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Archive for the ‘Protectionism’ Category

There were many policy mistakes that contributed to the Great Depression.

Monetary Policy presumably deserves the lion’s share of the blame, but politicians also increased the fiscal burden of government and radically expanded the amount of regulatory intervention.

And a tit-for-tat trade war, mostly caused by the United States (Hoover’s Smoot-Hawley tariff), also contributed to the economic destruction of the 1930s.

Sadly, history may be repeating itself, at least with regard to trade. That was my message in this recent discussion with Charles Payne.

This is why Trump’s protectionism is so alarming.

Let’s explore this issue.

Peter Coy, in a column for Bloomberg, explains the dangers of Trump’s approach. Simply stated, it’s not a good idea to let the protectionist genie out of its bottle.

…the president has instigated a trade war…his actions are eroding trust among both allies and rivals. Once gone, trust is hard to reestablish… U.S. corporate leaders soft-pedaled their criticisms of his trade policies in the past because they hoped he’d come around to their point of view. …Now they worry that waiting for the squall to pass may be a mistake because real damage could be done in the meantime. …the threats and counter threats create uncertainty that may induce businesses to hold back investment in new plants and equipment, known as capital spending, or capex.

We’re already seeing some blowback against the United States. But as I stated in the interview, the big concern is what comes next. The economic damage can be significant.

And all bets are off if the trade war goes hot. Fink warned that stocks could fall 10 percent to 15 percent if the Trump administration approves tariffs on an additional $200 billion of Chinese imports. …In the longer term, trade barriers make the global economy permanently less efficient because sheltered economies produce things that could be made more cheaply elsewhere. …if countries restored their tariff rates to their 1990 levels, wiping out almost 30 years of reductions, world average living standards in 2060 would end up about 14 percent lower.

Sadly, Trump seems oblivious to these concerns. So, just like 80 years ago, we’re heading down the tit-for-tat path.

What’s instructive for today is how the U.S. extracted itself from the beggar-thy-neighbor spiral that started with the Smoot-Hawley Tariff Act of 1930 and helped deepen the Great Depression. President Franklin Roosevelt lobbied for and got the Reciprocal Trade Agreement Act of 1934, in which Congress ceded some authority over international commerce to the president… To Dartmouth College economist Douglas Irwin, a historian of free trade, one lesson of the 1930s is that “it’s not as easy to snap back as you think” from a trade war.

Irwin’s argument is similar to the point I made in the interview about needing an adult to take charge before things spiral out of control.

P.S. Since I’ve referenced the Great Depression, I can’t resist reminding people that FDR was so awful that he actually tried to impose a 100 percent tax rate by executive fiat.

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I get offended when I hear people argue that Donald Trump is another Ronald Reagan. I’m not saying that out of animosity to the President. I also got offended when people compared Bush 41 or Bush 43 to Reagan.

I realize Reagan was not perfect, but I think he genuinely believed in free enterprise and he moved the country in that direction. Other GOPers, not so much.

That’s especially true on the issue of trade. Reagan’s goal was to expand markets. Trump, by contrast, seems inspired by Herbert Hoover.

So when CNBC asked for my thoughts on the President’s protectionism, I wasn’t overly optimistic.

Based on eight simple questions, I explained the economy-wide argument for free trade back in 2011. Simply stated, if it’s bad for prosperity for governments to impose taxes, regulation, and intervention on trade inside a country, then it’s also bad for prosperity for government to impose taxes, regulation, and intervention on trade that crosses national borders.

But maybe the case for free trade is easier to understand if we consider how various specific groups are harmed by protectionism.

Taxpayers – Tariffs are taxes. So when Trump imposes $13 billion of tariffs on Canada and $37 billion of tariffs on China, what’s really happening is that he’s increasing taxes by those amounts on American consumers. Trade taxes technically are paid by importers, but the real burden is borne by individuals, just as individuals bear the cost when a business writes a check for the corporate income tax.

