New US Tariffs are Anti-Maker and Will Encourage Offshoring

"The fact is that there is a strong feeling in the developing world that trade rules do not apply equally. Indeed, Washington lost the moral high ground earlier this year when it slapped steep tariffs on steel imports and locked in subsidies for its farmers. As well, the US has in place a sophisticated regime of non-tariff barriers such as anti-dumping laws that exporters from developing countries have found difficult, if not downright impossible, to circumvent. "

(The "non-tariff barriers" are important - all kinds of environmental and safety standards could be considered as these, and they can be far more difficult to deal with than simply paying an import duty. This is another thing a lot of Brexiteers haven't realised)

It's not a question of 'fairness', it's a question of what will actually improve our economy. Nothing out there suggests tariffs will do that; in fact, all data points to just the opposite.

But you've basically ignored the OP in any case; do you have a response to the rather realistic and obvious projection that, given the nature of these, assembly jobs will move out of the US, since the fully assembled goods are not subject to tariffs, but the parts are?

You do know the US is already heavily protectionist and many tariffs are protections against the US's price dumping due to its heavy subsidies, right?

And that the US already has plenty of tariffs to boot?

Intellectual property rights/copyright laws, both linchpins of US policy, are the very definition of government intervention.

The US aerospace and manufacturing industry is overwhelmingly subsidized by the military complex, a lot of it done under the auspices of "national security". For the US to complain about Airbus or Bombardier is simply incredible.

US agriculture is outrageously subsidized. I'll go into a specific example in a moment, but the notion that that the US is trying to play fair is simply incredible.

The US loses at the US-created WTO time and time again (see: Canadian softwood) and simply ignores the rulings.

"but when your "allies" have had non reciprocal tariffs"

I don't know what example you're thinking of, but let's consider the case of Canada (a country that the US has a trade surplus with). Canada has supply management for dairy to ensure a supply that matches demand to ensure food security. To protect this, Canada applies a high tariff for imports above the quota.

"So unfair to US farmers!" yells Trump.

Only here's the problem with his ignorant, easily swayed vision.

Canada exports less dairy to the US than vice versa. Like, 1/2 as much. The whole point of supply management is that it doesn't generate an excess, and for that small industry the exports and imports are generally only for very specialized things.

US dairy, in contrast, is hugely subsidized. To the tune of 74% of US dairy income comes, directly and indirectly, from the US government (0% in Canada comes from the government). Hence US farmers grossly overproduce and then look to dump it elsewhere, destroying production elsewhere. Just as US corn production is essentially a government enterprise, flooding the world with corn by-products and HFCSs.

Who is the villain here? Trump can rattle off some scary number to his clueless fans (I'd steer clear of the pejoratives, but given that Trump is a lifetime grifter and con man, whose virtually every statement is an outrageous lie, it is incredible that someone can be called his fan), but Canada has nothing at all, whatsoever, to do with those poor American farmers. It certainly isn't Canadian milk on American shelves causing their ills, because Canadian milk isn't on their shelves.

Nor did China cause the US poor to live in such dire straights. This is just the latest example of the US becoming more and more polarized, while convincing the poorest that it's always some external reason why they live in destitution in the richest nation on Earth.

Every country involved has industries which won't allow this. For example, all the countries in the G8 have agricultural sectors which will not allow elimination of trade barriers.

So, even if you want "free trade," you start with each country's list of stuff where there is not going to be free trade, and move forward from there.

For example US farm subsidies are significant and supply management is common in many areas, but the rhetoric around Canadian dairy supply management recently has been amplified far beyond even it's wildest possible impact. And this with a country with extraordinarily balanced trade, if anything probably a deficit. The history of trade between the two countries is littered with spats about US protecting this, Canada protecting that, but on the whole very balanced. Pretending otherwise may make for good politics (i guess that remains to be seen) but it isn't based on evidence or good policy work.

The only time the president mentioned lower tariffs was an offhand comment at the G7. All of his other positions imply he disagrees with you and thinks trade is bad.

Which sane person would make such an investment?

I'd not heard that argument at all so far.

In other words you think that subsidies and senseless bureaucratic obstacles are better than tariffs?

The OP is not saying that tariffs are a good thing, he's saying that tariffs are so obviously bad & stupid that they're easier to get rid of and negotiate away. Subsidies and senseless bureaucratic obstacles are just as damaging as tariffs but they are harder to get rid of.

And I am not against free trade (well, with reservations), but I think this idea has been proven wrong historically. I think countries that try to do a bit of everything, be self-sufficient, and perhaps specialize only in some very specific areas are generally more successful.

Just look at the U.S. as an example - if they followed Smith's advice, they would still continue to trade cotton. This advice will never let countries to build up an industrial base. (Or funny you mentioned LG - they were originally a textile corporation but the government forced them into electric industry.)

In my view, a country should have as many diverse industries as much it can keep all the specialists busy (the same is true for companies, by the way). That means to try to produce locally everything that is sufficiently consumed locally.

The reason why is that there are strong network effects in diversification. It's great if you e.g. produce agricultural machinery and you can talk directly to the farmer, who is going to use it. If you sell this machinery to people on the other side of the planet, with a cultural barrier, this gets much trickier.

I don't have strong opinions about trade barriers, but I generally fall on the "no barriers" side.

