My Comments: The article I share with you here appeared in Forbes, which no one thinks of as a liberal rag. The reality is that free markets evolve over time, with some markets proving resilient and profitable, and some going the way of the dodo bird. Putting limits on free trade makes little sense to me.
Free markets are compromised by tariffs, since they impose pressures that influence the laws of supply and demand. If you have something in demand, you can charge a higher price until the price itself causes the demand to slow and even drop. Tariffs add costs which lead to a higher price and you effectively shrink the demand.
Either alternatives are found or everybody gets pissed off which is what is happening now. And I for one, can find no valid reason to support the apparent arbitrary imposition of tariffs. You and I will see a decline in our standard of living. Are we winning yet?
John Brinkley, August 14, 2018
Casualties from the Trump Trade War of 2018 with China are piling up fast.
Farmers and small businesses across the United States are suffering under the weight of 25% tariffs on Chinese goods that they need and/or China’s retaliatory tariffs on products they export, but Trump shows no inclination to back down. His administration has compiled a list of $16 billion worth of Chinese products it will hit with a 25% tariff on August 23. Trump is considering a 25% tariff on all auto imports on national security grounds, and tariffs on all Chines imports.
Element Electronics plans to lay off almost all of its 126 workers and close its factory in Winnsboro, S.C., because of new U.S. tariffs on components it imports from China. This is particularly sad, because Element Electronics is one of the last remaining television assembly companies in the United States.
A U.S. cargo ship carrying $20 million worth of soybeans for China tried to get there before China’s soybean tariff took effect on July 6, but arrived 30 minutes too late. The tariff raised the cost of the soybeans to $26 million. The ship drifted about off the Chinese coast for a month while the cargo’s owner, the Louis Dreyfus Co., tried to figure out what to do.
The ship, Peak Pegasus, finally docked in Dalian during the weekend and began unloading its cargo after the Chinese company Sinograin agreed to pay the 25% tariff. As of Tuesday, there were two other cargo ships loaded with American soybeans still waiting off the Chinese coast.
The farmers who grew those soybeans have already seen their prices drop by 20%, said Chris Gibbs, a soybean farmer in Ohio. Even if the tariff were eliminated, Gibbs said in an interview with CNBC that he and other farmers feared that the U.S. would be seen as an unreliable supplier and its foreign customers would go elsewhere for soybeans and other farm products.
For commercial fishermen in Alaska, life is hard and dangerous even in the best of times. China’s new 25% tariff on Pacific Northwest seafood may be more than some of them can bear. The state of Alaska has been working for years to attract Chinese buyers for its seafood. Given that there are plenty of other seafood-exporting countries, Chinese importers probably will just stop buying Alaskan seafood.
“We’d rather be left to our own challenges that we have. We don’t need any more,” Alan Noreide, a fisherman from Seward, Alaska, told Reuters.
The iconic American motorcycle company Harley-Davidson (NYSE:HOG) faces a boycott of its products, because it said it would move some production overseas to avoid a tariff imposed by the European Union in response to Trump’s tariffs on steel and aluminum imports. Trump supports the boycott.
“Many @harleydavidson owners plan to boycott the company if manufacturing moves overseas. Great! Most other companies are coming in our direction, including Harley competitors. A really bad move! U.S. will soon have a level playing field, or better,” Trump said on Twitter.
He said he would try to lure foreign motorcycle manufacturers to the United States to further tighten the screws on Harley-Davidson, which is based in Wisconsin.
In California, where wildfires have destroyed about 1,200 homes this year, U.S. tariffs will add as much as $20,000 to the cost of rebuilding a house, according to the National Association of Homebuilders. In addition to the 25% tariff on imported steel, the U.S. has imposed a 20% tariff on Canadian softwood lumber, which is heavily used in home-building.
Larry Kudlow, Trump’s chief economic adviser, said Trump wasn’t to blame for any of this.
“Don’t blame President Trump, he said in an August 3 interview with Marketplace. “He inherited a broken world trading system where tariffs and particularly non-tariff barriers have been rising for years. The WTO, which is supposed to be the adjudicator, has been broken. . . So, the president is trying to fix it.”
In reality, the world trading system was working pretty well until Trump came along, and tariffs and non-tariff barriers have not been rising to any appreciable degree. The United States and 11 other countries negotiated the Trans-Pacific Partnership, which would have reduced or eliminated hundreds of tariffs, including Canada’s dairy tariff that Trump often complains about. Trump pulled the U.S. out of the TPP, stopped negotiations on a free trade agreement with the European Union, stopped negotiations on a bilateral investment treaty with China, abandoned the Obama administration’s work toward modernizing the WTO.
But Trump prefers war over diplomacy: Stick it to China with tariffs and China will beg for mercy.
So far, the only people begging for mercy are farmers and small businesses that are seeing their profits reduced or wiped out and the workers who will lose their jobs as a result.