EconoFact: “What is the National Security Rationale for Steel, Aluminum and Automobile Protection?”

From EconoFact, an update:

The Trump administration has implemented a number of trade related measures purportedly on the basis of national security. First, it invoked the seldom-used provision of the trade law to investigate whether imposing import restrictions for steel and aluminum is justified by national security reasons. The Commerce Department’s investigation concluded that imports of both metals pose a national security risk and subsequently the administration applied tariffs and quotas to both products. In a new investigation, the Commerce Department has started looking into whether imports of cars or automobile parts could impair U.S. national security.

One just has to recall, you don’t typically take Ford Mustangs into war, and even if we took sedans into battle, we get most of our auto imports from allies (at least they are allies right now). My concluding paragraph:

Imposition of these tariffs under the guise of national defense could have large negative economic effects even in the absence of retaliation. For instance, one estimate indicates a 40,000-job loss in the automobile industry (a heavy steel user) from the steel tariffs alone. With the expiration of exemptions on the EU, Canada and Mexico, some $50 billion of steel and aluminum imports are now covered by tariffs. One can expect the employment impact to be even more substantial. Adding in retaliation (but incorporating the now defunct exemption for Canada and Mexico), the consulting firm Trade Partnership estimated a net loss to the economy of 470,000 jobs. The Peterson Institute for International Economics estimates a 25 percent tariff on imported automobiles (currently at 2.5 percent for non-Nafta members, and 25 percent for trucks) would reduce employment by 195,000 over the course of three years. With retaliation, that number would rise to 624,000.

Interesting fact: by statute (10 U.S. Code § 2505), Canada’s industrial base is considered part of the Nation’s defense industrial base. And yet we are imposing national security rationalized tariffs on Canada…

Finally, remember — we (or Mr. Trump’s aides) — are doing this in the name of national security while he contemplates giving ZTE a pass.

176 thoughts on “EconoFact: “What is the National Security Rationale for Steel, Aluminum and Automobile Protection?”

  1. Bruce Hall

    Various articles with which everyone is free to dispute, support, or ignore as they please:

    Steel
    http://www.crainscleveland.com/article/20120726/FREE/120729871/department-of-defense-requires-military-to-use-steel-that-is-100 (Obama administration timeframe)
    https://csbaonline.org/uploads/documents/170328_Bryan_Clark_statement_at_2017_State_of_Steel_Hearing-final.pdf (Trump administration timeframe)
    http://www.ssina.com/news/releases/pdf_releases/steel_and_national_defense_0107.pdf (Bush administration timeframe)

    Aluminum
    https://www.commerce.gov/news/press-releases/2018/02/secretary-ross-releases-steel-and-aluminum-232-reports-coordination (note: From 2013 to 2016 aluminum industry employment fell by 58%, 6 smelters shut down, and only two of the remaining 5 smelters are operating at capacity, even though demand has grown considerably.)

    Domestic vehicle manufacturers
    It’s difficult to rationalize the military’s use of domestically manufactured cars and trucks as a national security issue since Chinese cars and trucks will soon be available. However, you might remember how domestic automotive production facilities were repurposed during WWII.

    While that is unlikely to be repeated in today’s conditions, domestic producers provide a reserve of highly qualified mechanical and electrical engineers that could be made available, if needed. Regardless, if national security is seen only in military capability terms, the automotive industry is not that important to national security. If, however, national security is expanded to included economic security, a case might be made for protecting the automotive industry.

    Reply
    1. pgl

      Kevin Hassett went out of his way to defend Wilbur Ross yesterday. It was even more embarrassing than DOW 36000. But you have now outdone Kevin!

      Reply
      1. Bruce Hall

        pgl, make your points rather than snide, non-contributing, ad hominem remarks. Was there something non-factual about the article to which you’d like to debate or is it simply you don’t like Mr. Ross? Please, be specific and exhausting.

        Reply
        1. pgl

          I’d rather be snide than dishonest. C’mon Bruce – all I did was to read the link and report on what it said. I guess fact checking to you is a Communist plot!

          Reply
          1. Bruce Hall

            You just said … nothing.

            “Kevin Hassett went out of his way to defend Wilbur Ross yesterday. It was even more embarrassing than DOW 36000. But you have now outdone Kevin!”

            An honest exchange would actually address points of disagreement, not “oooooo, I don’t like Wilber Ross”. I’m really waiting for you to make some salient and sane points.

          2. Moses Herzog

            <b. @ pgi
            Whenever you make a critical comment about Trump’s incompetent staff, unless you get at least 5 of these Trump flunkies that still run around telling everyone President Obama was born in Kenya messing themselves in their Kotex Maxi Pads, you’re not trying hard enough. You’re still about 3 messes short here.

    2. pgl

      From Bruce’s 1st link:

      “ArcelorMittal’s Cleveland works and other American steelmakers expect to get a boost from a pending U.S. Department of Defense rule change that will require the military to use steel that is 100% made in the United States.”

      I guess Bruce does not know that ArcelorMittal is a European based company that actually exports a lot of steel to the U.S.

      Reply
      1. CoRev

        Pgl, please drop the snark. What part of this “ArcelorMittal’s Cleveland works…” did you not understand? You obviously fail to understand what a multi-national company is.

        Reply
        1. pgl

          I do understand what a multinational is. I have also read their Annual Report. Sorry to rain on your and Bruce’s praise for the all mighty Trump but might I suggest the two of you actually bother to read a few Annual Reports before you entertain us with your usual high standards of utter ignorance.

          Reply
          1. CoRev

            Pgl, that response makes no sense. Please tell us how reading the Annual Report affects the tariff on the “ArcelorMittal’s Cleveland works…”. You might want to talk to Toyota and the many other multinationals on how their Annual Reports should be written to ensure maximum tariff payments on their products produced in their US entities.

        2. pgl

          Arcelor Mittal’s Annual Report:

          http://corporate.arcelormittal.com/~/media/Files/A/ArcelorMittal/investors/annual-reports/2017/2017-annual-report.pdf

          Since Bruce Hall cannot be bothered to read this and CoRev has no clue, permit me:

          “ArcelorMittal had sales of $68.7 billion for the year ended December 31, 2017 … Sales in the NAFTA segment were $18.0 billion for the year ended December 31, 2017.”

          Damn – we bought a lot of their steel. Was it all made in Cleveland? I highly doubt it. Here is what they say about production in the U.S.:

          “Operating loss for the NAFTA segment was $705 million for the year ended December 31, 2015 including impairment charges of $526 million, of which $231 million related to the intended sale of the Long carbon facilities in the United States (ArcelorMittal Laplace, Steelton and Vinton) and $276 million with respect to the Indiana Harbor East and West facilities (United States) in connection with deployment of the asset optimization programs.”

          Did you get this? They are shutting down what they have in regards of U.S. production. I also looked at the 10-K filing for AK Steel, a competitor of this European based steel multinational. All of their production facilities are U.S. based and they are good enough to export 10% of their production to Europe. But they hate foreign competition. CoRev would love their praise for the Wilbur Ross protectionism even if I find it embarrassing.

          Of course neither Bruce Hall nor CoRev do not know this as they seem to for some reason not capable of reading Annual Reports. Go figure!

          Reply
      2. pgl

        I’ve read that “case”. Laughable at best. My comments related to the really stupid links you choose to post. Did you read them? If you did – you would realize what I said was correct. Move on as you are doing nothing but trolling.

        Reply
    3. pgl

      Did Bruce actually read what Bryan Clark wrote:

      “Military and homeland security programs such as armored vehicles, aircraft, and ships represent only about three percent of U.S. steel demand … American-made steel is obviously important to U.S. national security, but the military is a small customer for U.S. steel producers. To enable steel manufacturers to support future demands for the specialized steels needed in warships, armored vehicles, or aircraft, the government needs to commit to sustained construction rates for these platforms. Only by contracting for multiple years of production can the government enable prime contractors to order materials like steel in advance. This, in turn, allows steel manufacturers to plan, efficiently establish required production rates, and hire needed workers.”

      Only 3% of the steel we consume. Huh? Clark makes some sensible recommendations here which in no way require broad based tariffs on steel imports.

      Reply
      1. Bruce Hall

        pgl, do you actually read what I wrote? “Regardless, if national security is seen only in military capability terms, the automotive industry is not that important to national security. If, however, national security is expanded to included economic security, a case might be made for protecting the automotive industry.

        It appears that when certain people post a comment, the only thing that registers on your brain is “Trump, Trump, Trump.” As I commented on an early post, you are very good at picking one sentence out of a very long thread. In other words, context is not your strong suit.

        Reply
        1. pgl

          I’ve read that “case”. Laughable at best. My comments related to the really stupid links you choose to post. Did you read them? If you did – you would realize what I said was correct. Move on as you are doing nothing but trolling.

          Reply
    4. pgl

      Bruce’s 3rd link is from early 2007 and the first sentence is telling:

      “This analysis presented by the U.S. steel industry addresses the importance of domesticallyproduced
      steel to our nation’s overall national defense objectives and the increased need for steel
      to bolster our economic and military security. ”

      Of course the representatives of the U.S. steel sector want protection. How seriously should any sane person take their “analysis”?

