It's Almost As If Trump Doesn't Know How Tariffs Work

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Economist said:
A complex situation does not always have a simple explanation. The fact that other countries also used the same incorrect practice does not make it correct. And I only talked about the detrimental effect of tariffs, which is undeniable.
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You didn’t answer the question. To cite an example, you just implied that the US tariff policy of 1789-1914 was incorrect. If the US of that era had embraced free trade as you advocate, how quickly would they have lost their previously tariff-protected edges to countries that took mercantilist advantage of them?

Thing to remember is that free trade only works if both sides agree to trade freely. Something the Chinese have clearly not done. When only one side practices free trade, there is no fairness present and the free trader is getting stiffed. That free trade by both sides scenario is pretty much nonexistent in today’s world and has been for most of our modern history. So a country like the US that engages in it gets taken advantage of. When a country like China that is doing the taking advantage refuses to play fair, then the only correct course of action is to make them feel the pain of what they’re doing to us. Now that Trump is attempting to level the playing field, they’re screaming at the idea they might have to play fair. Which has never been in their playbook.
 
Zzyzx_Road said:
When only one side practices free trade, there is no fairness present and the free trader is getting stiffed.
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No, everyone gets “stiffed”. When there is a tariff war, then both sides lose.

Here is the analysis: country “A” declares a tariff war against country “B” concerning product “C”. The price of product “C” imported from country “B” rises, thus forcing the importers in country “A” to pay more for the wares of country “B”. Clearly the importers are “stiffed”. But the importers are not stupid, and they raise the price of product “C”. Who loses? The consumers of country “A”! They are the ones who get “stiffed”.

Now the tariff might be used to protect the non-competitive producers of product “C” in country “A”. Without the tariff, they would have been forced to either become more competitive - by introducing better technology - or change and start to produce a different product. Everyone wins.

To protect a non-competitive industry at the expense of a competitive one is bad economics and also bad politics. Again, the problem is the lack of knowledge of economics. Not just on the part of the politicians, but the general public.

Trump introduced a “retaliatory” tariff and raised the prices of soybeans (among others). The Chinese don’t buy the produce, but Trump will “reimburse” the farmers by taking money from the competitive industries, thereby decreasing the profit there. Everyone loses. Trump “stiffs” the farmers, and to hide this fact he now “stiffs” the rest of us. And people don’t understand how bad it is for them.

There is a good principle: “idiots deserve what comes to them”. The real sadness is that in our great country we are unable to find some people who understand basic, elementary economics. Of course there are some, but they are busy cutting hair, running a restaurant, or balancing the family budget. But that is a different discussion.
 
Economist said:
Here is the analysis: country “A” declares a tariff war against country “B” concerning product “C”. The price of product “C” imported from country “B” rises, thus forcing the importers in country “A” to pay more for the wares of country “B”. Clearly the importers are “stiffed”. But the importers are not stupid, and they raise the price of product “C”. Who loses? The consumers of country “A”! They are the ones who get “stiffed”.
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That’s an overly simplistic analysis, that doesn’t reflect the real world.

First, it’s rarely just about product “C”. As with China, there is often protest about other systemic trade practices and regulations that close markets to a wide range of goods and aid in the theft of IP.

Second, importers are much smarter than you give them credit for. While they may raise the price on goods from country “B”, they will also cancel orders and source from countries “E”, “F”, “G” etc. You probably didn’t know this but any product of importance is dual and triple sourced, from different suppliers and different countries. It’s a necessary insurance policy that aids in price negotiations and provides protection against supply disruptions.

The net result is the producers of product “C” in country “B” very quickly see a downturn in export orders while the consumers in country “A” see little if any impact in their supply or on pricing.

In short order, country “B” does feel the pressure and becomes more reasonable to fair negotiations.

I did business in China for many years and we’ve allowed their unfair and abusive trade practices to continue far too long. It’s about time they were forced to level the playing field, respect IP rights, and relax their stranglehold on treatment of foreign investors. They are no longer an emerging market that need such special considerations.
 
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IP theft is definitely not free trade. Forced technology transfer is not free trade. These are two major factors that I don’t see tariff opponents addressing.
 
Trade does not necessarily flow away from “noncompetitive” producers. Truly free trade is a race to the bottom, particularly in labor-intensive industries. All other things being equal, the country that pays its workers the least wins the game. And if they produce by slave labor, their win is even bigger.

And some nations end up being the sellers of natural resources only because they never develop the ability to compete in the same way others do, even internally. Russia has, for example, been jokingly referred to as a “gas station masquerading as a country”. Have you ever seen monkey wrenches stamped “Made in Russia” at Walmart or Lowe’s? If Russia didn’t have foreign currency from oil sales with which to buy foreign products, it would collapse. Russia probably would benefit from high tariffs in order to give its industry a chance to develop. But in a kleptocracy, one has to grab quickly at short term goals.

Some nations protect their agricultural sector by tariffs. The EU and Japan both do that. The U.S., on the other hand, subsidizes agricultural production in some things.

Some trade agreements are political, in whole or in part. Granting China “most favored nation” status years ago was political, to accomplish two objectives; one international and one in this country.

Soybean prices are pretty close to a historic level they have been at frequently. Last year’s crop was a big crop, relatively speaking, and a lot of beans are in storage. They’re a fungible good, like oil. Once they’re on a ship, their origin disappears, and China can’t tell an American soybean from a Brazilian soybean. The world market just isn’t all that good at present.

But regardless, there’s no future for the U.S. economy or any other, in being primarily a seller of natural resources. Agricultural commodities are a “natural resource” just like coal or oil.
 
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Economist said:
Is it incorrect? That is the question.
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I detailed why it was inaccurate in the rest of my post

But since you ignored the remainder of my post, I can only assume you are deflecting and not here to discuss the issues.

Try again, and respond to the points I made.
 
There is no justification for IP theft. But to be fair this is more widespread than just China. How many Americans computer users alone have not pirated software of some type? Or haven’t zeroxed copyrighted material without permission?

Among other things.
 
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ProVobis said:
There is no justification for IP theft. But to be fair this is more widespread than just China. How many Americans computer users alone have not pirated software of some type? Or haven’t zeroxed copyrighted material without permission?
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That’s not the sort of IP theft we are worried about with China, you are describing pirating.
 
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