Tariff

octopus.jpgWe put tariffs on the table as part of the president’s initiative of putting an American first and American interest on equal footing when it comes to American trade policy going forward with our trading partners.  And as those tariffs have gone out, they’ve obviously caused great concern to many folks who are used to well-established status quo type of trade policies. I am glad to be able to highlight today that this new tool in our tool box is leading to some positive results.–Rep. Tom Reed reported in The Post-Journal by Katrina Fuller

You have tariffs potentially being deployed on products that are going to be imported to America. Those tariffs translate to potentially pressures on consumers, on people, when they purchase those items at the marketplace. The bottom line is, long-term, this is going to make us stronger as a country in regards to having the ability to make it here and sell it around the world. The more we can get our trade balance closer to even and not run these trade deficits long-term, I think that bodes well for the American worker longer-term.–Rep. Tom Reed reported in The Post-Journal by Katrina Fuller

Will tariffs or the threat of tariffs on imported goods be beneficial in the long-term as Tom Reed believes? Probably not.

The first quote suggests that the threat of tariffs on imported goods is causing trading partners to bend to America’s benefit in some cases. Perhaps this is true, but what about less favorable reaction? Tom neglects to mention that. Are “some favorable results” enough to confirm that an “America First” policy is a good idea?

The second quote asserts that tariffs may benefit American producers and workers. Again, this might be true, but any benefits would come at the expense of the American consumer. Tom brushes deceptively over that.

In his 1901 novel, The Octopus, Frank Norris tells the story of an enterprising wheat farmer. Growing wheat has become unprofitable due to excessive railroad tariffs–charges for transporting goods to market. The farmer sees that the railroad tariff for another crop, maybe it was soy, is much lower. Seeing an opportunity he plants soy.

At harvest time, the farmer checks the railroad’s tariffs again to confirm his expected profit. To his dismay, he sees that the tariff for soy has been radically increased turning his profit for that season into a loss.  The railroad’s motto is “All the traffic will bear.”

Today’s farmers face a similar dilemma. It isn’t only that foreign tariffs on their produce may cause markets to collapse and prices to fall, but also that they can’t know when they plan for the year what business conditions might be in the fall.

When we think about Tom Reed’s rosy prediction that in the long term tariffs on imported good or the threat of that will benefit all, we might ask these questions:

  1. How will growers and manufacturers make accurate business plans when markets are disrupted by governmental meddling?
  2. How is it possible for restrictive trade policy to benefit all? Where will the promised profits for agriculture and manufacturing, higher wages for workers, and benefits for consumers come from?
  3. Economists teach that free markets make the economy efficient. Republicans have long advocated free trade. Why should we believe differently now.

I was in Japan briefly in the 1970s on business. At that time American car companies complained that they couldn’t sell cars in Japan because of Japan’s tariffs. That wasn’t a vital problem though–American cars were not well suited to Japan’s roads, and they were of relatively low quality. Shortly afterwards, Japanese cars became very popular in America.

To make Tom Reed’s “make it here, sell it there” policy effective, we don’t need tariffs or threats, we need to make things here that people there want to buy.

http://www.post-journal.com/news/page-one/2018/04/reed-says-tariffs-will-pay-off-in-the-long-run/

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About whungerford

* Contributor at NewNY23rd.com where we discuss the politics, economics, and events of the New New York 23rd Congressional District (Allegany, Cattaraugus, Chautauqua, Chemung, (Eastern) Ontario, Schuyler, Seneca, Steuben,Tioga, Tompkins, and Yates Counties) Please visit and comment on whatever strikes your fancy.
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8 Responses to Tariff

  1. josephurban says:

    Tariffs are not the entire issue. The more important issue is the “America Only” philosophy that both Trump and reed embrace. By pulling out of international trade agreements the Trump administration has simply thrown away a key tool in enforcing fair trade practices.
    The Obama administration won at least 25 cases in the WTO against China and other nations, many related to dumping cheap goods, including steel, into the US.

    For example, in 2012 the US used the WTO to effectively challenge the $5,000,000,000 tariffs by China on US cars. When it became obvious that China was going to lose the case, they dropped the tariffs. The US also won WTO decisions against China for steel and chicken product disputes.

    Once the US, under Trump, left international trade agreements it effectively gave up a possible tool in ending unfair trade practices . (Under Obama not only China, but India, Argentina , Honduras, Colombia and a number of other countries. were effectively challenged by the US over unfair trade practices). When the only tool you have is a hammer, everything looks like a nail.

    Now, to use the WTO or NAFTA or TPP to enforce fair trade agreements takes intelligence, hard work and time. It is not easy. Nor does it make good headlines for your supporters. Quiet diplomacy is not sexy. But, when the US decides that international law and trade agreements are not important, it cannot expect other nations to follow those rules when trading with the US.

    While tariffs are a short term “feel good” and “I’m a tough guy” solution, it only leads to more tariffs and responses from other nations. Why would anyone with a brain think that the US can simply bully China or any other nation and not be challenged.

    We live in a highly integrated world trade system. Can’t avoid it. It is not 1618. It is 2018.

    Liked by 1 person

  2. whungerford says:

    President Trump’s incredible message is that every previous American trade negotiator was incompetent, taken in by wily foreigners, and only he can do better. Whether he is using his brain or not, I can’t say. He has sold this idea to some including Tom Reed.

    Liked by 1 person

  3. whungerford says:

    Tom Reed in 2011: “REED PRAISES BIPARTISAN PASSAGE OF FREE TRADE AGREEMENTS; Says removal of tariffs will create jobs in New York.” That was then; what’s different now?
    https://reed.house.gov/news/documentsingle.aspx?DocumentID=325

    Like

  4. Carol says:

    It is always interesting to see how Reed flip-flops on various issues over the years.

    Liked by 1 person

  5. whungerford says:

    Yes it is. In my opinion, Tom Reed has no principle other than whatever GOP misleaders want at the time.

    Liked by 1 person

  6. whungerford says:

    more flip-flops: “Trump directs top economic advisers to look at re-entering TPP”

    Liked by 1 person

  7. josephurban says:

    Re-entering the TPP would be a good first step. It would give the US some leverage in enforcing trade policies. But, who knows. That could change tomorrow.

    Liked by 1 person

  8. whungerford says:

    It may be that the TPP countries are no longer receptive to US participation with Trump’s conditions.

    Liked by 1 person

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