Workers – The “seen” effect of protectionism is that a few jobs are saved in a certain sector. But because the economy-wide cost of saving those jobs is so high, the “unseen” effect of protectionism is that overall employment falls. To cite just one example, Trump’s proposed taxes on auto imports are projected to reduce net employment by 195,000-624,000 jobs.

Consumers – When tariffs are imposed, selected special interests are shielded from competition and they respond by raising prices. This is bad news for households. Consider the case of washing machines. In the opening salvo of his war on trade, Trump imposed higher taxes on imported machines earlier this year. This headline from Mark Perry at AEI shows the consequences.

Retailers – As trade taxes ripple through the economy, one obvious adverse effect is that stores have to raise prices, which leads to lower sales. But that microeconomic impact just part of the damage. The combination of trade taxes and higher prices also put a dent in household budgets, and this macroeconomic impact leads to less overall spending on other items.

Exporters – When Trump unilaterally imposes higher taxes on trade, other nations almost always respond with tit-for-tat protectionism. And when these other nations target American products, that necessarily reduces exports.

Manufacturers – One of the big buzz phrases in business is “global supply chains,” which is simply a way of saying that companies have developed intricate networks to ensure the best inputs at the best prices. Trump’s tariffs have disrupted these networks by raising the prices of certain inputs. But the damage isn’t just higher prices.

Investors – At the end of the interview, I said Trump’s latest protectionist measures were akin to going from 1 month pregnant to 3 months pregnant. Except we’re talking about Rosemary’s Baby, not a bundle of joy. At the risk of mixing my cinematic references, continued 1930s-style protectionism eventually could produce Chucky after 9 months.

Hmmm…., maybe I should stick to economics and let movie critics develop analogies.

Since investors were my last category of victims, it’s very appropriate that we conclude today’s analysis by looking at some passages from a very good column by the Chief U.S. Economist for Morgan Stanley in the New York Times.

A protracted, escalating cycle of trade tensions has begun. In the latest action, the United States has proposed a 10 percent tariff on $200 billion in Chinese goods. …Even if all the proposed actions don’t go into effect, prolonged uncertainty alone can have a measurable impact on economic growth, and we should not underestimate the risks. …Just the threat of trade actions, even if there is no follow-through, is enough to dent business sentiment and investment. …roughly half of the growth we are seeing now is a result of a side effect of trade tensions — “doomsday prepping.” Global companies are stockpiling raw materials, intermediate goods and finished goods before tariffs take effect and raise the prices of those goods.

But the damage of protectionism will show up in other ways as well.

While the most direct effects will likely come from retaliatory measures that dent American exports, those impacts are just a fraction of what should be considered. Economists also need to consider the indirect effects of tariffs on consumer demand. Of the first $50 billion of announced tariffs, less than 2 percent apply to consumer goods. So the spillover effect on consumer demand — tariffs passed on as higher prices to consumers — should be quite small. But consumer goods represent more than 30 percent of the latest round of tariffs…firms can absorb the tariffs and cut costs elsewhere, but labor is the largest line item, which means layoffs or slower hiring. …At some point, investors will start to question whether global supply chains can withstand the escalating pressures from multiple rounds of tariffs, and financial markets may start to react.

In other words, there are no winners in a protectionist battle. Except, of course, for the army of lobbyists who get fat contracts to manipulate the system. So the swamp wins, but the rest of us lose.

P.S. As I noted in the interview, I don’t buy the argument that Trump is using protectionism to fight protectionism.

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A couple of days ago, I shared a segment from a TV interview about trade and warned that retaliatory tariffs were a painful consequence of Trump’s protectionism.

I also was asked in that interview about the negative effect on farmers. I speculated that farmers (and many other groups) were giving Trump the benefit of the doubt in hopes that this process might actually lead to trade liberalization – sort of like what Trump suggested at the G7 meeting.

While I was depressed and glum in that interview, it turns out that things are worse than I thought.