      Reply
      1. noneconomist

        In California, there are 5,500 workers employed in “making” steel. By contrast, there are over 100,000 employed by industries and businesses that purchase (and use) steel
        Protecting those 5,500 workers makes perfect sense. To those who have little, anyway.

        Reply
    5. pgl

      “From 2013 to 2016 aluminum industry employment fell by 58%, 6 smelters shut down, and only two of the remaining 5 smelters are operating at capacity, even though demand has grown considerably.”

      What Wilbur Ross does not admit and apparently Bruce does not know is that U.S. based multinationals have decided to establish smeltering affiliates in Iceland in large part because electricity is cheap there. This may be the dumbest excuse ever for aluminum tariffs.

      Reply
      1. Bruce Hall

        pgl, at last. A response worthy of discussion. To the extent that metal producing facilities are controlled by U.S. companies… and the metal readily exported to the U.S., there is reasonable certainty that any critical production for U.S. national defense would be available. I’d put a caveat with that: if a company is based in the U.S., but is not controlled within the U.S. (i.e., Chinese state-owned U.S. companies acquired in workarounds CFIUS and producing products outside of the U.S. that fall within those deemed necessary for national security), then that still leaves the question of national security open to question. I’m not sure such companies presently exist, however.

        The key is that skills, knowledge, processes, patents, etc. are American and can be readily re-patriated. What is often forgotten is that skills, knowledge, and processes are often lost when imports ravage domestic industries. U.S. tool and die making is almost a lost part of U.S. industry and that affects everything. Certain types of highly specialized welding skills are rapidly being lost as the manufacturing leaves the U.S. It’s not just steel or aluminum; it’s all of the ancillary capabilities that are lost when the manufacturing of those products or the manufacturing of products that use steel and aluminum leave the country.

        National security goes beyond mere economics. While you may be able to get a better “deal” through imports, eventually you relinquish control and adopt dependency. That may be fine for surround sound speakers, but maybe not so great for command and control systems or building new technology submarines.

        Reply
          1. Bruce Hall

            Menzie, I join you on that. But, you can’t have it both ways either. Either he sits back and does nothing or he makes China feel very uncomfortable… or maybe China changes its predatory strategy.

            There may or may not be legitimate “national security issues” with the targeted predatory trade practices of countries like China. But I believe there are real “economic security issues” (and have express that with responses to pgl). Do a search on “china’s targeted predatory trade practices”. I’m not standing alone in the dark on the edge of a cliff. You may not agree, but you’ll have a difficult time convincing a lot of the world that Trump is the genesis of this problem. https://www.wsj.com/articles/china-started-the-trade-war-not-trump-1521797401

          2. Menzie Chinn Post author

            Bruce Hall: The use of Section 232 for non-national security concerns will allow other countries to invoke equivalent rules with similarly weak basis. If the US wants to seek redress for, for instance, economic harm due to intellectual property concerns, then it could (as it has) invoke Section 301, which provides the president authority to retaliate against actions that burden US commerce.

            So I’m all for action against China on trade issues. But some actions are particularly counterproductive — you must see that given that the tariffs are hitting our allies primarily, and Chinese aluminum and steel imports into the US have already been drastically reduced by virtue of antidumping duties, yes?

          3. Moses Herzog

            It is very doable to (as I think President Obama put it once when talking about policy prescriptions) “use a scalpel” on these trade issues. It is not an “either/or” deal, as some multi-national conglomerates have sold it as—-the multi-nationals sell it, and lobby it, as an “either/or” deal because they are often rightly wagering that when push comes to shove (especially when bribing legislators under the table) that if it is presented as “either/or” then the conglomerates will be allowed to do whatever the hell they want.

            Bruce, you are regurgitating a largely held fallacy that has been spoon-fed to you—by none other then Rupert Murdoch’s propaganda tabloid.

        1. CoRev

          Bruce, in the 30s FDR started a new industry, building submarine periscopes. Guess where we were getting them from before building out own.

          Reply
          1. CoRev

            Pgl, what in heavens name are you now talking about? Gymnote does not equal building submarine periscopes in the US.

  2. Moses Herzog

    Off-topic
    I actually don’t want to put this video link in this thread, because I like things categorized (believe it or not). But I’m putting it here because I think more people will be apt to see the things in posts that haven’t “dated” a few hours. These are some of the people that people like Trump, PeakIgnorance, “Princeton” Kopits and the like apparently can’t stand, and apparently get convulsions and nausea when they think they might be happy or improving their own lives. Sometimes actually seeing people with your own eyes that are being hurt by bad immigration policy can give you a different view, than listening to some old orange colored bastard make descriptions of them to poorly educated southern white trash in campaign speeches.
    https://www.youtube.com/watch?v=KeGPXnX5kbU

    I mentioned before I spent about 7 years in China. Mostly a positive experience, and a decent percentage of the negative I brought upon myself. I am not very good with words, so I often have to steal the good words of others to convey things inside my head. Being overseas that long, has given me a different vantage point about immigrants, or even about observing “foreigners” (or as some southerners are known to say “furners”) in “my homeland” speaking their own native tongue and not English (which when I was a University student used to make my blood boil to no end. So I use these two quotes from Mark Twain, in the full spirit of self-deprecation and in the hopes it might make Menzie and others smile in its distinct truths:

    “In Paris they just simply opened their eyes and stared when we spoke to them in French! We never did succeed in making those idiots understand their own language.”
    ― Mark Twain, The Innocents Abroad

    “The gentle reader will never, never know what a consummate ass he can become until he goes abroad. I speak now, of course, in the supposition that the gentle reader has not been abroad, and therefore is not already a consummate ass. If the case be otherwise, I beg his pardon and extend to him the cordial hand of fellowship and call him brother. I shall always delight to meet an ass after my own heart when I have finished my travels.”
    ― Mark Twain, The Innocents Abroad

    *the above Mark Twain quotes’ truths/b> probably 98% apply to Western white males, or as the modern term goes “the ugly American”. Of which, I am hoping I was the milder version.
    https://en.wikipedia.org/wiki/Ugly_American_(pejorative)

    Reply
  3. Erik

    Canada’s defence industrial base has long been considered part of the North American Defense Industrial Base.

    President Tweet just invoked the War of 1812 and the fact that Canadians burned down the White House. This President was also going on about Muslims as posing an existential threat to the USA a while back. The nonsense never ceases.

    I strongly suspect that Americans do not understand to what extent President Trump is putting Canadian backs up against the wall.

    Reply
    1. Moses Herzog

      Trump is a very patriotic man Believe me!!!! Trump is the most patriotic man you’ve ever met. Trump is the most patriotic man in this blog!!! Ask anyone!! His patriotism is Yuuuuuge and Canada is a very very ugly woman. Ask anyone, Canada is a very ugly woman. We’re going to build a wall near Vancouver because Canada is very very stupid. And Canada is weak, Canada is very weak, and it’s not a ban on Canada. Crooked Canada!!!!! Trump’s hands are large, and Trump has no problem “down there”, Believe me!!!! And that Roseanne Barr, isn’t she great!?!?!?! And ABC, they’re going to pay for Roseanna Barr, they’re going to pay for all of Roseanne Barr, Believe me!!!!. ABC is stupid, and ABC has been a TOTAL DISASTER!!!! Nobody can sing the national anthem like I do, ask anyone here. Philadelphia Eagles are LOSERS. Ask anyone, Philadelphia Eagles are losers. NYT says I can’t sing the national anthem!!! FAKE NEWS!!!! NYT are losers, NYT will pay for all of it. MILLIONS AND MILLIONS!!!!
      https://www.youtube.com/watch?v=Zo_mpwmashg

      Reply
  4. dilbert dogbert

    I read that that man in the oval office was telling all that he wanted tariffs. No question. Tariffs. Don’t confuse me with the facts damn it!!! If the tariffs are implemented and cause a big job loss it will be Obama’s and Hillery’s fault. Or, maybe just false stories in the media.

    Reply
  5. Moses Herzog

    I haven’t even watched all of this myself, basically I cut off the first 7 minutes of bullcr*p, to save others here time. Trust Uncle Moses, you didn’t miss anything. The rest of this I am going to assume explains what “value chains” are as related to international trade. If we can understand “value chains” fully, similar to Menzie rightfully insisting we need to know our basic stats to understand some public research papers, then it will benefit us to truly understand how Trump’s policies are in fact masochistic for America, and are apt to have a final result of being damaging to USA National Security interests.
    https://youtu.be/qdjt0WfGfVw?t=6m53s

    Reply
  6. pgl

    “you don’t typically take Ford Mustangs into war”. Loved this line as it reminds me of my high school days … when we did take Ford Mustangs into “war”!

