Thursday, March 1, 2018

Begun the Trade War Has

Master Yoda at the end of the second of the Star Wars prequels:
Begun the clone war has
Exactly the right sentiment with this news:
President Donald Trump is expected to announce new tariffs on imports of steel and aluminum as soon as Thursday, a move that could trigger significant economic repercussions. "Our Steel and Aluminum industries (and many others) have been decimated by decades of unfair trade and bad policy with countries from around the world," Trump tweeted Thursday morning. "We must not let our country, companies and workers be taken advantage of any longer. We want free, fair and SMART TRADE!"
I wonder if the agriculture sector will see this as smart:
The tariffs would most likely trigger retaliation from other countries. China is already looking into restrictions on US exports of sorghum and soybeans, both of which are important crops for American farmers. Additionally, the European Union was said to be mulling tariffs on US agricultural products like cheese and bourbon.


Donald A. Coffin said...

Furthermore, raising (or imposing) tariffs on steel will increase steel prices in the US, increase the cost of making cars and appliances and capital goods in t he US, and increase imports of cars, appliances and capital goods. Military spending will have to rise (or other defense expenditures cut) as military equipment becomes more costly. Construction costs (particularly for high-rises and industrial buildings; and for bridge and road construction and repair). Yessir, those tariffs are the path to prosperity.

Bruce Wilder said...

I've noticed that a great many commentators on teevee are ready with their over-rehearsed paeans to global trade. Not so many praise "free trade" specifically as not so long ago, but they know the catchphrases for sure. Some decry the fading of American leadership in the world. Others have very narrow perspectives: the price of aluminum will go up and that will be bad for . . . I don't know, whatever industry they represent, say soft drinks.
What I do not see much of is long-run perspective or a sophisticated vision for national interest.
"Free trade" has long been the battle cry of the dominant economies, beginning with Great Britain in its mid-19th century heyday and protectionism has always been the ways and means of the up-and-comers. The U.S. benefited mightily at the end of the 19th century from enacting tariffs on a variety of British industrial products, which had the effect of transferring rents from the established British industries, helping to finance American investment in manufacturing industry. The protective tariff remained a policy touchstone of the dominant Republican Party -- made dominant in part by the economic success of that policy (and the accident of expanded gold production relieving deflationary pressure) -- for over 30 years, until the ridiculous Smoot-Hawley tariff failed to arrest the Great Depression.
More far-sighted business leaders recognized in the late 1920s that U.S. economic dominance -- a degree of dominance not seen since the Industrial Revolution in Great Britain gathered steam (so to speak ;) 1820-1870 -- made "free trade" in the American interest. Creating international institutions to manage the reduction of tariffs globally was a cornerstone of the internationalist aspirations of liberal Republicans and internationally minded New Deal Democrats during and after World War II. And, to a large extent, we live in a world of global trade managed by the descendants of those institutions. But, those institutions and the ideas that guide them have "evolved" for lack of a better word.
The shibboleths of "free trade" have not evolved much. People recite them and I guess feel good about themselves, but as they do so, they do not connect much with factual circumstances of conditions now.
U.S. economic dominance outside of the financial sector is mostly long gone with exceptions that are deeply dependent on conventions regarding intellectual property, which itself is essentially financial. Letting the deeply corrupt financial sector run international trade policy at the expense of industry is national suicide. The U.S. has nothing to gain from further "broad" expansion of trade -- and there is no scope for "broad" expansions as tariffs on merchandise and intermediate products trade are quite low.
Letting Yoda speak is appropriate because we are not simply witnessing the beginning of trade war, but because we are witnessing a continuation of the decline and degeneration of the American Empire, underway now for nearly 20 years.
Things cannot go on as they have. Pining for an ideal regime of free trade is just an excuse to ignore circumstances that make what that regime used to be, impossible to continue and, in fact, undesirable to continue. The actual international regime of trade and finance with the U.S. at its core is ugly and destructive to the vast majority of Americans as well peoples abroad. Built on financial fraud and perpetual war, it must be destroyed before it destroys us and the planet. It is a sad commentary on our parlous state, that only that idiot Trump can breach the establishment wall of orthodoxy even slightly to defy a conventional wisdom conspicuous for its determined resistance to even acknowledging current economic circumstances.

/end of rant said...

Late 1920s? The Smoot-Hawley tariff was passed in 1930. Did not exactly help either the US or world economy stay out of rhe Great Depression.