Instead of keeping their fingers crossed for trade liberalization, farmers may be nonplussed by protectionism because President Trump’s expansion of bad trade policy may also wind up being the pretext for an expansion of bad agricultural policy.

The Wall Street Journal opines on the upside-down logic of Washington.

When pork prices collapsed amid a global trade war during the Great Depression, the Roosevelt Administration in 1933 had an idea—slaughter six million piglets. Put a floor under prices by destroying supply. It didn’t work. Now the Trump Administration may try its own version of Depressionomics by using the Commodity Credit Corporation (CCC) to support crop prices walloped by the Trump tariffs: Hurt farmers and then put them on the government dole.

Given the economic misery of the 1930s, it should be obvious that copying the awful policies of Hoover or Roosevelt is never a good idea.

But that’s not stopping the crowd in Washington.

In 2012 Congress put limits on CCC purchases of surplus commodities and on price supports after the Obama Administration used it for a costly 2009 disaster program without Congressional approval. But then out of the blue this year, Congress lifted the limits on CCC’s power to remove surplus crops from the market to support prices. Republicans made that change because the Trump Administration wants to use the CCC to mitigate the damage to U.S. crop prices from the Trump trade war. In a June 25 USA Today op-ed, Agriculture Secretary Sonny Perdue wrote that the Administration is ready to “begin fulfilling our promise to support producers, who have become casualties of these disputes.” Too bad these U.S. casualties were caused by friendly fire.

And don’t be surprised if today’s handouts wind up becoming permanent entitlements.

The bigger danger is that the need for Mr. Perdue’s “help” is unlikely to be temporary. …With the higher tariff, Beijing will turn even more to Brazil and Argentina for soy and grains; Australia and Chile for fruit, nuts and wine; and Canada and the European Union for some or all. …The CCC is a relic of Dust Bowl America. Today the American farmer is high-tech, productive and eager to compete. Mr. Trump’s trade policy is creating a problem that didn’t exist and next he may create another one to ease the pain he has caused.

In other words, one bad government policy is being used the justify another bad government policy.

This is a classic example of Mitchell’s Law, otherwise known as the lather-rinse-repeat cycle of government failure.

We see it when government over-spending is used as an excuse for big tax increases.

We see it when government-run healthcare is used as an excuse to impose nanny-state policies.

We see it when government drug-war failures are used as an excuse to push for gun control.

And now we’re seeing it when bad trade policy is leading to more bad farm subsidies.

I realize this is pure fantasy, but wouldn’t it be nice to have the reverse approach? How about we simultaneously eliminate trade barriers and get rid of the Department of Agriculture?

Given the inherent corruption of Washington, I won’t hold my breath for that outcome. I’ll have more luck waiting for this fantasy to become reality.

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The theoretical case against protectionism is very straightforward. Economic growth suffers when politicians interfere with markets.

The empirical case against protectionism also is very straightforward since there’s lots of data showing that it’s a job killer.

There’s also a political case against protectionism because governments almost always respond to protectionism with protectionism.

I try to summarize those concerns in this short segment from a recent interview with Neil Cavuto.

Unfortunately, retaliation by our trading partners already is causing problems.

Let’s look at a sampling of recent stories.

How about this headline for the Wall Street Journal?

Or this headline from Missouri?

And this headline from CNBC?

Here’s another headline from the Wall Street Journal.

How about this headline from Utah?

And here’s part of a headline from the New York Times.

There are hundreds of such headlines that could be shared, so maybe it’s time to look at the issue from another perspective.

Here’s a map showing the retaliation against American exporters. And it’s only showing the retaliation against Trump’s steel and aluminum tariffs.

But I don’t want to be too depressing.

So let’s consider some good news. Most trade is still unaffected, at least based on this interesting data from the Washington Post.

Though maybe this is also bad news since it shows how much additional damage Trump can do to the global economy.

