March 2, 2018

So, Here We Are

I don't intend to pile on. Not when it's been done so much better by the WSJ Ed Page:

Donald Trump made the biggest policy blunder of his Presidency Thursday by announcing that next week he'll impose tariffs of 25% on imported steel and 10% on aluminum. This tax increase will punish American workers, invite retaliation that will harm U.S. exports, divide his political coalition at home, anger allies abroad, and undermine his tax and regulatory reforms. The Dow Jones Industrial Average fell 1.7% on the news, as investors absorbed the self-inflicted folly.

Mr. Trump has spent a year trying to lift the economy from its Obama doldrums, with considerable success. Annual GDP growth has averaged 3% in the past nine months if you adjust for temporary factors, and on Tuesday the ISM manufacturing index for February came in at a gaudy 60.8. American factories are humming, and consumer and business confidence are soaring.

Apparently Mr. Trump can't stand all this winning

More broadly, it has been a bad 48 hours for those who love liberty and were trying to come to terms with our quixotic cheif executive.

I know that neither Mr. Shapiro nor the WSJ Ed Page are natural allies of President Trump. Yet I cannot help but feel we are reaping what populism has sown. Ideology is abased, but it does provide one with a rudder.

UPDATE: If you're not convinced by liberty, or Adam Smith, or David Ricardo:

Molson-Coors warned in a statement, "Like most brewers, we are selling an increasing amount of our beers in aluminum cans and this action will cause aluminum prices to rise and is likely to lead to job losses across the beer industry." The company contends that domestically, "there simply isn't enough supply to satisfy the demands of American beverage makers."

Hat-tip: Jim Geraghty

Trump Agonistes Posted by John Kranz at March 2, 2018 9:46 AM

But on the bright side, Trump's action seems to have revived activity on our dear Blog!

Q: What happens when, in a trade war, one side surrenders?
A: The "New Normal." Economic stagnation, at least for whatever American industrial sectors wherein some other nation chooses to advantage its own workers.

Whether its a good idea or not to fight back, time will tell. But let there be no mistake - Donald Trump did not START a trade war. Although I have no illusions of ever reading that in the Globalist NeverTrump Journal.

Posted by: johngalt at March 2, 2018 1:13 PM

Here's a view from the pro-tariff side of the argument.

Anyone who has taken a macro-economics course knows the wisdom passed down from plenty of 19th century economists: free trade is the most efficient means of acquiring cheap goods and services. But there's more to life than just cheap goods.
Posted by: johngalt at March 2, 2018 1:18 PM

Yes, we were tiring of winning...

And I do -- as always -- appreciate your engaging. I cannot lie, however: when the latest President Trump Imbroglio occurs I wonder "will this be the one over the line? I knew tariffs would not be it, but I thought "we'll take all the guns, and then due process later" might get an eye roll? A throat clear? A loud sigh?

I'll defend myself with consistency. I whacked President Bush for his reading of this craven lunacy. And he was "my guy," though I should have been tougher.

Most of our steel imports come from Canada (Tim Horton's-munching slave labor!!!) and the domestic industry is quite robust.

Much more to life than cheap goods, indeed. Economists are unjustly pilloried for that, and a fair reading of Adam Smith makes the case better than most. But consumption is a part of human flourishing. And the well being and professional opportunities 6.5 million who use steel and aluminum as inputs is important as well.

(When Bush did his, I heard from an acquaintance of blog friend SugarChuck that his boutique guitar amplifier business might close. Consumers are (legitimate) victims, but if their plight does not move you, think of the producers who will be hard pressed to compete (the steel in a complete amp made in China is not tariffed).

And: weren't you the self-professed "can snob?" Injustice!

Posted by: jk at March 2, 2018 3:11 PM

Injustice, yes. International trade partners should not have been waging trade war with us since the Eisenhower administration.

As a starting point, let me say that I don't see import duties as yet another "new normal." I see it as a tactic. You see, we can't negotiate reduction of THEIR tariffs without tariffs of our own to reduce.

