A prior post, March 2018, addressed this topic, Trump Facts and Tariffs. Since then Trump has learned nothing. He does not read or listen. He just plays to his base and uniformed gut.
A tariff on Chinese goods is pure and simple a tax. Likewise a tariff on US goods is a tax. The question is who pays the taxes and by extension are tariffs a good policy?
Krugman has two recent editorials that address these question, one published May 7 and another March 3, How Goes the Trade War?
The bottom line: Consumers, not foreigners, are paying the Trump tariffs. Read the editorials. Below are selected quotes:
Trump’s tweets over the past few days may well be featured in future economics textbooks as perfect illustrations of how people misunderstand the basics of international trade and trade policy. In fact, I can pretty much guarantee it, since I’m the co-author of two textbooks.
… enough time has passed for economists to look at the actual results of Trump’s trade policy so far, and the Chinese are not, in fact, paying the tariffs. As I wrote a couple of months ago, “to a first approximation, foreigners paid none of the bill, U.S. companies and consumers paid all of it.”
So if you’re trying to make sense of what’s happening on trade, you should start with the basic point that Trump has no idea what he’s doing, that there isn’t any coherent U.S. policy goal.
Paul Krugman, one of the smartest people on the planet when in comes to international trade, just posted his thoughts about Trump and trade wars, The art of the Flail. It is worth a read. Below are some exerts just to get your attention:
So is a trade war coming? Nobody knows — even, or perhaps especially, Trump himself. For while trade is one of Trump’s two signature issues — animus toward dark-skinned people being the other — when it comes to making actual demands on other countries, the tweeter in chief and his aides either don’t know what they want or they want things that our trading partners can’t deliver. Not won’t — can’t.
…Let’s talk in particular about the will-he-or-won’t-he confrontation with China.
In some ways, China really is a bad actor in the global economy. In particular, it has pretty much thumbed its nose at international rules on intellectual property rights, grabbing foreign technology without proper payment. And to be fair, Trump officials do sometimes raise the intellectual property issue as a justification for getting tough.
But if getting China to pay what it owes for technology were the goal, you’d expect the U.S. both to make specific demands on that front and to adopt a strategy aimed at inducing China to meet those demands.
In fact, the U.S. has given little indication of what China should do about intellectual property. Meanwhile, if getting better protection of patent rights and so on were the goal, America should be trying to build a coalition with other advanced countries to pressure the Chinese; instead, we’ve been alienating everyone in sight.
More on Trump & Trade-Wars by Krugman
First some selected Krugman’ quotes on trump facts and tariffs, A Ranting Old Guy With Nukes:
1. Regarding being “factually challenged:”
…you can’t help noticing that his opinions seem a bit, well, factually challenged. No, we aren’t experiencing a huge wave of violent crime carried out by immigrants. No, we don’t give away vast sums in foreign aid. And so on down the list. Basically, what he imagines to be facts are things he thinks he heard somewhere, maybe on Fox News, and can’t be bothered to check.
2. Regarding tariffs on steel and aluminum, Trumps justification is “national security.”
After all, we can’t be dependent for our aluminum on unstable, hostile foreign powers like … Canada, our principal foreign supplier. (Canada is also our biggest foreign supplier of steel.)
Meanwhile, in the days since Trump’s announcement, he’s tweeted out one falsehood after another. And I don’t mean that he’s been saying things I disagree with; I mean that he’s been saying things that are simply, flatly wrong, even according to the U.S. government itself.
He has, for example, declared that we have large trade deficitswith Canada; actually, according to U.S. numbers, we run a small surplus.
The best argument I have heard against the steel & aluminum tariffs is the following:
- Steel and aluminum are not consumer products. They are used in the production of goods — for example beer kegs and automobiles.
- Imposing the tariffs raise the production cost of steel and aluminum goods.
- The tarrifs may have a minor positive effect on US employment in steel and aluminum production but they will make US steel and aluminum products less competitive.
- The result — reduced balance of trade and increased cost of US goods.
- If the tariffs result in a trade war things just get worse.
Does this sound like winning? So much for the the wonders of tariffs to increase US production. Hell of an idea Mr. Trump!