My nightmare scenario is that Trump imposes additional trade taxes, which leads other nations to respond with their own trade taxes. Trump then gets offended by those responses by levying another layer of taxes, which triggers more retaliation by other nations.And so on and so on.

Lather, rinse, repeat, all the way to a global downturn (a repeat of the Great Depression is unlikely since that would require big increases in income taxes and many other bad policies as well).

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I very much suspect Obama partisans and Trump partisans won’t like this column, but the sad reality is that both Obamacare and Trump’s protectionism have a lot in common.

  • In both cases, government is limiting the freedom of buyers and sellers to engage in unfettered exchange.
  • In both cases, the fiscal burden of government increases.
  • In both cases, politicians misuse statistics to expand the size and scope of government.

Today, let’s add another item to that list.

  • In both cases, the Washington swamp wins thanks to increased cronyism and corruption.

To see what I mean, let’s travel back in time to 2011. I wrote a column about Obamacare and cited some very persuasive arguments by Tim Carney that government-run healthcare (or, to be more accurate, expanded government control of healthcare) was creating a feeding frenzy for additional sleaze in Washington.

Congress imposes mandates on other entities, but gives bureaucrats the power to waive those mandates. To get such a waiver, you hire the people who used to administer or who helped craft the policies. So who’s the net winner? The politicians and bureaucrats who craft policies and wield power, because this combination of massive government power and wide bureaucratic discretion creates huge demand for revolving-door lobbyists.

I then pointed out that the sordid process of Obamacare waivers was eerily similar to a passage in Atlas Shrugged.

Wesley Mouch…issued another directive, which ruled that people could get their bonds “defrozen” upon a plea of “essential need”: the government would purchase the bonds, if it found proof of the need satisfactory. …One was not supposed to speak about the men who…possessed needs which, miraculously, made thirty-three frozen cents melt into a whole dollar, or about a new profession practiced by bright young boys just out of college, who called themselves “defreezers” and offered their services “to help you draft your application in the proper modern terms.” The boys had friends in Washington.

Well, the same thing is happening again. Only this time, as reported by the New York Times, protectionism is the policy that is creating opportunities for swamp creatures to line their pockets.

The Trump administration granted seven companies the first set of exclusions from its metal tariffs this week and rejected requests from 11 other companies, as the Commerce Department began slowly responding to the 20,000 applications that companies have filed for individual products. …several companies whose applications were denied faced objections from American steel makers. …companies that have applied for the exclusions criticized the exercise as both long and disorganized. “This is the most screwed-up process,” said Mark Mullen, president of Griggs Steel, a steel distributor in the Detroit area. “This is a disservice to our industry and the biggest insult to our intelligence that I have ever seen from the government.”

From an economic perspective, it certainly is true that this new system is “disorganized” and “a disservice” and an “insult to our intelligence.” Those same words could be used to describe the welfare state, the EEOC, farm subsidies, the tax code, and just about everything else the government does.

But there’s one group of people who are laughing all the way to the bank, The lobbyists, consultants, fixers, and other denizens of the swamp are getting rich. Whether they’re preparing the applications, lobbying for the applications, or lobbying against the applications, they are getting big paychecks.

And the longer this sordid protectionist process continues, we will see a repeat of what happened with Obamacare as senior-level people in government move through the revolving door so they can get lucrative contracts to help clients manipulate the system (yes, Republicans can be just as sleazy as Democrats).

Washington wins and we lose.

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Back in January, I compared Reagan’s pro-trade views with Trump’s cramped protectionism.

Well, here’s another video of the Gipper talking about trade. I especially like how he used “destructionism” to describe protectionism.

And let’s consider exactly the kind of destruction that may occur.

ScotiaBank in Canada has crunched numbers on the possible consequences to North America in a world of Trump-style tariffs. The “good news” is that the United States suffers the least amount of damage.

The bad news (actually the worse news) is that the American people will suffer a significant and sustained loss of economic growth. And that has very negative implications for long-run prosperity.