And I see the choice of steel and aluminum as more symbolic than targeted. (Unless of course you consider the Pennsylvania special election in the coming weeks.)

Finally, the two apparent goals here are both laudable in my view: Make blue collar work pay better than it has since the dawn of NAFTA; and solidify the "Reagan Democrats" in his base for reelection in 2020.

Besides those two points, I see the vagaries of specific tariffs, duties, taxes and subsidies as mere "deck chairs on the Leviathan." Life's too short to get worked up over each individual plus or minus, that will change again soon anyway. Free trade is best. Yes. Yes. A thousand times yes. But trade requires partners.

As for the threat of gun confiscation from the lips of the Donald, two words: Republican Congress. Yet another tack to the middle for this amateur politician, who appears to be sailing along quite adeptly.

And if none of this is persuasive, two more words: President Oprah (Or Kamila. Or Michelle. Or Bernie. Or Fauxchahantas.)

Posted by: johngalt at March 2, 2018 4:41 PM

And by the way, didn't the Karl Roves of the world insist that Republicans could never win elections without being more moderate? And now Trump is criticized for reaching across the aisle.

Posted by: johngalt at March 2, 2018 4:47 PM

I'm not, first and foremost, an 'ad valorem' guy, but if I were I would link Kudlow, Laffer and Moore long before the GNTJ.* They almost make having certain sectors of our economy get pwned by predatory competitors sound like fun. But more importantly, they remind that trade duties are never a long-term solution to any problem.

In the early 1980s, Ronald Reagan's invoked anti-dumping provisions against Japanese steel. It was one of his few decisions he later confessed he wishes he hadn't made. ‚ÄéTrump will come to learn the same thing, and we hope it is sooner, not later.

If there's anything Trump has proven in his short history of policy positions it is an ability and willingness to "evolve." Like I said yesterday, I see the move as a tactic. Even if it only serves to make the President appear crazy and clueless, these unpredictable moves serve to free up an ossified status quo. Trump is taking the modern presidency out of its "conventional wisdom" straightjacket.

* "Globalist NeverTrump Journal


"Ad valorem." Ay yi yi. I meant ad verecundiam. "Argument from authority."

Although, reading further, this is a form of "defeasible argument" which is in turn a particular kind of non-demonstrative reasoning, meaning it produces a contingent statement or claim. This is stock in trade for engineers so, at long last, it turns out I AM, first and foremost, an ad verecundiam guy!

Posted by: johngalt at March 3, 2018 5:34 PM

I truly hope you're right that this is tactical and we end up in a very different place. I just said the same on a Facebook thread without having read this. So, yeah, it is possible.

(The TV news this morning did a long segment on "President for Life." I concede that his enemies go too far. BUT.)

But he campaigned as a protectionist. And he has wide latitude under this "Section 232." And he has Peter Nevarro hanging around.

I do not find the "predatory competitors" argument at all persuasive. The bulk of our Steel imports come from friendly nations and the numbers fro domestic production have been strong. To blunderbuss domestic auto and appliance production and risk retaliation over Chinese steel that is 2% and change if imports is indefensible.

A dime a beer case, $175 a car, $1 million on a plane -- it is all contrary to the spirit of liberty and very well established economics.

Posted by: jk at March 5, 2018 11:26 AM

Disclaimer: I don't aim to argue or persuade, merely to share "alternative" points of view.

I found authoritative data on this subject here. [PDF]

I'll begin with a Trump counterfactual. He has called America's steel industry "dead" due to unfair competition, but American steel production and consumption have been in the neighborhood of 80 MMT (million metric tons) and 100 MMT, respectively, since 2010. So we're importing 20% of our steel. A recent theory that this is a NAFTA renegotiation ante suddenly makes more sense than "saving American steel."

And while Canadia is indeed our number one import source, Mexico is number four. Note that these are our two NAFTA partners.