    Reply
    1. Moses Herzog

      Some of the language in the Commerce Dept rationalizations for the absurd policy, pretty much shows you what decade Wilbur Ross lives in. My God. That’s if the dumb b*stard can stay awake at any of the meetings. “Wilbur”, even more the doddering old man than old Lloyd Bentsen was, dozing off and slobbering on himself for crying out loud. What’s “Wilbur” going to say next, we’re losing our American “know-how” at making bell bottom pants?? Hope Apple, Google, Sony, and SoftBank are keeping up on those “high-tech” Ford dashboards. Sure would hate to lose the “big battle” for the technology frontier on that one…..

      Reply
        1. Moses Herzog

          Hahahaha, Yeah I happen to sympathize with you on this. I didn’t mind Lloyd Bentsen, he was a pretty good guy—but he had a pretty well documented habit of falling asleep in the middle of meetings. His family must have scraped the evidence out of Google images, ‘cuz I just went to fetch some and they were gone. I’m telling you there used to be tons of pictures of the man conked out with his chin buried in his chest.

          Reply
        2. Moses Herzog

          It’s hard to outdo Donald Trump in the clueless department, but Dan Quayle and Sarah Palin would give him a run for his money. At least 10 years ago a red-blooded American male filling out a ballot could think of ONE activity he could use Palin for, so way back in 2008 she had that edge on the other two. Now what do we have?? Trump sits with international leaders with his tiny hands clasped over his crotch and his mouth gaped open 2-3 inches like some 10 year old at a grade school assembly.

          https://goo.gl/images/Zxo3Tb
          I think Trump is so used to assuming this expression just below Putin’s lounge chair it’s become his natural RBF now.

          Reply
          1. pgl

            I hear Mrs. Quayle made Dan cookies in her kitchen. You see – she was not a very good lawyer so they could not afford Mrs. Fields!

          2. Moses Herzog

            That was like a “Dad joke”. I’m probably the only person on this blog that enjoys Dad jokes, so maybe go back to the mild vulgarity (friendly teasing, you made me laugh).

            Did you hear they are reporting Chef Bourdain died from suicide?? Personally, I’m not buying this and I hope they get a very good forensic scientist and high credentialed coroner to check all of this out. Bourdain did NOT fit the psychological profile for suicide. He was a borderline narcissist. And I don’t care the usual cliches “you never know where someone is in their lives, or what they’re feeling”. Bullcr*p!!! For some people (and Bourdain was very close to this type) everything in the world starts and ends with themselves. The only way I am buying this is if he lost some woman in his life very recently or I smell “foul play” on this death bigtime.

  7. pgl

    “In 2017, the top source of U.S. imports of steel was Canada with 17 percent of U.S. imports (by tons). The next largest sources of U.S. steel imports were Brazil (14 percent of US production), South Korea (10 percent) and Mexico (9 percent). Steel imports from China ranked 10th and represented 2 percent of U.S. imports”

    The link provided was quite handy. Of course one can find the same data over at http://www.census.gov with a little work. Interesting fact – we used to import a lot more steel from China but then its final assembly shifted to Vietnam.

    Reply
  8. ilsm

    Today is a big day in USMC history, 100 years ago US Marines and Army infantry were engaged in Belleau Woods during the Marne defensive campaign. 4 Jun was 76 anniversary of the Navy win at Midway.

    Here is a description of US auto industry contributions to D-Day 74 years ago yesterday:

    http://usautoindustryworldwartwo.com/normandyinvasion.htm

    See captions of pictures as well. It takes a lot to supply a war.

    Reply
  9. pgl

    Josh Marshall on the Trump trade wars:
    https://talkingpointsmemo.com/edblog/thoughts-on-trumps-attempted-trade-wars
    The trade fights we’re currently seeing with Canada, Europe, China and other allies and trading partners around the world are being discussed through a prism of free trade and protectionism or degrees of protection of technology or intellectual property. This is all the wrong prism. While there are players in the mix operating with different viewpoints on trade, President Trump is driving the process. And those perspectives really aren’t relevant to him. He probably hasn’t even taken the time to understand them. Each of these engagements fits exactly with President Trump’s business history and basic mindset. Each can be summed as this: Trump’s finds a certain ‘deal’ in place and wants to get more from it. If the trade deficit is X, he wants more trade back.
    The economics of trade imbalances are complicated. Most would agree we don’t want to run big trade deficits. But the causes and impacts of these deficits are complicated and disputed. And there’s no rhyme or reason or strategy in what the President is doing. His goal is to threaten, cajole, walk away and try other antics that will allow him to impose tariffs and not have the target retaliate. Then he’s “won”. They “caved”. You see things start to spin out of control when the other countries either threaten to impose or do impose their other retaliatory tariffs. That’s totally predictable. But Trump views it as picking a fight.

    Reply
    1. 2slugbaits

      pgl I agree with a lot of what Josh Marshall is saying regarding Trump’s personal motivation; that’s exactly how Trump sees things in his little world of the NYC real estate market. But I don’t agree with Marshall’s implicit suggestion that we still shouldn’t discuss the actual economics. The audience should not be Trump himself because he’s already made up his mind. To him trade is just another opportunity to play wheeler-dealer, just as he seems to believe that the reason we have prisons is so he can have the opportunity to feel the intoxicating power rush of granting pardons. The Great and Mighty Oz. We should just ignore Trump and abandon any hope of trying to get him to change his mind. Instead the discussion should explain to Trump supporters why his policies will make them and everyone else worse off. With a little luck they won’t make the same mistake twice.

      Reply
      1. pgl

        Josh knows he and his excellent crew on the west side of lower Manhattan (Chelsea district) are not economists but their writing shows a lot more economic insight than those who pretend to be Trump’s economic advisers.

        Reply
  10. 2slugbaits

    I don’t know how anyone takes Trump’s national security excuse for imposing tariffs on our allies at all seriously. It’s laughable on the face of it, but apparently there are folks who don’t see it as ridiculous. As I understand it, Trump is offering three national security rationales.

    The first rationale is based on a belief that we haven’t developed the economic base to mine the raw materials. This has two problems. The first problem is that if you’re worried about national security over the long run, then you should hold your natural resources in reserve before tapping into domestically mined resources. The second problem is Trump doesn’t want to apply the same reasoning to raw materials that really are strategically critical. For example, Israel provides virtually all of the germanium used by DoD. Germanium is critical in the manufacture of sensitive target acquisition subsystems. You could say similar things about crystals or chromium or helium. The man-on-the-street sees a tank and believes the amount of steel is what’s critical. But that’s not what makes a tank a tank.

    Trump’s second rationale is the need to “warm base” the industrial capacity. This also has a couple of problems. If you’re committed to warm basing, then you’re committing yourself to overpaying and wasting other resources. There’s no free lunch. You don’t get to add a warm base infrastructure without taking away some other infrastructure. The second problem is that a warm base strategy is inconsistent with efforts to downsize DoD excess capacity at depots and arsenals. That’s what the various BRACs were all about.

    The third rationale for tariffs is that it would protect American jobs that are critical to national defense. Under some conditions this might be true. For example, if the US was in a deep recession and if we could impose a tariff without risk of escalating into a trade war, then a tariff might actually have a transient benefit. But none of those conditions apply in today’s world. The reason we should want free trade is that it frees up resources that could be shifted to other sectors of the economy. Have we advanced the national security argument if saving one steelworker job means we lose one cybersecurity analyst’s job? Labor resources are finite (and more finite with an anti-immigration policy!), so you want to allocate those resources such that they earn the highest marginal return. The reason centrally planned economies fail is because no one is smart enough allocate resources, which is why we leave it to markets to allocate based on price. When you impose a tariff you are essentially acting as a central planner. In Trump World we’re likely to end up with too many rust belt workers making low value products and not enough higher end products. The old Soviet Union used to produce insane amounts of steel and electricity. It also produced some really crappy tanks. Lots of them, but really crappy. That seems to be the Trump model as well. I always thought he was a closet Leninist.

    Reply
      1. 2slugbaits

        Have you seen Rudy lately? If he ever did get down on his hands and knees he’d never be able to get back up without the help of a crane. He looks like the fat Mafia gangster in some “Godfather” sequel; i.e., exactly the same kind of organized crime kingpin that he used to send to prison. The saying used to be that the most dangerous place in the world was to be between Rudy and a microphone. I think we’ll need to update that to say between Rudy and a plate of lasagna.

        Reply
        1. pgl

          The NY tabloids note since Rudy divorced wife #3, the usual gold digging Uppity East Side gals are all hovering to go out with him.

          One of the many reasons I moved to Brooklyn. These old gold diggers will grovel for money regardless of who pulls out the wallet.

          Reply
      2. Moses Herzog

        @ pgi
        Have to confess you made me laugh on that one, but you surprised me a little. I may have to “tone it down” a little, my blunt way of communicating may be rubbing off on you (which I feel certain would be a relief to Menzie, as amazingly tolerant as he’s been). I actually don’t care and would be even more blunt than now, only I feel a mild guilt as to any affect it might have on Menzie in the halls of the ivory tower. Nobody’s going to believe that last part, but…….