But this isn’t just about macroeconomic aggregates.

Here’s an example from the Wall Street Journal of how protectionism backfires.

Lyon Group Holding…is struggling to survive as Donald Trump’s steel tariff gives his Chinese competitors an unfair advantage. Meet the law of unintended tariff consequences with arbitrary harm to the innocent. …Steel has long accounted for 45% of the cost of making lockers at Lyon and Republic, the single biggest expense. Mr. Trump’s 25% tariff has driven up the price of foreign steel and given domestic steel the chance to raise prices. American hot-rolled steel coil recently sold for $900 per short ton…up 38%, or $248 per ton, since the beginning of January. …Raising locker prices isn’t an option. Even before the tariffs, Lyon and Republic’s clients were paying a 10% premium for the convenience of buying American instead of Chinese, and they can’t afford to go any higher, Mr. Altstadt says. …foreign manufacturers are benefiting from Mr. Trump’s steel protectionism.

And here are some of the real-world costs.

If the tariffs remain in place, Mr. Altstadt says he’ll have no choice but to buy foreign-made locker components. Reluctantly, he’s visited factories in China to consider his options. But if Lyon and Republic outsource locker parts from abroad, Mr. Altstadt says he’ll have to lay off at least one-fourth of his American workforce and perhaps shutter and sell one of his metalworking factories. …he is haunted by “the devastating effect on real people.” Two-thirds of his workforce is unskilled.

I feel sorry for Mr. Altstadt, but I won’t lose sleep about his plight. I assume he’s at least in the top-5 percent for income and wealth.

The real victims of Trump’s protectionism are the ordinary workers at the company. These people may not have high skills, but they are playing by the rules and doing the right thing instead of living off the government. Yet now many of them may lose their jobs because the President doesn’t like America’s system of free enterprise.

Disgusting. Protectionism isn’t just bad economics. It’s immoral as well.

P.S. Reagan’s rhetoric on trade was perfect, but not his policy. As I explained last year, his generally strong economic record was marred by some protectionist initiatives.

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On the issue of trade, Donald Trump is wallowing in the swamp of special interest favoritism instead of defending the interests of taxpayers and consumers.

  • He’s wrong on NAFTA.
  • He’s wrong on dealing with China.
  • He’s wrong on steel and aluminum.

And it appears that he is determined to be wrong on automobiles.

The Administration has launched a “Section 232” case at the cronyist Commerce Department, which is the first step toward a big tax increase – which would be unilaterally imposed – on imported vehicles.

By the way, Section 232 is supposed to be limited to issues involving national security. And since American consumers don’t buy cars from countries that are enemies (or even potential enemies) of the United States, the entire case is a farce.

Yet the protectionists in the Administration get to act as judge and jury.

Unfortunately, when a sentence is imposed, it will fall on Americans. The trade experts at the Peterson Institute for International Economics have analyzed the issue and they are not impressed by Trump’s proposed protectionism.

A new PIIE analysis shows that…production in these industries would fall 1.5 percent and cause 195,000 US workers to lose their jobs over a 1- to 3-year period or possibly longer. …If other countries retaliate in-kind with tariffs on the same products, production would fall 4 percent, 624,000 US jobs would be lost… This second scenario would also hurt US exports of these products more than imports. …Both scenarios demonstrate how reliant the domestic industries are on imported parts, or intermediate inputs, that are not produced in the United States or that have no easy US-made substitute. Tariffs would raise the cost of these parts and domestic production, which makes products more expensive to consumers and lowers demand for them in the United States and abroad. … nearly 98 percent of the targeted car and truck imports by value would hit key US allies: the European Union, Canada, Japan, Mexico, and South Korea.

Here’s a table from the PIIE study (click to enlarge).

Unfortunately, the second line is the most relevant since other nations will respond with their own destructive trade taxes.