That said, implementation matters. Badly implemented barrier reduction policies will be worse than well implemented barrier raising policies. Policies are like everything else, in this respect. We just get more list in the high falutin debate more often, when it comes to politics.

I'm arguing that if trade barriers are going up, tariffs are the better implementation.

yes. the consumers are the losers.

OTOH, the US is now in a position to question and modify the consumer-centric policies the US has embraced for decades.

the US is beginning a real-life experimental modification of the policy of prioritizing low consumer prices over other things.

this will have upsides and downsides.

> In a functioning market, local suppliers are likely to raise prices in response to the tariffs, as they face less competition.

Is that entirely bad? The whole "US Made!" tagline of old stopped becoming possible because we couldn't charge wages low enough to compete with foreign dollars or foreign slave wages. Raising the cost of X item so that it is actually able to be produced locally would seem to, conceptually, bring that type of job "back".

With that said, there's the obvious opposite of now every item US made is meaningfully more expensive. Seeing as so much of what we buy is made offshore, this seems to effectively raise the cost of living.

So, I don't really have any answers.. but hey, I don't work in economics :)

What I'm arguing is that there are always winners and losers to trade barriers. Tariffs make it easy to understand and quantify this, because they are explicit and straightforward. They're flexible and leave less legacy or mess. It's always clear what they are trying to achieve, and how.

This is not an argument for trade barriers, it's an argument for how trade barriers should be implemented if they are implemented.

"U.S. consumers are willing to pay more for “Made in America” goods, according to a recent nationwide survey"

https://morningconsult.com/2017/11/21/poll-support-for-purch...

2.) tariffs encourage reshoring and new robotics/automation factories, which is still net jobs for US. which also makes prices back to where it was before tariffs (maybe even less)

"171,000 JOBS COME HOME TO USA IN 2017" http://yonkerstimes.com/171000-jobs-come-home-to-usa-in-2017...

3.) in a perfectly competitive market, price always goes to equilibrium. which would discount tariffs

If the US were primarily harming itself with tariffs, other nations wouldn't be reacting the way they are. They all know the game is up and they're all desperately looking to hold onto their advantages.

US manufacturing costs are nearly on par with China at this point because of the vast inflation in costs that have occurred in China over the last 20 years, including in wages. That's particularly the case when you account for the cost of foreign transport/distribution.

Chinese manufacturing will only get more expensive over the coming decade, increasing US price competitiveness (whereas there was previously a vast gap between the two, eg just as recently as 2005).

It's ideal to begin competing with China using the same tactics they've been using to compete with everyone else for decades. China is no longer a tiny developing economy, they're an economic superpower and still rapidly expanding.

The US should spur domestic manufacturing, by increasing the cost of Chinese products. Over time, the net benefit will be to increase domestic manufacturing and reduce Chinese imports.

Worst case scenario, the US redirects trade to other developing nations, such as Vietnam, and away from China. That's also a dramatic benefit to the US, as Vietnam can never be a superpower rival.

However, we don't seem to talk about tariffs the same way we talk about other taxes. Trade policies are considered good if they're good for the economy and bad if they're bad for the economy. The revenue aspects tend to get swept under the rug.

I wonder if this is just an example of successful marketing by large corporations (who are the ones who bear most of the cost of tariffs and trade barriers); that they've managed to get people who are otherwise fine with taxing corporations to be opposed to taxes when trade is involved.

That said, I agree with Bunnie that imposing tariffs on components but not finished goods is dumb, and will hurt hobbyists and companies that assemble electronics in the United States.

So it may have been good policy back when America was a fledgling economy being exploited by the Brits.

Our blue collar jobs have stagnated since we’ve been off-shoring manufacturing to China.

The poor in the US were getting poorer. Not everyone has the ability to transition into a thinking job and we need a balanced economy for these people.

Can’t we simply find all the tariff data and examine it, with any necessary context like amount in dollars traded?

I’d rather start with the numbers than an emotional appeal like you have given.

The US is throwing its weight around for the first time since Reagan. Last time it worked out pretty well.

Things have changed a lot since then with the rise of China and the EU.

With the new big players in the world it’s time the US put on its big boy pants and renegotiated its place.

If you’re going to negotiate, you don’t play all your cards at once.

I don’t think the end state of the negotiations is protectionist tariffs for the US, it’s to get China to drop their protectionist tariffs. If we reach that end goal, how is that a bad thing?

The US makes most profit via services but is still #2 in manufacturing via the advanced end and remained #1 for a while even during their rise. Given the sheer effort and scale involved by China and it cannibalizing world markets to so that is still very impressive. It brings to mind the US agricultural sector - it is at the top and it is still a tiny portion of the GDP. The top end strategy pays economically.

Ultimately consensus is only useful if all participants are willing to take the same action together. That is powerful.

But consensus that says “hey, China, you should have better dealings with us” but then none of the participants have the backbone to do anything, then there is no power and the concensus is worthless.

They are of course at war with the media. What I don't understand is when educated people started to side with the war mongering media. The only time they were favourable was when he attacked syria.

Asked no serious manufacturer ever: "Gee, should I use this minor setback as an excuse to shut my entire operation down or slightly adjust my prices?"

New suppliers may spring up, or existing suppliers may change locales. The economic system is like a stream and tariffs are like a boulder. It'll flow around, under, and over. Sucks if you are splat upon the boulder, though.