        I really have no “gauge” as to what I say comes across as ‘sexist” or not. But it must be said, Trump is one of the few guys (and Giuliani also for that matter) who could engage in acts with a woman of that particular profession and make you wonder how SHE could allow herself to “go slumming” in such a low way.

        Reply
      1. dilbert dogbert

        The USSR produced a lot of crappy stuff. They did produce some really good rockets and reentry systems. Still in use.

        Reply
      2. 2slugbaits

        Not read it. Way back in the mists of time I did take a semester course on the Soviet economic system. They used something like a 60 row matrix to allocate planned output across the economy. A hopeless task.

        Reply
    1. ilsm

      2Slugs,

      The US navy has a warm shipyard base (2 Billion dollar Virginia class subs so US can keep the “skills”). The FY 19 House bill adds two littoral combat ships (mainly 1/2B dollar PT boats) to keep two shipyards “warm”). It also has 93 F-35’s (16 more than JSF SPO plans) to achieve unit price (learning curve) reductions. The issue with F-35 is it flies like an A-7 and carries 18,000 pounds of jet fuel+!

      A lot of investing so US industry base can deliver equipment with deviations and waivers. And congress critter profess an interest in “readiness”! Why O&M is a growing part of appropriations.

      +Why the USAF needs KC 46 it carries about same maximum fuel off load as KC 135 but a lot more cargo space for spare parts for the F-35 than the old 135.

      Reply
  11. baffling

    Now we use national security as a reason to impose tariffs AND enforce crony capitalism in the fossil fuel energy sector. And you must show me your documents when you vote. Steven, corev, bruce, peak etal. You do understand you are backing a political position in line with those countries you criticize as socialist and communist. And you appear to be supporting it with zeal. Wow!

    Reply
  12. pgl

    Alas I have to protest to two examples of blatant trolling. First up Bruce:

    “You just said … nothing.” He continues pretending he has not read my other replies. He likely has but then he just ignores them. Hey Bruce – until you engage in a real conversation about what was in what you linked – I’m ignoring you.

    And of course CoRev:

    “Pgl, that response makes no sense. Please tell us how reading the Annual Report affects the tariff on the “ArcelorMittal’s Cleveland works…”. You might want to talk to Toyota and the many other multinationals on how their Annual Reports should be written to ensure maximum tariff payments on their products produced in their US entities.”

    Really CoRev? Can you make it more obvious you have no clue what corporations put in their Annual Reports. We know for a fact you have never read one.

    Reply
      1. pgl

        Seriously CoRev? That is all you got. Homework assignment for you. Read the 10-K of Toyota and educate us on how many of their cars are made in Asia and imported here v. how many are made here. Then tell us how Japan is compensated for their intellectual property on the cars made here. Extra credit if you figure out how much steel our Toyota plants have to import as well as where the components are imported from. We’ll wait. I’m sure the American Economic Review is eager to publish your latest thesis.

        Reply
        1. CoRev

          Sigh, and there he goes again, that old pgl, deflecting again from a challenge. “ArcelorMittal’s Cleveland works…” is a US producer and Toyota may have imported some parts for US vehicle production and produce some vehicles off shore for import, but you seem to think those things are written in stone in the Annual Reports. Tough trade negotiations/tariffs would have no effect on them? They never worked in the past. Oh wait, all those Toyotas, Hyundais, BMWs, Hondas, Nissans and Kias built here in the US never happened. Yeah right!

          BTW, do you know what percentage of the Toyota components were actually designed here and thru agreements IP and manufacturing processing handed over in Co. to Co. agreements? Y’ano that ole everyday trading that goes on between multinationals.

          Pgl, you need to widen your horizon. there’s a whole world of trade going on of which you are unaware because it goes on in “deplorable land”. Y’ano that area west of NYC.

          Reply
          1. pgl

            “do you know what percentage of the Toyota components were actually designed here and thru agreements IP and manufacturing processing handed over in Co. to Co. agreements?”

            This is like your periscope question. You ask but you cannot answer. Do you know the percentage? I didn’t think so. Now if you think US created IP in the auto sector dominates Japanese created IP – then you are dumber than PeakStupidity. Ever heard of Lean Production? Look it up. Oh wait – I asked you another basic research question. Never mind – you flunked every other time I asked you to actually do basic research.

          2. pgl

            PeakStupidity dares to call us ignorant as he quotes from a source that writes:

            “These barriers take the form of restrictive licensing”.

            Peak wants the Chinese to pay royalties to the US. Ah Peaky – that is called licensing. Yes PeakStupidtiy contradicts himself more than a Trump twitter machine!

          3. CoRev

            Pgl, you’re answers are getting hilarious, when you try to actually provide one. Question 1 re FDR implementing production of submarine periscopes… and what does pgl think is an adequate and related answer? Something about a French submarine in 1888?????? Wrong period by 50 years and product.
            Question 2 about how much of a Toyota Toyota components were actually designed here and thru agreements IP and manufacturing processing handed over in Co. to Co. agreements? And he talks about the Toyota production/manufacturing philosophy. Yup! That sure makes sense if you realize pgl is totally out of his area of expertise.

            Another typical pgl response. He even thought I was talking about stealing IP, and not the frequent and normal sharing agreements among multinationals, even competitors. Another example of too much knowledge of theory versus real world exxperience.

          4. Menzie Chinn Post author

            CoRev: Mr. Trump has spoken about Chinese requirements that MNCs share IP in order to operate in the country as “stealing”. Would you concede that Mr. Trump has the same interpretation? And hence, that he is wrong in his interpretation?

          5. CoRev

            Menzie, your response has nothing to so with pgl’s and my discussion of submarine periscopes and Toyota and US manufacturers’ agreements.

            I did include IP and manufacturing process as part of those agreements. If that triggered your response, then no, they were given freely as part of quid pro quo agreements.

            As far as Trump’s understanding, never considered it, and won’t now.

  13. Not Trampis

    completely off topic.

    On Friday my time I run Around the Traps on my modest blog.

    It is merely articles that are interesting on a variety of topics.

    Keen for feedback after a fair while

    Just so you know where I am coming from. I am both a social conservative and economic liberal.which puts me in invidious positions a lot of the time.

    Unlike a lot in the USA I am a biblically literate evangelical thinbk Timothy Keller for example

    Thus on this topic I am quite close to slugsy,. I am afterall a free trader at heart. I think anyone who has studied economics is.

    Reply
    1. PeakTrader

      Not Trampis, the liberal/socialists fail to understand, among many other misunderstandings, Trump is a free trader – it’s our major trading partners, who aren’t free traders.

      Even before the business tax cuts and deregulation, the U.S. economy was very competitive. Our trading partners need an advantage or cheating to compete with the U.S..

      The liberal/socialists totally misunderstand what Trump means by making America great again – they believe it’s a joke, racist, or some other ignorant belief. Half of America – “the deplorables”- gets it.

      Trump is also correcting much of the economic-foreign-social train wreck caused by ignorant politicians, like Dodd, Frank, Pelosi, Obama, Kerry, Hillary, etc., although the national debt is a economic constraint. It’s pathetic some prefer Big Mother rather than the father figure they desperately need to set them straight.

      Reply
      1. baffling

        He may be a free trader, but he appears to not be a free market enthusiast. His latest directives forcing the energy sector to buy overpriced and uneconomical fossil fuels are not the words of a free market thought leader. I suppose you support this crony capitalism peak?

        Reply
      2. 2slugbaits

        PeakTrader Trump is many things, but he’s definitely not a free trader. Trump is an old fashioned mercantilist. How else do you explain his obsession with bilateral trade deficits? How else do you explain his belief that the benefits of free trade must be conditioned on fair trade? If he really understood the free trade argument, then he’d also understand why worrying about bilateral trade deficits is a waste of time. If he really understood the free trade argument, then he’d know that whether or not your trading partners engages in protectionist policies is irrelevant to the kinds of free trade policies we should be pursuing. If Canada wants to impose tariffs on US produced dairy, then that’s Canada’s problem, not mine. And I don’t think you’re a free trader either. You like the label, but it’s clear you don’t understand the arguments for free trade; otherwise you wouldn’t be making the kinds of comments that you’ve been making lately.

        As to Trump’s base, I would agree that Trump expresses their feelings about free trade; but that’s because his core base is largely ignorant of economics. Understanding free trade is not something that you’re born knowing. It’s not instinctive or intuitive. You had to have had at least some formal training in economics in order to understand the free trade argument. It’s unlikely that core Trump voters with a 12th grade education have that kind of formal training. That’s why they’re vulnerable to demagogues like Trump. Trump’s base is fighting a rearguard action. Globalization is a done deal, like it or not. And many don’t. And many are quite right to blame at least some of their deteriorating economic condition on globalization and competition from foreign workers. But throwing up tariffs is a losing strategy. Instead of wearing MAGA hats and cheering racist nonsense at Trump rallies, they should be demanding higher taxes on those who are globalization’s winners and then using that tax revenue to help retrain, re-educate, relocate and resuscitate those who have lost out. A good template might be Pittsburgh, which was a city knocking on death’s door before it gave up the vain hope of reliving the good old days at the steel mills.

