The Largest US Trading Partners All Put Higher Tariffs on the US Than Vice Versa

Australian dairy exporters have been suffering from this because a traditional export market (SE Asia) has been flooded with cheap (subsidized) dairy products from the EU (particularly Italy IIRC). This typically gets labelled "dumping".

Now market forces (and since subsidies are in play it's not really market forces) will otherwise kill the local industry. When those producers are gone and a change of government ends the dumping those producers don't magically reappear. It takes time.

This sort of thing is why so often self-sufficiency and key industries are touted as being in the national interest.

Making them is pretty low tech, there's a team of people that design machines, robots, and human processes to manufacture the parts. That would be high tech but it's not that many jobs, and many of those jobs were already here. Then, there's a few people to get the stuff the robots can't do, and a couple guys to grease the robots, and a couple guys to maintain the conveyors and such. None of those are really high tech jobs. The senior machinery tech and the senior robotics guy and a sysadmin may be 'high tech' but most of the work, even working with the robots, is swaping parts, lubing and calibrating. And that, while it pays more than the floor workers, is still far below what we would think of as a high tech salary.

Laymen have basically been saying this for years while being ignored by the ruling elites but economists have been slowly starting to get on board.

Even post Trump I suspect that the global attitude toward free trade will become much more nuanced than it had been over the past 20+ years.

We're told that finally a master negotiator is at the helm and that he will renegotiate trade deals that leave the US at a disadvantage.

One data point that offers evidence counter to that view is the president's vocal opposition to NAFTA, a deal that resulted in a large (mostly) free trade zone and lower tariffs on US goods than on those from the other participants.

I think the most likely explanation is that the tariffs are viewed as a way for the executive branch to unilaterally redistribute wealth to key swing states that have been hit hard by globalization.

If your speculation is true, then the administration must believe not just that escalating tariffs will move trade negotiations to the brink and will allow the US to negotiate freer trade... but it must also believe that the negotiated freer trade will be economically significant nationally AND to the swing state areas hit hard by globalization.

It is my understanding that if the above is true about the administration's beliefs, that the numbers quite obviously do not add up.

So while the US would certainly be better off with freer trade, the economic cost of tariffs is not enough to move the needle economically in a significant way (per an analysis done by Reason magazine). This directly contradicts the claims made by the administration.

So unless there is a deep factual discrepancy between the analysis conducted by Reason magazine and the analysis the administration is doing, the tariffs seem intended mainly as a tactic to rally key groups of voters, and there appears to actually be no broader strategic significance or possible negotiated outcome that would achieve the goals the administration claims will be possible via the tariff escalation.

That said, the tariffs are probably a smart way to try to win a few elections. They allow the public to view other nations as adversaries and to rally behind the US "winning" over other nations. They also prop up the fiction that trading partners are in fact adversaries rather than cooperators. Such adversarial rhetoric is obviously a useful political tool.

So since this kind of us vs them, zero-sum rhetoric has been such a key element of the administration's message, I find it unlikely that it would ever seem desirable to remove the tariffs and to reframe the US relationship with other nations as constructive rather than as adversarial. Why give up such a useful enmity if it's working politically?

My concern is that the tariffs will cause unexpected and sudden economic harm, which could quite suddenly cause a lot of the players to lose their perspective and actually begin to act adversarially.

FWIW tariffs also reduce trade cooperation between nations and reduce the disincentive for armed conflict.

International trade theory's core concepts are structured as a n-player game, with n being the number of nations. That is to say, a nation has a fixed amount of resources. If a domestic policy is chosen to optimize for the production of cheap microchips (because you can't produce under-cost for a significant period of time), you are impacting the production of other goods.

When a nation optimizes for the production of a good it can produce advantageously (see: comparative advantage), the world benefits (As you make less of the goods you produce less efficiently). Sure, individual members within the nation may receive subsidies or subsidize others, but that's a domestic issue.

It's difficult to explain this in the level of detail that it warrants to the layman, because the underlying theory is built upon a substantial chunk of underlying economic theory. The biggest issue with Econ is that it's simply unintuitive, and that it takes a lot of effort to switch your mindset.

It has no relationship with the health of the economy whatsoever. Firms within an economy have their choice of whether to import inputs from domestic providers or foreign providers, and they choose the option that offers the best value.

Let's use the example of a company that is considering opening a 50K square foot call center for customer service. The company will decide whether it makes sense to open that call center in an expensive place like downtown San Francisco, but it may also consider opening it in a place that would be more affordable.

If you focus only on the call center workers in downtown San Francisco, it will look like perhaps a tariff should be created by the city of SF to prevent firms from opening call centers in Iowa. After all, where will those call center workers find jobs?

