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Trump’s Tariffs Are Stupid

Trump turns right on Kavanaugh

by Caleb Talley 

President Trump wants a trade war. Or so it seems. After all, he said they’re “good and easy to win.” Who wouldn’t believe him? Answer: every economist in the country.

There have been a number of crazy news stories come out of the White House in the last week, per usual. The most lascivious bits make the headlines. (When’s the last time “president” and “pornstar” was used in the same lede?) But in reality, the most newsworthy thing President Stable Genius did this week was implement a tariff on imported steel and aluminum.

On Thursday, in clear defiance of anyone even remotely cognizant of economic policy and the bulk of his own party, Trump signed two tariff proclamations, erecting 25 percent and 10 percent tariffs on steel and aluminum, respectively. Mr. Businessman President is under the impression that these tariffs will bring back “shuttered plants and mills.” It won’t.

And everyone with any understanding of how the economy works disagrees with his theory. Except, of course, steel workers who will directly benefit and sycophant Commerce Secretary Droopy McPoodle – I mean, Wilbur Ross. He’s happy. Everyone else? They know this is a moronic move, and it’s likely meant to bolster an embattled Republican candidate in Pennsylvania special election, if we’re being honest.

But so far, some spineless Republican lawmakers (see: Rep. Rick Crawford) and conservative media talking heads are giving the president a huge pass on this birdbrained proposal. And it’ll be at the expense of the economy’s overall wellbeing, putting the brakes on any of the growth we’ve seen.

Simply put, a tariff is a tax. And taxes are bad. There was a whole to-do over that not to long ago – remember? And it appears as if the populist, protectionist members of Trump’s base – or fan club – have forgotten who ultimately pays these types of taxes. It’s not the businesses. Consumers pay those taxes.

Rather than absorb the tax and take a hit to the profit margin, businesses will pass those taxes on to us, the consumers, by way of increased prices for goods and services. And they can’t rightfully be expected to do any different, can they? This is true in practically every case – pass-through taxes, corporate taxes and especially tariffs.

And tariffs aren’t just taxes. They’re a hindrance to a free market. Protectionist policies like the ones Trump has lined himself up with are literally the opposite of free market policies – those types of things that actual conservatives like to adhere to. You’ve heard of capitalism, right?

These protectionist policies, as well-meaning has Trump claims they are, lead to unfavorable outcomes pretty much all of the time. An actual conservative would allow the market to reach equilibrium. If steel is cheap because China is “dumping” it into our markets, then every single industry that uses steel benefits. Their costs go down, which allows them to lower the price of their goods and services, employ more workers and all the other things that were said of tax reform.

Most of the “millions and millions” of steel- and aluminum-related jobs Trump thinks have been shipped overseas can’t come back, because they’re now done by robots. And in reality, only about 100,000 steel-related jobs have been lost to China over the years – oh, the hyperbole. Automation is taking more jobs than any other country could.

If we’re being honest, does it even make sense to bring some of these jobs back? Does it make the most economical sense to grasp for 20th century jobs rather than preparing the workforce for present and future economies? Do you really want to pay $10,000 for an iPhone?

Take, for example, Trump’s first major tariff, the one he imposed in late January on solar cells and panels made overseas. China produced them cheaper than US companies could. And with affordable solar cellsavailable on the market, companies began to carve out a thriving industry in installing them for individuals, and businesses, that could finally afford them. Everyone benefited – the people who wanted solar panels for lower energy costs, the companies that installed them and, oh yeah, the environment. Everyone except a negligible number of US companies that construct solar panels and cells, which come at a much higher cost to the consumers.

With the stroke of a pen, Trump reversed all of that progress. With costs up, demand decreases. That’s kind of how the market works. Once thriving companies are putting projects on the back burner, laying off employees, scaling back business plans.

That’s the impact tariffs have already had on companies that buy foreign-made solar panels. Those companies make up such a small fraction of the country’s overall economy. Imagine how many companies rely on steel and aluminum.

If only we had a recent example of steel tariffs… *sigh*

Oh wait, we do!

In 2002, in the face of industrial pushback, President Bush implemented a similar tariff on steel imports in an effort to shore up domestic producers against low-cost imports – no different than what Trump is doing now. It failed miserably.

The move lasted just over a year, and cost the country at least 200,000 jobs and $4 billion in lost wages just within the first few months. For comparison, the entire US steel industry employed about 197,000 at the time. Studies conducted in following years showed that any gains made in factories making raw steel were largely outweighed by job losses in industries that use steel, like automobiles and appliances, among others. According to some of those studies, it cost roughly $400,000 per steel-related job saved.

I’ll ask again: does this make any sense?

And in 2002, the states that were hurt the most were those that gave Trump the White House. Arkansas lost roughly 1,800 jobs in the months after Bush’s steel tariff. Texas lost more than 15,800 jobs. Some of Trump’s swing states were hit hard, too. Michigan lost more than 9,800, Ohio more than 10,500 and Florida more than 8,000. California lost nearly 20,000 – but who cares about those liberals, right?

Simply put, economies evolve. Our economic policies need to evolve with it. Over the years, the bulk of American workers moved from back-breaking labor in the fields to factories as technology made farm work easier and less labor intensive. Workers made their way from the factories to the office place, as automation had the same effect.

We wouldn’t make farm equipment too expensive in order to put factory workers back into the fields. Why would we make steel too expensive in order to put officer workers into raw steel factories? Trump is making a big mistake, and even his own advisors are walking out on him because of it.

But what do I know. I had to take economics twice.


In Cash & Candor, Arkansas Money & Politics / AY Magazine Editor Caleb Talley aims to shoot it straight when it comes to business and politics in and around the Natural State. Talley comes to AMP by way of the Arkansas Delta, where he called balls and strikes at the Forrest City Times-Herald. He can be contacted by email at ctalley@aymag.com. Read more Cash & Candor here

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