        Reply
        1. pgl

          Trump appears to hate Canada and other members of the G6. But he loves the Chinese and Putin’s Russia. If PeakIgnorance thinks this a free markets agenda – what has he been smoking?

          Reply
          1. PeakTrader

            Pgl, your ignorance knows no bounds. You’re only interested in little facts with lots of fake news for your false narratives.

            “Non-tariff barriers (NTBs) can decrease market opportunities for U.S. exports and provide unfair competitive advantages to EU products. These barriers take the form of restrictive licensing, permitting, and other requirements applied at the border, but also barriers behind the border, such as unwarranted technical barriers to trade and sanitary and phytosanitary measures. Through T-TIP, we seek to identify ways to reduce costs associated with regulatory differences by promoting greater compatibility between our systems, while maintaining our high levels of health, safety, and environmental protection.”

            https://ustr.gov/trade-agreements/free-trade-agreements/transatlantic-trade-and-investment-partnership-t-tip/t-tip-2

        2. PeakTrader

          2slugbaits, you have no credibility believing “Trump’s base” doesn’t understand economics and are racists, particularly given the poor economic performance under the Liberal/Socialists and the long history of racism in the Democrat party.

          You’re fine with all kinds of unfair trade barriers and Intellectual Property Rights taken away, along with taking away Constitutional Rights. If you really want free trade, the U.S. should be able to play under the same set of rules as the E.U. member states and U.S. rules should be roughly equal to E.U. rules. The U.S. shouldn’t be in a trading disadvantage.

          Reply
          1. pgl

            Yes – none of us have your credibility or supreme intelligence. You know PeakPathetic, if you did not write this BS, The Onion would have to fill in. Keep the most incredibly stupid comments EVER coming. WE LOVE IT!

          2. 2slugbaits

            PeakTrader You’re confusing issues. Let me help you out. I don’t want to be too hard on you because you’ve not had any formal training in economics, so I’ll keep it really basic. Okay? No one disputes the claim that we would be better off if other countries removed their trade barriers. Are you with me so far? Here’s what you don’t seem to get; we’re still better off not responding with our own tariffs. Our not having trade barriers should not be conditional on other countries not having trade barriers. If you don’t understand this, then you don’t understand the argument for free trade. Let me make this really, really, really simple. Suppose our welfare without any trade (i.e., autarky) is worth a value of 5. Suppose that our welfare with free trade everywhere is worth 10. I think we both agree that we’re better off. But suppose our trading partner puts up some tariff that reduces our welfare to only 8. You seem to be suggesting that we should respond with our own tariff that would take us down to 5. I’m saying that 8 is greater than 5. So even though we’d be better off if the other country didn’t have trade barriers, that does not mean we should respond with our own trade barriers. I’m not interested in defining “fairness” in terms of cutting off my nose to spite my face, which is how you seem to see things.

            You’re fine with all kinds of unfair trade barriers…
            No, I’m not fine with trade barriers. I’d rather there not be any trade barriers; that’s why I’m opposed to Trump’s tariffs. You seem to be the one advocating tariffs, not me. Sorry, but you’re living in an Alice Through the Looking Glass world in which up is down, black is white, and Trump’s tariffs are not trade barriers.

            the long history of racism in the Democrat party.
            Let me correct you. I think you meant to say “the long ago history of racism in the Democratic party.” You could have brought that comment up to current times by adding “…and today’s racism in the Repugnant party.”

          3. PeakTrader

            2slugbaits, you’re wrong as usual. I have degrees in economics and passed the comp exams in International Trade. It’s not surprising you’re so wrong on so many fronts. Obviously, you don’t understand why trade barriers (it’s not just tariffs) are bad, only that they are bad, which any Econ 101 student can tell you. At least, you agree with me, although by disagreeing and creating more false narratives. Obviously, the status quo can be improved, but you’re willing to accept an inferior position, because you’re afraid trade disputes may turn into a trade war. It may not and instead result in real free trade agreements. Wishing trade barriers would go away is not a strategy.

          4. PeakTrader

            Pgl, what’s really stupid is assuming everyone who voted for Trump is economically ignorant and racist. You deserve the Stupid of the Century award.

          5. 2slugbaits

            PeakTrader No one believes you had any formal training in econ. Just give it up. No one is buying it.

            You still don’t get it. What the other country does shouldn’t affect what we do. As best I can tell you seem to be hanging your hat on Trump’s ability to bluff his way into getting other countries to lower their trade barriers. Howz that working out so far? Looks to me like those other countries have called Trump’s bluff. They’ve figured him out. Trump is a lousy dealmaker. Always has been. That was the point of the Larry Summers blog post. You’ve hitched your wagon to a loser. Forget the “MAGA” hat. Save letters and just have a one bit “L” above the brim.

          6. PeakTrader

            2slugbaits, your only comment that’s close to being correct is we have no control over foreign economic policies.

            If you’re willing to put up a $1,000 bet, I’ll show you my degrees in economics.

            Here’s your chance to being proved correct for once 🙂

      3. pgl

        We were worried that you fell off the face of the earth. Welcome back as we missed your fact free rants. Trump is a free trader? Oh that made my laugh too hard.

        Reply
    1. pgl

      Thanks for the reminder. The real purpose of that 2002 was to re-elect Bush-Cheney. And it worked in 2004. So after that the tariff went away.

      The real reason for Trump’s trade policy may also be to garner more votes in places like Pennsylvania.

      Reply
    1. 2slugbaits

      Did you hear that our G7 partners have quietly renamed it the “G6 Plus One”? And then we’ve got Putin’s Pet Poodle arguing for a revived G8…or should I say “G6 Plus Two”?

      Reply
      1. PeakTrader

        Greater competition for the G-6 citizens would be good for them. They may wake up and actually go to work, rather than rely on generous government benefits – something the leftists and socialists don’t seem to understand.

        Reply
          1. pgl

            I disagree. None of them are up at 3am spreading lies on the Twitter the way Trump does.

          2. PeakTrader

            They do work hard to keep jobs, make U.S. producers pay for the privilege of selling their good in the E.U., and collect revenue for their giant social programs.

          3. PeakTrader

            Here’s what someone from Britain, who moved to Denmark, said – Trump should help the remaining Western Europeans – the U.S. and E.U. will both benefit from greater competition in the globalized (i.e. free trade, open markets, and unrestricted capital flows) world.

            “The Nordic Countries “success story” economies are a joke. I’ve been living here the last couple of years after being dragged here by my wife, and trying to run your business here is tough. It just isn’t a business friendly place at all. Taxes in Denmark are 60-odd % as soon as you have the cheek to earn more than £35,000 a year! My guess is that 50-70% of the population are in government jobs, and they rely heavily on exports of oil, timber and fish in order to generate the foreign earnings to pay for it all.”

        1. pgl

          Who is subsidizing the French, the German, the Brits. Certainly not us. Oh wait – you must mean the subsidies from Putin. OK – let Putin in the G7 and kick out the moron named Trump. That way the morons who kiss Trump’s ring will not be heard in future G7 sessions. Sorry PeakPathetic – you have lost your seat at the table.

          Reply
  14. c thomson

    Wow! – what magnificent TDS! – congrats to all concerned! – reminds me of our 9th grade debate club

    Reply
  15. Barkley Rosser

    Bruce Hall claims that economic security leads to national security, but latest estimates suggest that for every job gained in the aluminum and steel industries from the tariffs will cost 16 jobs in the rest of the economy where higher cost steel and aluminum inputs will damage their productivity, with this including the automobile industry, which Trump also seems to think is a national security issue. of course, those gained jobs are heavily in Midwestern swing states crucial to his getting elected, while those others lost will be scattered more broadly, as will be the consumers paying higher prices for a variety of goods.

    Regarding Canada, Trump has mostly rather stupidly emphasized bilateral trade balances. But this does not work with Canada, with whom most reports show the US having a modest trade surplus. For a very long time Canada has been the closest ally of the US, helping us out in such situations as getting hostages out of Iran and much else. No wonder Trump has had to make an even bigger fool of himself than usual by invoking the burning of the White House by the British in the War of 1812, As it is, what went down between Canada and the US in that war were failed attempts by the US to invade Canada and annex parts of it, but I suspect Trudeau has held back from pointing this out to the insane Trump.

    Reply
  16. pgl

    The farmers of Idaho are being interviewed by MSNBC. They want Mexicans to buy more of their potatoes for obvious reasons. But a Trump trade way will likely mean Mexico will buy less of their potatoes. Canadian potatoes will sell more to the Mexicans.

    So who will buy Idaho potatoes? I will of course. I love potatoes and I look forward to the lower prices. Trump is indeed a GENIUS. Unless one is a potato farmer in Idaho!

    Reply
  17. Barkley Rosser

    Of course there is the more shocking matter not being emphasized as much as it should be of Trump accepting a bribe from the Chinese in the form of half a billion dollars into the Trump Organization in Indonesia just days prior to Trump suddenly deciding that jobs of workers at ZTE needed saving. While it is patently ridiculous to say that imports from Canada are a national security threat, ZTE had been declared a national security threat by the Pentagon, with them advising people not to buy ZTE phones due to their potential use for spying, not to mention ZTE violating sanctions against both Iran and North Korea. This is just flamingly blatant, made all the more so as Trump and his people are bragging about a settlement with ZTE.