But let’s not rely on just one source. The Hill reported on some additional research about the potential job losses from higher taxes on auto imports.

President Trump‘s proposed tariffs on imported automobiles and parts would cost the U.S. economy 157,000 jobs, according to a report by the Trade Partnership, a trade policy consultancy. “We find that the tariffs would have a very small positive impact on high-skilled workers in the motor vehicle and parts sectors, but very large negative impacts on workers — both high- and lower-skilled — in other sectors of the economy,” the study says. …the tariff policy would boost jobs in the auto sector by 92,000, but then destroy 250,000 jobs in the rest of the economy, according to the study. The price of foreign vehicles would rise from $30,000 to $36,400, a 21 percent increase. All in all, the economy would lose 0.1 percent of its value. Those effects don’t take into account any potential retaliation by American trade partners for the tariffs.

The Tax Foundation looked at the impact of higher taxes on imported autos and discovered that they would wipe a big chunk of the recent tax cuts.

 increasing tariffs on automobile imports would reduce the gain in after-tax income for households in 2018 derived from the Tax Cuts and Jobs Act while making the tax code less progressive. In 2017, the United States imported nearly $293 billion worth of vehicles for consumption, while paying about $3.4 billion in duties on those imports. If we assume that import levels will remain the same…the new tariff would amount to a $73 billion tax increase. …Using the assumptions mentioned above, we estimate that the new tariffs on automobiles would reduce after-tax incomes for all taxpayers by 0.47 percent in 2018 while making the distribution of the tax burden less progressive. These tariffs would fall harder on those taxpayers in the bottom 80 percent, reducing their after-tax income by 0.49 percent.

Here’s a chart from the report showing – for various income groups – how the trade tax hikes are offsetting the reductions from last year’s tax reform.

The Wall Street Journal opined on the economic harm to ordinary Americans.

The tariffs shave gains in all income brackets, but no one is hurt more than the poor and middle class. …Tariffs are inherently regressive because low-income Americans spend more of their income on household goods. Commerce Secretary Wilbur Ross has argued that no one will notice price increases—what’s a few cents more for a can of soup? But people in Mr. Ross’s income strata are not the Trump base. The Commerce Department is still looking at whether a muffler is a national security threat under Section 232 of the Trade Expansion Act of 1962. President Trump should abandon the idea lest Americans wonder if they really benefitted from that tax cut.

What about the White House’s claim that there should higher taxes on foreign cars because of national security?

Well, I rarely agree with Paul Krugman on fiscal policy, but there’s a good reason why he won a Nobel Prize for his work on international economics. His analysis on this topic is spot on.

…there have been only a handful of Section 232 investigations over the past half century — and most of them ended with a presidential determination that no action was warranted. But Trump is different. He has already imposed tariffs on steel and aluminum in the name of national security, and he is now threatening to do the same for autos. The idea that imported cars pose a national security threat is absurd. We’re not about to refight World War II, converting auto plants over to the production of Sherman tanks. And almost all the cars we import come from U.S. allies. Clearly, Trump’s invocation of national security is a pretext, a way to bypass the rules that are supposed to limit arbitrary executive action.

Showing this is a big tent, the Chamber of Commerce also concurs.

The U.S. Chamber strongly opposes the administration’s threat to impose tariffs on auto imports in the name of national security. If this proposal is carried out, it would deal a staggering blow to the very industry it purports to protect and would threaten to ignite a global trade war. In fact, the U.S. auto industry is prospering as never before. Production has doubled over the past decade, it exports more than any other industry, and it employs nearly 50 percent more Americans than it did in 2011. These tariffs risk overturning all of this progress. This isn’t about national security. The administration has already signaled its true objective is to leverage this tariff threat in trade negotiations with Mexico, Canada, Japan, the European Union, and South Korea. These allies provide nearly all U.S. auto imports and are among America’s closest partners. Neither they nor these imports endanger our national security in any way. The president’s Section 232 authorities should not be abused in this way, and doing so only encourages other nations to do likewise.