Further, Russia is number five. Wasn't the failed Democratic candidate for president just saying that POTUS needed to get tough with the Russians? (Okay, I'm being flippant.)

The rest of the top ten import sources are Brazil, South Korea, Turkey, Japan, Taiwan, Germany and India. These guys should cross their fingers that Canadia and Mehico play ball on NAFTA as fast as possible.


As for Trump's off-the-record joke with the press (did I mention he was kidding?) we may as well go ahead and describe it the way media members heard it with their ears and felt it with their hearts: "Fuhrer Trump." I'm sympathetic because I would have freaked out if Obama said it, even in jest. But in the end I must conclude that the compliant, complicit, double-standard news media in this country thoroughly deserves to have it pointed out to them that, as bad as they think he is, other world leaders (like China's) are much worse. Not that they even recognize the fact but, news flash, Xi Jinping is NOT kidding.

And finally, I don't have numbers for the tariff hikes on a car but I do for a Boeing jetliner - $33,000. That's .013% of the cost of a 787. (And just 3.3% of your own estimate.) Taking the $175 auto estimate on faith though, a driver could recoup that by recycling a case of beer cans per day for a year!

Gotta go - Professor Cutsinger is on line 1.

Posted by: johngalt at March 5, 2018 3:57 PM

I almost forgot...

You cited "very well established economics." My Bud drinkin' buddies call this by various names:

Status quo
Hedge Fund Corporatist B.S.
Swamp Business
NeverTrump mutual "back-scratching" rules.

In November 2016 a plurality of American voters decided it was time to change the established rules. I, for one, can't blame them.

Posted by: johngalt at March 5, 2018 4:03 PM

Speaking of that fellow who used to be President, how would you have felt had he presented a ruse of a phony national security scare so that he could enact a favored policy? Because that's the best-case scenario of the President's tactics.

Would you agree there is (subtract five, carry the one...) exactly zero national security risk of our proud nation's importing steel from our great allies? If we lose China and Russia, that's a blip.

So, Section 232 is a ruse -- there is no compelling national security interest. But it is a very convenient loophole for bypassing Congress so that he can have a bargaining chip in his high-stakes renegotiation of nafta. That's bad, right? Had President Obama pulled a similar stunt to fund SCHIP we'd've been pissed, right?

My numbers came from Peter Nevarro's appearance on FOX News Sunday through the imperfect medium of my memory -- exacerbated by the physical pain I was in hearing his explanations.

I guess the American consumer can always afford to pay more taxes. You're right -- it's really just "crumbs" when I think of it.

Posted by: jk at March 5, 2018 7:01 PM

Were Adam Smith, David Ricardo, Larry Kudlow, Art Laffer, Walter Williams, Don Boudreaux, Fredrich Hayek, Milton Friedman, Henry Hazlitt and Frederic Bastiat wrong? And an electoral-representation-of-a-plurality of American voters right?


I'm in a reflective mood. I read all but a few pages of Steven Pinker's "Enlightenment Now" over the weekend and just finished Nassim Taleb's ninth appearance on EconTalk. Two of the most esteemed intellects on the planet, and two that challenge my core beliefs very deeply. And I got a more brutal thrashing last week than even you did.

The common thread is holding core truths even as ancillary beliefs are shaken. From Pinker: do I love Enlightenment values and modernity more than I fear government? From Taleb: how can I dismiss "the God of risk assessment" when he spurns GMOs?

I cannot, however say "some Things were bad before Donald Trump was President, ergo, everything he disagrees with is right." Some things I believed in before he was president are still right.

Posted by: jk at March 5, 2018 7:10 PM

Well said all the way 'round. We're of a mostly like mind. Perhaps the biggest reason for my Trumpism sanguinity is that this president and the swamp are at loggerheads, not lockstep. The latter is what really scares the crap out of me. c.f. Obama. Bush.

Posted by: johngalt at March 6, 2018 3:03 PM | What do you think? [12]