    Really, how much worse can this get. Jail Trump!

    Reply
  18. Not Trampis

    The national security argument is specious. Protectionism appeals to the left ( I am putting my Dan Mitchell ‘ mask on here, because they think it will help the economy and manufacturing industry which is essential.
    It is claptrap. St Rronnie of Reagan blew up the colour TV industry way back when when he did something similar. ( How come Republicans love protectionism so much.

    Bush Jnr imposed protective measures as well. They were advocated by political operatives not his economic advisors and he had to scrap them not too long after.

    A modern economy never needs protective measures.

    Trump is not clever ( euphemism) and neither are his advisors.

    Be scared, be very scared

    Reply
    1. PeakTrader

      Trump knows what cards he’s holding and knows how to play them. You just don’t like the way he’s playing, which is rough and quick. Many complacent leftist and socialist politicians, who had their ways with past U.S. Presidents, have been jolted into reality. The U.S. will no longer support their underfunded defense budgets, for example. Of course, they don’t like it. The E.U. countries need to make some changes in international trade. I’m sure, the changes will benefit them and the U.S..

      Reply
      1. pgl

        Larry Summers disagrees with your latest stupid rant and wrote an impressive post on why his strategy is stoooopid. Of course PeakStupidity just ducks what he wrote as he tweets more of his usual BS.

        BTW – we have been waiting for you to tell us what you got your economics degree for months. You cannot even tell us who wrote your text books. Oh wait – I know. Dr. Seuss!

        Reply
      1. Not Trampis

        guess what happens to costs when you whack a large tariff on steel which is your main input. costs blow-out.

        Reply
  19. -E

    Guys, I was wondering about the massive amount of tax payer money that is directed to the US agricultural sector. Is that done with national security in mind? Hear me out.

    Food is heavily subsidized so that Americans become overweight and obese. But others will wonder if American men have been having so much sex with each other that they finally got pregnant. Like as in really pregnant: 7 months in with quadruplets.

    This will deter invading armies as the enemy will ascertain that the remaining slimmer men will mob invading soldiers hoping to have lots of man sex and ultimately get pregnant.

    Look at President Tweet. He has gorgeous man b***s and huge appealing hips. Any red-blooded man would want to tap that fine piece of masculine meat. No wonder President Tweet is worried about foreigners taking advantage of handsome, red hot Americans like himself.

    It has taken me a long time, but I finally figured out why the US socialist system is so incredibly generous with its agricultural subsidies.

    Reply
    1. MRP

      The capitalists in San Juan Norte are to be left to their own devices. Who is your padre is of no consequence?

      Does that qualify as a proper econbrowser post?

      Reply
    2. Moses Herzog

      Surprised Menzie let this one in. I guess I’m partly to blame for this or something.

      I mean people used to think Letterman was rude. But if you looked at it there was usually some underlying reason for it. Does America overly subsidize Agriculture?? YES, undeniably. But it’s hard to make a connection between that and….. I’m starting to wonder if the Russians on Twitter are syphoning off to the blogs now?? This smells of either a Russian, East European, or Chinese IP address. Again, I would nearly pay Menzie to know the IP location, but this smells of Russia.

      Reply
      1. Menzie Chinn Post author

        Moses Herzog: You’re right — there’s some profanity so have edited slightly. While -E’s comment is bizarre, it is no more bizarre than some other recent comments (statistical theory is nonsensical, we run a trade deficit with Canada, there is no collusion, etc.)

        Reply
        1. Moses Herzog

          Menzie, it’s actually pretty hypocritical of me to discuss the issue of vulgarity on a blog. I hope it goes without saying (but I’m going to say it anyway) I have deep respect for you on that front (and really ALL fronts). I step right up to that line of taste, because of my extreme anger towards Trump and other people I deem selfish and destructive towards others. You’ve probably stepped beyond your own personal lines of taste to placate this middle-aged grump (me) and I appreciate it. You’ve saved me from myself in the “bounds of good taste”.

          Reply
      2. MRP

        u realize u just wanted me out? Im summering close to wisky. Damn ruskies.

        Is that about the quality of your multiline diatribe?

        Reply
  20. PeakTrader

    What is Trump really up to? – Is he actually a free-trader?

    The real Donald Trump

    “Why isn’t the European Union and Canada informing the public that for years they have used massive Trade Tariffs and non-monetary Trade Barriers against the U.S. Totally unfair to our farmers, workers & companies. Take down your tariffs & barriers or we will more than match you!”

    7:15 PM · Jun 7, 2018

    https://mobile.twitter.com/realDonaldTrump/status/1004909785547001856

    Reply
    1. pgl

      That is what he tweeted but we know the real deal. If someone in Europe lines the pockets of his daughter, he will line their pockets. Hey China figured this one out and now Ivanka is a much richer person!

      BTW – CoRev’s latest just avoids the topic as he falsely accuses me of evading questions he asks but never answered. I know he will likely duck this too but here goes.

      I noted that Lean Production was invented by the Japanese automobile manufacturer Toyota. Given all CoRev bloviates without saying anything substantive, I have to guess at what he really thinks. Menzie has already asked him if it is OK that we “steal” that intellectual property. CoRev did not answer that either.

      But I get the sense that he does not think Lean Production is really a valuable intangible. Of course there are entire books written on how this production system has radically changed manufacturing for the better. Which makes me wonder if CoRev has ever run a business with more than one person working in the shop.

      Reply
  21. 2slugbaits

    PeakTrader Trump has always opposed free trade. He’s held that position going back to at least the 1990s. I suppose there are lots of reasons why he feels that way, but surely one of the main reasons is because there’s less room for wheeler-dealer horse trading in a free market. And with Donald Trump it’s all about the intoxicating thrill of closing a deal…which immediately gets renegotiated two minutes after the ink dries. That’s just who Donald Trump is. He is not a free trader. Never has been and never will be. You’re so in love with the guy that you’re going through all kinds of embarrassing mental gymnastics to try and convince yourself and others that deep down Trump really is a free trader. He’s not. He just isn’t. He’s been very plain about that for decades. And his rust belt supporters don’t want him to be a free trader. One of the reasons they voted for him was because he promised that he wouldn’t be a free trader.

    And anyone who believes that Trump would “more than match” any country that takes down its trade barriers is probably stupid enough to sign up for courses at Trump University. Time to turn on your BS detector.

    Reply
    1. PeakTrader

      2slugbaits, reducing unjustified and unfair trade barriers will increase global trade, and most likely boost U.S. exports.

      And, do you really expect me to accept the 100% negative comments about Trump, no matter how ridiculous. If they were 50% negative, I may agree with much of it.

      Reply
      1. pgl

        Our exports will likely rise but so will our imports. If the latter effect dominates the former, Trump will whine this is “unfair”. Which will lead to more tariffs not less as long as this moron that you so worship remains President. I would ask what part of this do you not understand? Of course the answer is all of it.

        Reply
    2. pgl

      Does Trump University teach graduate courses in economics? Maybe that is where PeakIgnorance got his degree!

      Reply
  22. pgl

    It is self evident that PeakIgnorance never took a graduate course in international economics as he is clearly ignorant of the basic Mundell-Fleming IS-LM model. Bear with me. The Euro floats with respect to the dollar so what would be the effect of the Europeans imposing trade barriers against U.S. exports to Europe? Export demand would be lower but the net impact on the trade balance would be zero as the dollar would devalue with respect to the Euro reducing our imports from Europe.

    PeakIgnorance thinks Europe should let us export more to them which would make Boeing happy. But wait – that would lead to a dollar appreciation which means we would import more from Europe. This would angry U.S. Steel to no end.

    ANYONE who has studied international macroeconomics gets this simple point. But not PeakIgnorance. Of course they do not teach Mundell-Fleming at Trump University.

    Reply
    1. PeakTrader

      Pgl, do you have any idea how the equilibrium shifts, including changes in income and prices, when one country imposes protectionist trade policies. Which way does it shift?

      Reply
  23. joseph

    PeakTrader: “reducing unjustified and unfair trade barriers will increase global trade, and most likely boost U.S. exports.”

    Exactly what trade barriers are you referring to? Canada and EU tariffs on U.S. exports are quite small, around 2%. Likewise, U.S. tariffs on Canadian and EU exports are quite small, around 2%.

    Can you quantify the “big boost” you expect from removing the 2% tariffs? And if the U.S. in reciprocity removes its tariffs, will it likewise create a “big boost” to imports? Can you quantify the net effect on the trade balance?