But think about the rest of the firm. Maybe with the money it saves by opening the call center in Iowa, it can open an R&D office in downtown SF instead. Maybe in a few years the R&D pays off and now the firm can hire 1000 more workers in SF for other jobs.

But if we rewind and consider the situation with tariffs. The firm still decides to open the call center in Iowa but now must pay a tariff, which reduces the profitability of the decision. Now it can't afford to open the R&D office and ends up a few years later going out of business.

Or, suppose that the tariff is high enough that the firm does open the call center in SF. Due to the costs there is still no money to open the R&D office and so the company still fails.

The counter-intuitive thing about economics is reasoning about counter-factual scenarios... all the things that might have happened if things had gone differently.

In the above example, SF loses the higher skilled R&D jobs due to the tariff and also loses the 1000 new jobs a few years later. But it's easy to ignore those since they are counter-factual. The politicians can point to the SF call center employees and say "See, the tariffs got these people jobs, look how we're helping the economy!"

But the truth is quite the opposite, the tariff prevented the company from having the capital to invest in R&D, cost the Iowa call center jobs AND the SF R&D jobs AND the 1000 other jobs that would have happened due to growth.

In a nutshell, the mindset that makes people think tariffs are a good idea is anchored on the idea that the economy is static and that someone is winning only at the expense of someone else losing. In the tariff supporter scenario, Iowa would have "won" if SF had not instituted those tariffs to keep the jobs at home.

I use SF and Iowa as an example here just to make the concept more simple and to remove the confounding ideology of nations being adversarial to one another. Trade makes otherwise adversarial nations into partners and allies, so you could substitute SF and Iowa for the US and Canada respectively.

I'm not sure, however, how you can say that working in a steel mill that would not be in business if it weren't for tariffs on imported steel comes with any dignity. Sure there is the dignity of showing up for a job and doing good work, but ultimately that job is being funded by welfare, and is itself a handout being received by the worker.

The economy is a rapidly changing thing, and there is no reason to believe that any industry that is thriving today will still be thriving in a decade.

But rather than undertake the worthy and challenging task of positioning our economy (via job training, entrepreneurship, etc.) to be resilient to change, we prop up industries that are much more efficiently done elsewhere.

Consider how this would have played out in the early days of the automobile. Soon most of the blacksmiths who had been gainfully employed putting shoes on horses would find themselves out of work because people started preferring motorized cars to horse-drawn transit.

By your logic, we should have idealized that horse-drawn era and should have put policies in place to guarantee that all of those blacksmiths were able to continue the dignity of their trade even though their skills were demanded much less.

While there is something nostalgic about the days of horses and pre-industrial society, most of the important humanitarian (moral, etc) advances that have been made since then have been due to the proceeds of the improved economic output of an industrialized economy.

What happened to those blacksmiths? Some probably ended up out of work and had to struggle to survive, while others likely transitioned their skills doing metalwork in the industrial sector.

All humans have value as humans and I believe that the vast majority have strong work ethic and a desire to support themselves and their family through work and discipline.

Nonetheless, as the economy changes rapidly, we find that we (industrialized nations) have lagged significantly when it comes to our educational system. Our modern schools still do many things the same way they were done in a one room schoolhouse.

There are many reasons why this happened -- I'd argue that the biggest one was the state takeover of education during the industrial era to free up more workers by providing free daycare (not education). So the root cause of worker displacement is connected with industrialization, but it is due to state monopoly power and the destruction of liberal educational ideals in favor of daycare and rudimentary skills training. In other words, we should not teach people a trade we should teach them how to learn for themselves.

Our educational system today is still very trade oriented, and that creates calcification in the economy and is ultimately a grave threat to national security.

But politicians will of course prefer to prop up dying factories in dead industries in exchange for primary votes rather than tackling the much harder problem of figuring out how first world education should work in 2018.

If Mr. Widget isn't competitive at $100 vs. imports sold at $90, and you add a tariff of $10 so its "competitive", suddenly Mr. Widget's sales will increase. The other country, knowing their widgets aren't competitive (except $$ wise) then tariffs something like solar panels to protect a nascent solar panels industry.

Tariffs are a form of welfare for domestic corporations. Creating a new Mr. Widget on the assumption that tariffs will remain the same is an expensive gamble you take only if you are sure your widgets are better than Mr. Widget's widgets.

Subsidized loans (i.e. "The Bank of Boeing") are another example of welfare for domestic corporations.

The administration has also set aside $12 billion to relieve farmers hurt by the tariffs. [1] This money could come from the money generated by the tariffs, making it look more like a handout.

[1] https://www.npr.org/2018/07/24/631953880/trump-administratio...

A tariff on "cheap shit from Amazon" is a heavily regressive tax, and acts to reduce total delivered value. Whereas taxing the well-off to pay for education and encourage investment increases total delivered value.