Wednesday , October 21 2020
Home / Mish's Global Economic / How Successful Were Trump’s Tariffs?

How Successful Were Trump’s Tariffs?

Summary:
How Successful Were' Trump's Tariffs?Please consider Did Trump’s tariffs benefit American workers and national security?Job Creation Key PointsTrump’s tariffs have helped some workers and hurt others. Nothing is particularly surprising about this; trade policy almost always has important distributive effects, and any change in trade policy is a choice to benefit some groups at the expense of others.Overall, when economists have attempted to add up the net effect of Trump’s tariffs on jobs, any gains in importing-competing sectors appear to have been more than offset by losses in industries that use imported inputs and face retaliation on their foreign exports. Even those jobs that have been created have come at great cost: studies suggest American consumers paid about 7,000 in higher

Topics:
Mike Shedlock considers the following as important:

This could be interesting, too:

Mike Shedlock writes Senate Votes Postponed for Two Weeks: What are the Implications?

Mike Shedlock writes Doctors Question Trump’s Experimental Covid Treatment and Dosage

Mike Shedlock writes Job Recovery Slows and Headwinds Mount for October

Mike Shedlock writes The Airlines, Allstate, and Shell Announce Mass Layoffs

How Successful Were' Trump's Tariffs?

Please consider Did Trump’s tariffs benefit American workers and national security?

Job Creation Key Points

Trump’s tariffs have helped some workers and hurt others. Nothing is particularly surprising about this; trade policy almost always has important distributive effects, and any change in trade policy is a choice to benefit some groups at the expense of others.

Overall, when economists have attempted to add up the net effect of Trump’s tariffs on jobs, any gains in importing-competing sectors appear to have been more than offset by losses in industries that use imported inputs and face retaliation on their foreign exports.

Even those jobs that have been created have come at great cost: studies suggest American consumers paid about $817,000 in higher prices attributable to the tariffs for every job created in the washing machine industry and $900,000 in the steel industry. While policy interventions to support manufacturing jobs may be warranted, there are cheaper ways to do so.

Negotiation Leverage Key Points

When we look in closer detail at the outcome of these negotiations [USMCA and China], the threat of tariffs does not appear to have brought substantial gains to the U.S. 

The USMCA is, in general, very similar to NAFTA. And the Phase One trade deal consisted mostly of basic purchase agreements—which, due in part to the COVID-19 shutdown, are extremely unlikely to be attained—while punting the trickier, but more important, structural questions to a hypothetical Phase Two deal (which at this point seems unlikely to ever occur).

Tariffs may get other countries’ attention, but don’t necessarily lead them to make substantial concessions to U.S. demands. Trump’s eagerness to resort to tariffs, including in relations with close allies, has made the U.S. a less desirable trade partner for other countries.

Improve Security

The Trump administration imposed tariffs on steel and aluminum imports on the basis of national security reviews (known as Section 232 investigations), and threatened to do so for automobiles, uranium, and titanium. 

Evaluating the impact of trade policy on national security is difficult. The national security case for tariffs on steel and aluminum is even murkier: while there may be a case for ensuring domestic production capacity for these commodities, it isn’t clear tariffs are the best instrument (or that they even achieve this goal).

These tariffs antagonized many of America’s closest security partners, particularly Canada, which undermined efforts to cultivate a broader multilateral alliance to challenge China. Moreover, the Trump administration’s frequent recourses to national security on flimsy grounds will make it more difficult for the U.S. to push back when other countries cloak protectionism in tenuous appeals to national security.

Summation

  • Job Creation: On average, Trump's tariffs destroyed jobs. But there were some winners and losers notably steel. The cost of the "winners" was $800,000 to $900,000 per job created. More jobs were lost elsewhere.
  • Negotiation Leverage: Nonexistent. Trump resorts to threats so often on the flimsiest of grounds creates mistrust.
  • Improve Security: No. Antagonizing allies never improves security. 

And a key point the article missed is that Trump was willing to trade away security concerns for the flimsiest of things. 

For example, Trump labeled Huawei 5G technology a security threat. Then he made a deal with China if they would buy more soybeans.

Either this is outright crazy or Huawei was not really a security threat.

If Biden Wins

If Joe Biden wins, he will likely seek to reverse some of Trump’s more protectionist pushes. In particular, Biden will seek to repair trade relations with allies in North America and Europe, and to work through established channels such as the World Trade Organization (WTO). Yet he appears unlikely to simply return to the trade paradigm of the Clinton, George W. Bush, and Obama administrations. Several Democratic trade policy advisors have argued that Biden should break with earlier, more pro-corporate approaches to trade. For example, Biden’s trade policy would likely have greater emphasis on labor and environmental concerns than in previous administrations. Biden has promised his administration “won’t enter into any new trade agreements until we’ve made major investments here at home, in our workers and our communities” and advocated for a strong Buy American procurement policy. He has sharply criticized Trump’s tariffs on China, but it’s not clear if his administration would maintain them or not. Either way, a Biden administration would almost certainly adopt a more confrontational trade policy with China than Clinton, Bush, and Obama did.

If Trump Wins

Over the course of the last three and a half years many of the advisors and officials who restrained Trump’s protectionism have left office, tilting the balance in favor of bolder, more radical policy options. This dynamic would likely extend during a second term, which suggests the Trump administration might be more likely to follow through on some of his more extreme ideas. These include withdrawing from the WTO (though to be sure, this idea would still face strong resistance) and provoking further trade fights with allies such as Europe, Canada, Mexico, and Japan. In a second term, the guardrails that kept Trump’s trade policies from deviating too far from established approaches would further erode, opening the door to more radical changes.

Three Failures vs the Unknown

Trump miserably failed on all three of his stated goals. 

Biden rates to do better, but so would a rock.

Mish

Mike Shedlock
Mike Shedlock (Mish) is a registered investment advisor representative for SitkaPacific Capital Management (http://www.sitkapacific.com/). Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction.

Leave a Reply

Your email address will not be published. Required fields are marked *