 on: June 21, 2018, 11:06:57 AM »
Not saying this is the case here (I really don't know) but sometimes a market reset is painful but necessary. This happens all the time in the boom/bust 'cycle' and people don't seem to question the necessity for it (although they should). I suppose it shouldn't come as a surprise that it might happen too in the realm of international trade, where a bad status quo needs to be broken up even if that means pain in the short term. I have no idea if this 'break up' will actually help anything, but it has been apparent to me for many years that the current status quo is terrible.

Wayward Son

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Re: Tariffs are a problem?
« Reply #44 on: June 21, 2018, 11:36:45 AM »
If you think the trade war is an "illusion," you need to check your glasses. :)

There have always been tariffs.  There will always be tariffs.  But the tariffs in the past, even the ones we've increased, haven't caused China to retaliate with billions of dollars worth of new tariffs.  They haven't caused Europe and Mexico to retaliate with billions of dollars worth of new tariffs.  They haven't caused Canada, of all places, to respond with billions of dollar of new tariffs and question our alliance and wonder what the **** we are thinking!  ::)

Washing machines are now cost 20 percent more than before Trump's tariffs on them, because of the tariffs imposed before the steel tariffs.  How much more will they cost after the effects of the steel tariffs go into effect?  The solar panel tariff has increased the cost by about 3 percent, instead of decreasing by 2 to 6 percent as we've seen in past years.  Senators are already complaining about damage to corn, wheat, soybeans and pork prices, automobile sales, aluminum can costs, and ketchup production.  (Heinz might move to Canada.)  And this is just the effects of the last few months.

A competent President would have made only targeted tariffs, with plenty of diplomatic dialogue with the affected countries to make sure the effects were limited and temporary.  But you elected Trump, who doesn't know the meaning of limited or diplomacy.  The result is we are going to see higher costs for goods (aka inflation) along with higher unemployment in the near future.  Which, of course, Trump will declare as a "WIN!"  ::)

So when you start seeing that you can't afford things anymore, and you and your friends start losing their jobs because of cutbacks, just remember that the President is "WINNING" this trade war.

On your back.  :P

TheDrake

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Re: Tariffs are a problem?
« Reply #45 on: June 21, 2018, 12:11:05 PM »
Sometimes you have a house that needs repairs. You don't normally raze it unless it is so bad it costs more to fix it than build a new one. Given the relatively robust level of our economy, it seems severe to have a full do-over. The rest of the world doesn't want to see WTO melt down, so it will remain in place with or without us. Rather than see other members exit the framework, we're likely to see them make it as painful as possible to leave - much like Brexit.

Maybe there's a promised land out there somewhere, but that is quite a leap of faith and meanwhile it selectively wreaks havoc with entire industries, which means more families on public assistance. It will especially damage small and medium business - enterprise and global scale companies can shift operations between countries and tend to be more diversified.

Fenring

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Re: Tariffs are a problem?
« Reply #46 on: June 21, 2018, 01:29:15 PM »
Sometimes you have a house that needs repairs. You don't normally raze it unless it is so bad it costs more to fix it than build a new one.

Think of it more like, each year the walls cave in just a bit more and the effect is that your dining room space has gotten tighter each year. You can still eat there but it's cramped. It seems like an issue not 'big enough' to warrant gutting the entire floor, until you realize that these creeping incremental movements will inevitably cause it to be impossible to even enter the dining room, let alone be there comfortably. Now what Trump is doing is taking a wrecking ball to the walls, whereas some argue it would be better to get a fine craftsman to open up the walls carefully so as to make sure the pipes don't get smashed in the process. But observing the lack of finesse in technique doesn't quite address whether something needed to be done.

TheDrake

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Re: Tariffs are a problem?
« Reply #47 on: June 21, 2018, 01:57:41 PM »
I don't agree with the rate of change argument. I don't see any indication that any trade policy disparity was increasing. Accepting the premise, its more like the dining room started out small - or that your family grew and you don't want to get by with the original space.

Again, best alternative to a negotiated solution - doing something assumes that you are not better off doing nothing. Sometimes doing nothing is just fine. There are no indications that we were heading for some kind of crisis - but now we are. I don't much like the idea of playing chicken with the global economy. Sure, you might win, but what if the other guy doesn't flinch?

Fenring

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Re: Tariffs are a problem?
« Reply #48 on: June 21, 2018, 02:26:54 PM »
I don't agree with the rate of change argument. I don't see any indication that any trade policy disparity was increasing. Accepting the premise, its more like the dining room started out small - or that your family grew and you don't want to get by with the original space.

The analogy probably breaks down if we go too far, but what I mean to say is that the room is getting smaller not because trade agreements are getting progressively worse but because with things as they stand right - even stably - the economy will continue to be hurt until it crumbles. The jobs are vanishing and won't ever come back as things stand, and it's taken experts a surprising amount of time to realize the inevitability of this. There is growing consensus that this is the case, but it should have been obvious 20 years ago. Trade agreements aren't 100% responsible for this but they've made it much worse. The reality of the need for a basic income will become more apparent in 10 years, but in the meantime the problem still appears to some to be an artifact of the boom/bust cycle.
« Last Edit: June 21, 2018, 02:28:57 PM by Fenring »

TheDrake

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Re: Tariffs are a problem?
« Reply #49 on: June 21, 2018, 02:47:10 PM »
Fair enough - something is going to have to be done about the huge employment displacement that is accelerating. I think that a trade war is a painful distraction from any policy that might actually solve the problem. Look at all the drivers that won't have a job in 20 years and that's all they've ever done. No tariffs are going to solve that - although I suppose you can protect the jobs by making the tech illegal, at great cost and loss of opportunity.