As does the Business Roundtable.

The Section 232 tariffs on steel and aluminum imports have harmed the U.S. economy, resulting in higher costs on U.S. businesses and consumers, and exposing U.S. exporters to foreign retaliation. Imposing such tariffs on automobile and automotive parts imports would only make things worse. Using ‘national security’ arguments under Section 232 to investigate and potentially impose tariffs on auto imports doubles down on a bad precedent for U.S. trade policy. It undermines our nation’s credibility in the global community, weakens the international trading system, and emboldens other countries to use ‘national security’ to limit U.S. goods and services exports to their markets.

Even the auto industry – including some American manufacturers – is opposed, as reported by ABC.

Two Washington D.C.-based automaker groups are slamming President Donald Trump’s decision to launch an investigation into auto imports, which could lead to tariffs on foreign-made vehicles. “To our knowledge, no one is asking for this protection. If these tariffs are imposed, consumers are going to take a big hit,” said John Bozella, President of Global Automakers, a trade group representing foreign manufacturers doing business in the U.S. …The legal mechanism for the investigation “has rarely been used and traditionally has not focused on finished products,” said Gloria Bergquist, spokeswoman for Auto Alliance, a group that represents foreign automakers like Volkswagen and BMW in addition to U.S. manufacturers like GM and Ford. “We are confident that vehicle imports do not pose a national security risk to the U.S.,” Bergquist said. …”Last year, 13 domestic and international automakers manufactured nearly 12 million vehicles in the U.S. The auto sector remains the leading exporter of manufactured goods in our country,” Bergquist said.

And the Financial Times notes that the rest of the world isn’t happy, either.

Donald Trump’s threat to impose tariffs on automotive imports in the name of national security has drawn condemnation from US trading partners around the world and warnings that it would disrupt global supply chains and put the international trading system at risk. …The European Commission…said it was “far-fetched” to invoke a national security consideration for car imports. That sets the stage for a possible challenge to any US tariffs at the World Trade Organization. …Japan also responded in unusually strong terms. “If they were to go ahead with such wide-ranging trade restrictions, it would throw the global market into confusion,” said Hiroshige Seko, minister of economy, trade and industry. “There could be a negative effect on the WTO multilateral trading system. It is extremely regrettable.”

In my humble opinion, “extremely regrettable” is the understatement of the century. As Walter Williams observed, protectionism is a punitive form of government intervention. Politicians and bureaucrats decide that their prejudices should take priority over consumer preferences.

That’s morally offensive, but it’s also economically self-destructive since the research unambiguously demonstrates that protectionism is a net job destroyer.

Yet politicians don’t care, either because they are motivated by “public choice” or because they lack the cognitive skills to realize that the “seen” jobs that are saved by trade barriers are easily offset by the “unseen” jobs that are destroyed (h/t: Bastiat).

I suspect Trump is part of the second group, but I’ll reserve judgement until I have the opportunity to ask him these eight questions.

Let’s close by making the elementary observation that national security is easier to finance with a strong economy. Yet protectionism reduces economic vitality. All the more reason why Section 232-instigated trade barriers are so senseless and illogical. And all the more reason why I wish Trump was serious when he proposed zero trade barriers with American allies.

P.S. Here’s a bit of trade history. The United States already imposes a 25 percent tax on imported light trucks. So why did American politicians decide to hurt American truck buyers with this tax? As explained in this video, it’s because European politicians decided to hurt their consumers with taxes on American chickens.

So if the Trump Administration moves forward with a big tax hike of foreign cars, video makers in the future will have new stories to tell about how reciprocal protectionism hurt various American industries, workers, and consumers. Maybe politicians will take the sugar program and extend that moronic approach to other sectors of the economy.

Gee, isn’t government wonderful?

P.P.S. This is yet another reason why I miss Reagan.

P.P.P.S. Here’s the only acceptable argument for import taxes.

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