Thursday, March 08, 2018

Trump's Tariffs: Good, Bad, or Ugly?

By Douglas V. Gibbs
Author, Speaker, Instructor, Radio Host

The typically average historian, Keynesian economist, globalist, establishment type, or public school graduate will tell you that the cause of the Great Depression in 1929 was Smoot-Hawley, an act sponsored by Senator Reed Smoot and Representative Willis C. Hawley and signed into law on June 17, 1930 (an act that raised U.S. tariffs on over 20,000 imported goods to record levels).  These are the same people freaking out every time Trump mentions the word "tariff," especially lately, since he has been threatening a tariff on steel and aluminum.

The experts have proclaimed that Trump's Tariffs will cause a trade war, and ultimately another Great Depression.

The "trade war" was not the cause of the Great Depression.  The culprit was the entity that was manipulating our currency, the Federal Reserve - who, by the way, were also the same international bankers who were simultaneously manipulating other currencies around the world, as well.  They wanted a collapse, and they got one.

That said, I understand the fears emerging over Trump's talk about tariffs.  Like anything else in life, if the game of tariffs reaches beyond moderate levels, it could stir some difficulties.  Moderation is the key.

Trump's latest call for tariffs has all of the experts nervous.

Foreign Policy has proclaimed that the immediate blowback is the least of our worries with Trump's Tariffs.

President Donald Trump's announcement that he is planning on imposing steep tariffs on imported steel and aluminum has sparked outrage around the world.  Republican Congress Critters are freaking out over it.  There is a fear that the looming trade war would create massive job losses across the rest of the U.S. economy.

Trump said he plans to impose remedies proposed by the Commerce Department, which includes a 25 percent tariff on steel imports and 10 percent on aluminum. The recommendations came after the department found that the underperforming U.S. steel and aluminum sector posed a threat to national security. Tariffs also would fulfill yet another Trump campaign promise.

The fearmongerers claim the decision is a protectionist trade policy that will be disastrous.  They claim the move will make manufactured products more expensive for all Americans, and it could lead to big job losses.

The details have not been drafted, yet, but will likely target the European Union and China.

China promised to take measures to protect their own interests.

The globalists in Europe promised quick European action to punish U.S. exports in response.

Canada, one of the biggest sources of steel for the United States and one of the biggest buyers of American steel, also reacted angrily. Foreign Minister Chrystia Freeland said tariffs on Canadian steel and aluminium would be “absolutely unacceptable.” She added: “Should restrictions be imposed on Canadian steel and aluminum products, Canada will take responsive measures to defend its trade interests and workers.”

Trump's Republican Congress was also critical.

“Let’s be clear: The president is proposing a massive tax increase on American families,” said Sen. Ben Sasse (R-Neb.). “You’d expect a policy this bad from a leftist administration, not a supposedly Republican one.”

"We tried it a bunch of times over the last two centuries," Sasse also said. "Every time, American families have suffered. It is bad policy . . . His regulatory reform agenda has been great. This trade policy will be disastrous."

The Heritage Foundation laid out three reasons the tariffs could be bad for American workers.

1.  Steel-using industries employ 17 million Americans in sectors ranging from automotive manufacturing to construction. An increase in the price of imported steel and aluminum would put these jobs at risk. This already happened in the recent past. Steel tariffs imposed in 2002 cost 200,000 hardworking Americans their jobs.

2. Trade restrictions, by their nature, result in price increases for the goods in question. If the price of steel and aluminum goes up, manufacturers will be forced to pass those costs onto American consumers.

3.  In 2002, the United States faced threats of retaliatory tariffs from major trading partners. Oftentimes, agriculture products are the first target, and in the past, the European Union targeted Florida orange juice. Canada has already threatened retaliation should the U.S. move forward. Tariffs on U.S. exports in retaliation, in the agriculture sector for example, could lead to lower sales abroad for U.S. businesses, putting the jobs of additional American workers at risk.

The Heritage Foundation also made some recommendations, stating that the President should exercise extreme caution when considering tariffs and follow these four guidelines:

1.  Refrain from imposing tariffs in response to heavy-handed political lobbying. Section 201 and 232 tariffs should not be used to reward businesses that spend resources on lobbying and lawyers rather than on improving business practices and products.

2.  Consider the consequences for other domestic industries and producers. In deciding cases, the government must take into account both the benefits for one firm or sector and the potential negative consequences elsewhere in the domestic economy. The 200,000 jobs lost in the U.S. in steel-using industries after President George W. Bush imposed steel tariffs in 2002 are a dramatic example of the unintended harm that can follow the imposition of trade restrictions.
3.  Respect U.S. obligations under existing trade agreements. While trade restrictions like Sections 201 and 232 are permitted under the WTO, the United States will benefit most if all countries exercise restraint in such unilateral actions.
4.  The goal of trade cases should not be to “punish” other countries. Using broad trade measures to target the actions of one country might seem like firing a missile at a target, but the shrapnel can have a devastating effect on bystanders. In these cases, China or Korea might be the target, but Americans will be among the victims.

Among the early consequences for threatening tariffs is Electrolux, who, as Europe's largest home appliance maker, had been planning on opening a plant in Tennessee to the tune of a $250 million investment.  Electrolux buys all the steel it uses in its U.S. products domestically.

Sweden's Electrolux decided that in response to Trump's tariff threat they would delay their plans in Tennessee.

The company is waiting to see the final details of the U.S. tariff plans before making a final decision.

Another casualty as a result of Trump's planned tariffs is the President's economic adviser, Gary Cohn.  Cohn announced his resignation on Tuesday, triggering a slide in U.S. financial markets.

Gary Cohn is a former Goldman Sachs banker, and globalist.

Mark Hamrick, senior economic analyst for, told the Washington Examiner, “It’s a setback for reasonable economic policy, and it’s clear that Cohn was aggravated by the president’s embrace of trade tariffs.”

Personally, I think Trump's threat of tariffs is brilliant.  Here's why.

1.  The Pennsylvania special election is next week, and Pennsylvania is home of American Steel.  Protecting American Steel will appeal to Pennsylvania voters, and likely keep Pennsylvania in the Republican Party's neck of the political woods.

2.  It's a supply-side move.  While the tariff's may disrupt prices of foreign products and trading in the short-run, it will encourage domestic manufacturing in the long-run.  Domestic manufacturing creates jobs, and drives prices down.

3.  Foreign threats of a trade war are a bluff.  The United States is the world's number one consumer.  They need us more than we need them, and to cease trading with the United States would doom their own economies.

4.  People don't realize that the countries who are complaining hammer us with tariffs already.  

5.  Tariffs will put America in position of renegotiating better trade deals.  Essentially, "You want us to lower or remove the tariff?  Play ball the way we want you to, or the tariff stays."

6.  Moves to protect steel will solidify Trump's popularity in Pennsylvania and Michigan, which is not only good for the election of representatives, but for Trump's reelection bid in 2020.

In short, the threat of tariffs is brilliant, and those who are crying foul will wind up with egg in their faces.

Besides, notice who is the maddest about Trump's Tariffs.  The Globalists.  Anytime the globalists don't like something, it usually means it's good for us.

-- Political Pistachio Conservative News and Commentary

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