The Case Against Trade Tariffs

Reply Mon 23 Jul, 2018 11:53 am
A lot of current events get wrapped up under the Trump thread, so I thought I'd try to pull some out for separate discussion.

I'm not an economist, but I understand the basics behind why free trade benefits the US and its citizens and have been a proponent of free trade on A2K for years including supporting the TPP when that was unpopular. The trade tariffs recently imposed on steel and aluminum are already hurting businesses in the US and driving up costs for everyone. If more tariffs are added, the impact will get significantly worse. We are already seeing manufacturing growth stalling in the US and some cases of work moving overseas.

The reality in the US is that manufacturing jobs have been increasing steadily since the great recession. Prior to the tariffs, the US has been a good place for a manufacturing startup or expansion and the US has been rebuilding its supply chains after years of job losses. These tariffs put all that at risk while also risking industries were the US has been the world leader for years.

I was listening to an interview with small business owners this morning and the impact on the agricultural sector in the US is already very large. Farmers can't afford to expand because they can't afford rising prices while their customer base is drying up. Wheat sales are down 20% this year. China has stopped buying US soybeans, a significant hit since 2/3 of US soybean exports were to China. Prices for pork, wheat and soybeans in the US are crashing while prices in Australia and Brazil are rising. More profit for those countries, less for US farmers.

Not only are US manufacturers and growers facing rising costs and lower demand compared to their international competitors, US consumers are facing rising prices. Already some prices are going up, but there's lots worse to come. If the proposed auto tariffs are implemented, the auto industry estimates that foreign manufactured cars will go up by on average $6,000 while domestic cars will go up by $2000. That means a lot of people aren't going to buy new cars. That's just supply and demand - and job losses for Americans. For businesses trying to stay in business, the solution is very straight forward - move manufacturing overseas. For overseas customers, their solution is also simple - find someone outside the US to buy from. Those lost jobs and customers are not going to come back when all this is resolved.
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Reply Mon 23 Jul, 2018 05:02 pm
Some of the targets for our current tariffs are confusing as well. We don't have a trade problem with the EU or Mexico. We have a few trade spats with Canada, mainly over protectionism over their agricultural products, but those were agreed to in the past and can be negotiated on in the future. On China, we are on firm ground complaining about their trade policies, but even there, by imposing sanctions unilaterally, we become the international bad guys instead of them.
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Reply Mon 23 Jul, 2018 08:48 pm
I'm in favor of free trade as well. I wish that Obama had been able to get the TTP passed into law before he left office.
Reply Tue 24 Jul, 2018 06:26 am
It's amazing all the work that went into the TPP and the benefits that all the other countries are getting that the US just threw away.
Reply Tue 24 Jul, 2018 07:35 pm
I continue to hope that a future US government will still join TPP.
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