    Reply
  24. CoRev

    Joseph, the term was trade barrier not just tariffs.
    “Examples of Trade Barriers

    Tariff Barriers. These are taxes on certain imports. They raise the price of goods making imports less competitive.
    Non-Tariff Barriers. These involve rules and regulations which make trade more difficult. For example, if foreign companies have to adhere to complex manufacturing laws it can be difficult to trade.
    Quotas. A limit placed on the number of imports
    Voluntary Export Restraint (VER). Similar to quotas, this is where countries agree to limit the number of imports. This was used by US for imports of Japanese cars.
    Subsidies. A domestic subsidy from government can give the local firm a competitive advantage.
    Embargo. A complete ban on imports from a certain country. E.g. US embargo with Cuba”.

    Non-Tariff Barriers are often forgotten, but are common subtle ways to limit trade.

    Reply
    1. Menzie Chinn Post author

      CoRev: Excepting agriculture, my impression is that NTBs converted into tariff equivalent measures are pretty comparable to tariff barriers, for advanced economies like Canada and the EU. Now, if we start talking ag, we have to think about what we in the US do with respect to ag subsidies, sugar quotas, etc. before we can credibly complain about NTBs in Canada and EU ag restrictions. (Not that I’m defending them — but let he who is without sin cast the first stone).

      Reply
      1. CoRev

        Menzie, my understanding is that the Canadian trade barriers are primarily INTER-PROVINCIAL, each province protecting its own products from both inside and outside competition. I don’t know how NTBs will work well in that environment. Even without NTBs, full open trade, a private company trading would be restricted by the Canadian partner under those inter-provincial agreements/restrictions. Reminds me in a way of Europe in the early days under the EC.

        I can’t think of an equivalent in the US. One product being limited from import from one state to the next. I’m sure there are some, for instance for differing safety concerns, but they are not so common or we are so accustomed to them they are just part of our daily lives. The only example i can think of is states limiting import of wild game for Chronic Wasting Disease and imports of some products from states to control spread of similarly infected products.

        Restrictions on Genetically Modified may be the long range end game in this whole Ag. tariffs issue. Dunno, just conjecturing here.

        Reply
          1. CoRev

            I think I have presented another unknown to the conversation with interprovincial barriers. I think your dubiousness re: quantitative magnitude is just a shot from the hip without any numbers.

            Your reference touches on some of the issues being discussed, but is too general to be pertinent for this article’s specific policy issues. It also doesn’t consider interprovincial barriers trade barriers we’ve discussed.

  25. joseph

    Corev, don’t keep us in suspense by speaking in generalities. I asked PeakTrader to be specific and quantify the trade barriers between the U.S. and Canada and the EU — on both sides. Trump says it is unfair. Give us some numbers to support the “unfairness.”

    Reply
    1. CoRev

      Joseph, not going to do your research for you. That argument is between you two. I choose not to be included.

      Reply
  26. joseph

    PeakTrader, Trump is making a big deal about Canadian dairy tariffs. But there is a glut of milk on both sides of the border. It’s rather pointless to argue about a balance of trade in milk when both sides are producing more than they can consume.

    But if you insist, then lets talk about the subsidies for dairy farmers in the U.S. — price supports and SNAP subsidies. Are U.S. dairy farmers prepared to give that up?

    And most U.S. dairies are only viable because of farmers illegally employing undocumented immigrants. You seem to be a law-and-order guy. Should farmers go to jail for breaking the law? Freely violating the law is a tremendous subsidy to U.S. dairy farmers.

    And you claim to be a free-market guy. How about you give green cards to those illegal employees working for the dairies so that they can freely trade their labor on the market instead of being captive to illegal employers.

    Reply
  27. joseph

    Trump just now: “Based on Justin’s false statements at his news conference, and the fact that Canada is charging massive Tariffs to our U.S. farmers, workers and companies, I have instructed our U.S. Reps not to endorse the Communique as we look at Tariffs on automobiles flooding the U.S. Market!”

    That’s the deal-maker-in-chief calling his counterpart a liar. And perhaps Trump is not aware that Canada is the world’s largest importer of U.S. made cars, more than double any other country in the world. So how’s that going to work out for you.

    Yes, more cars are traded from Canada to the U.S. than from the U.S. to Canada but almost all of those are U.S. owned brands. And more than just finished cars, there is a complex trade of auto parts between the two countries. Trump is a blathering idiot.

    And no word on exactly what those “massive Tariffs” are except presumably milk. Perhaps PeakTrader can enlighten us.

    Reply
  28. joseph

    And Trump follows up: “Our Tariffs are in response to his of 270% on dairy!”

    Oops, Trump outs himself as a liar when he said the tariffs were for national security reasons.

    This is really the dumbest president ever.

    Reply
    1. 2slugbaits

      He really is an idiot. I disagreed with most of the stuff Bush 43 did, but at least there were a few areas where I thought he was pretty good. Not many areas, but a few. And I never thought Bush 43 was the sharpest knife in the drawer, but at least he knew he wasn’t. Trump is a complete ignoramus who actually believes his own press…maybe it’s because he dictates his own press just like he dictates his own medical reports. And I loved that photo of Angela Merkel lecturing Trump and our idiot president sitting there pouting with his arms crossed.

      All this reminds me of the John Candy movie “Canadian Bacon.”

      Reply
  29. joseph

    President of Canada’s auto parts industry association responding to Donald J. Trump:

    “So…. you’re suggesting using a National Security regulation to charge $8B in tariffs to *American* consumers who buy 1 million cars made by American automakers, containing 60% American parts content, because of the price of milk in Windsor?”

    Reply
  30. PeakTrader

    Trump has called for elimination of all trade barriers:

    https://www.google.com/amp/s/amp.cnn.com/cnn/2018/06/09/politics/trump-g7-tariffs-trade/index.html

    Also:

    “US President Donald Trump may actually have a point when it comes to unfair taxes on US goods coming into Europe. That is the finding of a new study by a leading German think tank…“The EU is by no means the paradise for free traders that it likes to think,” said Gabriel Felbermayr, director of the ifo Center for International Economics, a division of the Munich-based ifo Institute. The European Union actually comes off as the bigger offender when compared to the US, he added. The unweighted average EU customs duty is 5.2 percent, versus the US rate of 3.5 percent, according to ifo’s database.”

    https://www.google.com/amp/s/global.handelsblatt.com/politics/trump-may-point-eu-tariffs-ifo-says-899083/amp

    Reply
      1. PeakTrader

        Menzie Chinn, it seems, there may not be much difference between weighted and unweighted average in large numbers. Don’t know if the data justify unweighted average. Also, the WTO concludes tariffs alone are higher for U.S. exports to the E.U. than E.U. exports to the U.S.. Of course, tariffs between E.U. member countries are much lower or non-existent.

        Reply
      2. CoRev

        Menzie, it might have someething to do with the Canadian Regulation restricting quality rankings on imported Ag products. Although import is allowed, but then limiting ranking of those products to the lowest/lower quality ranks limits pricing for them.

        Reply
    1. 2slugbaits

      PeakTrader So even if all that’s true, how does that justify Trump imposing tariffs? How does a trade war make us better off? That’s the question I’ve asked multiple times and it’s the question you keep refusing to answer. And how is possible “unfairness” a national security issue?

      Reply
      1. PeakTrader

        2slugbaits, I think, Trump wants to lower or eliminate trade barriers, because that would increase U.S. exports, and our trading partners are resisting. The U.S. has been at a competitive disadvantage with steel and aluminum production, because of dumping, which lowers the world price and puts U.S. producers out of business.

        Reply
        1. 2slugbaits

          PeakTrader You still didn’t answer the question. I asked you to explain how a US tariff makes us better off even if it’s true (which it isn’t) that our allies are misbehaving in the way Trump claims. You keep saying that Canada and the EU are bad actors and putting US businesses at a disadvantage. Okay, for the sake of argument let’s say all that’s true. How does imposing a tariff fix that problem? How are we made better off? We aren’t. That’s the right answer and it’s the one you keep bobbing and weaving to avoid answering. And then you invent this fantasy that Trump is really a free trader despite over 30 years of his strongly opposing free trade.

          The U.S. has been at a competitive disadvantage with steel and aluminum production

          Why are you so obsessed with protecting one narrow sector of the economy? If Canada is dumping steel and aluminum, then doesn’t that put American industries that use steel and aluminum at a competitive advantage? And how do you know they’re “dumping” just because their price is lower? The whole point of international trade is to take advantage of price differences between countries! And notice how you and Trump keep changing your stories. Look at the title of Menzie’s post. It’s about Trump’s claim of imposing tariffs on steel and aluminum because of national security concerns. And since that lie won’t fly Team Trump has moved onto another excuse about how mean and unfair our allies have been. When will you wake up? Trump has always believed in tariffs. He promised his voters that he’d pull out of TPP. He promised his voters that he’d tear up NAFTA. He promised his rust belt voters that he’d impose tariffs on steel and aluminum. And he promised his voters that he’d get tough with China…which he did until China offered King Donald and Princess Ivanka large bribes, which they gladly accepted.

          If Trump was really concerned about trade deficits and putting US companies at competitive disadvantages, then he wouldn’t be blowing up the budget deficits. The US is running a large current account deficit because we’re running large budget deficits, not because of Canadian and EU tariffs on US products.

          Reply
          1. PeakTrader

            2slugbaits, obviously, you didn’t comprehend my answer. When our trading partners won’t equalize their tariffs, then the U.S. raises its tariffs to pressure those countries to lower their tariffs. Sometimes, words or threats don’t work.

            Entire U.S. industries have been offshored to other countries. The same can happen with steel and aluminum. Why does Japan still grow rice when it’s very expensive?

        2. 2slugbaits

          PeakTrader And you still haven’t answered the question. I fully comprehend what you are trying to say; it just doesn’t answer the question I asked. You are hitching your wagon to some unjustified belief that Trump really wants to lower trade barriers all around. That’s a fantasy of your own making because you don’t want to admit the truth. Trump has said many, many, many times over at least 30 years that he opposes free trade. That G7 statement was a smokescreen. Trump’s core base certainly doesn’t want him to lower tariffs and trade barriers. Face it, you’ve been duped by Trump. Trump’s business strategy is keep an eye out for that sucker who’s born every minute. You’re it.

          Reply
  31. joseph

    Hmm. Do you wonder about the import of the adjective “unweighted” before the word “average”?

    If PeakTrader needs a further hint, if the tariff on pencils is 49% and the tariff on automobiles is 1%, the unweighted average tariff is 25%.

    According to the WTO Canada’s overall weighted tariff is 3.1%. It is 3.0% for the EU and 2.4% for the U.S. These differences are so tiny as to be meaningless. Certainly not worth a trade war.

    Reply
  32. joseph

    PeakTrader: “Of course, tariffs between E.U. member countries are much lower or non-existent.”

    Trick question: What’s the tariff between California and Texas?

    Reply
  33. CoRev

    The NYT has an article relevant to this discussion. A pull quote:
    “As for Canada, which has been most strident in its criticism of the United States, it has for decades dumped its lumber into the United States, threatening lumber industry jobs in Alaska, Oregon and other states. It erects high non-tariff barriers that harm our wheat and barley growers and place United States beer and spirits exporters at a disadvantage. Wisconsin dairy farmers know all too well that Canada unfairly manipulates its dairy prices to protect its dairy farmers, hurting United States dairy exports to Canada and other markets around the world.””
    Another having to do with autos:
    “Consider Germany, with which the United States had a trade deficit in goods of about $64 billion in 2017. While the United States tariff on cars made in Germany and elsewhere in the European Union is 2.5 percent, the European Union tariff is four times as high, at 10 percent. No wonder Germany sells us three cars for every one we export to Germany.”
    https://www.nytimes.com/2018/06/08/opinion/trump-trade-g7-russia-putin-navarro.html?rref=collection%2Fsectioncollection%2Fopinion

    The article includes other trade barrier problems and countries.

    Reply
      1. CoRev

        Menzie, I almost preambled the reference with how the papers, especially in their opinion pages, were printing more articles in support of Trump. Maybe Ii should have.

        Do you dispute his numbers and reasoning?

        Reply
    1. 2slugbaits

      CoRev Good to know that we don’t impose any tariffs or quotas on Canadian exports of dairy products. Oh wait, we do:
      https://www.motherjones.com/kevin-drum/2018/06/us-trade-policy-on-dairy-is-simple-we-basically-allow-no-imports-at-all/

      You could say the same thing regarding sugar or cotton or peanuts or corn or soybeans or wheat or just about any ag product. And maybe Germany has trade surpluses because they don’t have budget deficits. Of course, in Germany’s case the world would probably be a lot better off if it didn’t run chronic budget surpluses, but that’s another matter.

      Reply
      1. CoRev

        2slugs, do a little research. “we-basically-allow-no-imports-at… just about any ag product. ” In your list above we do import sugar, and all kinds of other ag products. The list ag imports is long, but ever heard of coffee, Winter produce?
        “Over 44 percent of U.S. agricultural imports are horticultural products: fruits, vegetables, tree nuts, wine, essential oils, nursery stock, cut flowers, and hops. Sugar and tropical products such as coffee, cocoa, and rubber comprised just over 20 percent of agricultural imports in 2015. Imports of vegetable oils, processed grain products, red meat, and dairy products have grown significantly in recent years.”
        https://www.ers.usda.gov/data-products/ag-and-food-statistics-charting-the-essentials/agricultural-trade/

        Reply
        1. 2slugbaits

          CoRev The main topic was tariffs and trade barriers on dairy products. Obviously we import many kinds of agricultural products, but then again we’re not trying to protect the domestic coffee, cocoa and rubber markets. OTOH, we do put up some significant trade barriers against sugar because we have a very strong beet sugar lobby in Congress.

          And you took the phrase “…just about any ag product” out of context. He was saying that all nations engage in some protectionist policies for ag products. And there actually is a pretty good case for ag tariffs under some conditions because they are typically demand inelastic. This gets a bit wonky, but ag commodities are vulnerable to backward bending demand curves that can result in multiple unstable equilibria in a free market, depending on whether the income or substitution effect dominates. Under some conditions it is possible to make a coherent and economically sound argument for some kinds of tariffs. The problem is that the Trump team isn’t smart enough to understand those arguments.

          Reply
          1. CoRev

            2slugs, another arrogant response? I caught you in another exaggeration, and the best you can do is point out the subject of the article then ending with your group opinion.

            You folks are completely flummoxed by Trump. I think we have been lead too long by beta or go along to get along males, and are either threatened by an alpha male. What Trump has shown is he is a straight talking leader who follows up on his promises. The country and the world still doesn’t know how to react, although I think G6 are trying. We’ll see how it works out, but I think it will end with a split in their united front.

            You folks still don’t get his goals because he was elected as a deep felt reaction to your own. Trump is more successful in achieving his (our) goals in his 500 days than any president’s term since Reagan, our last alpha male leader. Our country is already better off in his 500 days than the past 8 years.

          2. baffling

            corev, take your alpha male, wife beating dogma back to the past, where it belongs. you do understand you simply want to run the world like an animal, right? let me give you a little clue, humans have actually evolved from the alpha male stereotype. you are living in an undesirable past. it is pathetic that even in retirement, folks like you still have the audacity to try and screw up the world.

          3. CoRev

            Baffled, wow, a defensive beta? When your beta president claimed credit for the alpha males killing Osama bin Laden did you cheer along with him? Get a clue, humans have actually evolved from the alpha male stereotype into betas, except for those alphas you so desperately need to cover your back sides.

          4. Barkley Rosser

            CoRev,

            “straight talking leader” You mean this man who not only is known to publicly lie an average of five times a day, far in excess of anything we have seen any other president do, but is also out and out taking bribes from foreign governments, something else we have also never seen another president do. Frankly, CR, you are out of your mind.

          5. CoRev

            Barkley, straight talking in telling us his intentions and then implementing what he said he intended. Doesn’t happen often in today’s political arena.

          6. Barkley Rosser

            Sorry, CoREv, just plain lying bs on your part. Are you trying to imitate Trump? The list of things he said he would do and has not and will not do is very long, even if he has followed through on some seriously dumb things he promised to do. Three he promised and will not deliver: 1) large infrastructure plan (not a damn thing and completely sidelined), 2) Mexico will pay for the wall (lol lol lol), 3) Maintain requirement for citizens with pre-existing conditions to continue be able to get reasonable insurance (just undone by recent failure of DOJ to defend against a lawsuit against ACA; this is a really big one). I could go on and on and on, but you will just focus on the handful of stupid promises he has followed through on, despite lying like no president we have ever remotely seen.

          7. CoRev

            Barkley, an extensive list of liberal wishes he has not yet gotten to or Congress has delayed. Why would Congress, especially the Dem Senators, be in delay mode? Your focus on lies is revealing, as it ignores the lies and attacks of a weaponized bureaucracy we saw in the Obama years.

            We are hours away from seeing the DOJ IG Report which should highlight these transgressions.

  34. joseph

    Speaking of Peter Navarro, here he is on the morning TV shows talking about Justin Trudeau: “There’s a special place in hell for any foreign leader that engages in bad faith diplomacy with Donald J Trump and then tries to stab him in the back on the way out the door.”

    I realize he is a former colleague so some reluctance to criticize but now he is also a Sunday TV pundit and seems fair game. What the heck happened to Peter Navarro to turn him into a crazed nationalist. Was he always that way under the surface or did he turn that way after 9/11 like many other previously reasonable people or some other PTSD trauma occurred in his life?

    Reply
  35. joseph

    Here’s more Navarro craziness: “All Justin Trudeau had to do was take the win. President Trump did the courtesy to Justin Trudeau to travel up to Quebec for that summit. He had other things, bigger things on his plate in Singapore. He did him a favor and was even willing to sign that socialist communique.”

    You see, the rest of the world, dirty communists that they are, should be grateful that Trump did them the favor of showing up at the party, even though he showed up late and left early and petulantly refused to discuss any of the issues at hand. And then refused to sign the communique because his precious feelings were hurt.

    Navarro is spouting full on Trump crazy at this point. Does this concern economists?

    Reply

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