“… the quick fix, of the “countervailing tariff,” “voluntary” restraints, and the like, will only mean higher prices for consumers in the short run, and greater distress in the long term. “Reciprocity” … notwithstanding, protectionism will only prove a temporary, and costly, palliative for inefficient industries, in a world populated by NICs, MICs and [Advanced Developing Countries].”
That’s me, writing in 1984, “Protectionism: The Rising Tide“. With the election of Joe Biden, is an end to chaotic, counterproductive tariff wars in sight? Is a more coherent, theory-consistent approach in the offing? It’s hard for me to say definitively, so let me outsource predictions (including Jeff Frankel). Cato describes the trade policy views of the CEA choices here. The USTR nominee, Katherine Tai, will be a leader in the setting of trade policy negotiation and implementation. These choices suggests a “yes” answer to both questions.
But before moving on, we should recount exactly what counterproductive policies have been wrought by the Trump tariff wars, kind of a natural experiment in stupidity since the tariffs were imposed in a way not related to the economic distress in protected sectors.
I’ll focus in my review on the the macro implications of the tariffs, reserving the negative economic impacts of trade retaliation (which are obvious and indisputable to all but the most blind) for a future post.
Since the beginning of 2018, the United States has undertaken unprecedented tariff increases, with one goal of these actions being to boost the manufacturing sector. In this paper, we estimate the effect of the tariffs—including retaliatory tariffs by U.S. trading partners—on manufacturing employment, output, and producer prices. A key feature of our analysis is accounting for the multiple ways that tariffs might affect the manufacturing sector, including providing protection for domestic industries, raising costs for imported inputs, and harming competitiveness in overseas markets due to retaliatory tariffs. We find that U.S. manufacturing industries more exposed to tariff increases experience relative reductions in employment as a positive effect from import protection is offset by larger negative effects from rising input costs and retaliatory tariffs. Higher tariffs are also associated with relative increases in producer prices via rising input costs.
See also K. Russ in this Econbrowser post.
Fajgelbaum, Goldberg, Kennedy, Khandelwal, The Return to Protectionism (QJE):
After decades of supporting free trade, in 2018 the U.S. raised import tariffs and major trade partners retaliated. We analyze the short-run impact of this return to protectionism on the U.S. economy. Import and retaliatory tariffs caused large declines in imports and exports. Prices of imports targeted by tariffs did not fall, implying complete pass-through of tariffs to duty-inclusive prices. The resulting losses to U.S. consumers and firms who buy imports was $51 billion, or 0.27% of GDP. We embed the estimated trade elasticities in a general-equilibrium model of the U.S. economy. After accounting for tariff revenue and gains to domestic producers, the aggregate real income loss was $7.2 billion, or 0.04% of GDP. Import tariffs favored sectors concentrated in politically competitive counties, and the model implies that tradeable-sector workers in heavily Republican counties were the most negatively affected due to the retaliatory tariffs.
Amiti, Redding, Weinstein, The Impact of the 2018 Tariffs on Prices and Welfare (JEP):
We examine conventional approaches to evaluating the economic impact of protectionist trade policies. We illustrate these conventional approaches by applying them to the tariffs introduced by the Trump administration during 2018. In the wake of this increase in trade protection, the United States experienced substantial increases in the prices of intermediates and final goods, dramatic changes to its supply-chain network, reductions in availability of imported varieties, and the complete pass-through of the tariffs into domestic prices of imported goods. Therefore, the full incidence of the tariffs has fallen on domestic consumers and importers so far, and our estimates imply a reduction in aggregate US real income of $1.4 billion per month by the end of 2018. We see similar patterns for foreign countries that have retaliated with their own tariffs against the United States, which suggests that the trade war has also reduced the real income of these other countries.
We estimate the price effect of US import restrictions on washers. The 2012 and 2016 antidumping duties against South Korea and China were accompanied by downward or minor price movements along with production relocation to other export platform countries. With the 2018 tariffs, on nearly all source countries, the price of washers increased nearly 12 percent. Interestingly, the price of dryers—not subject to tariffs—increased by an equivalent amount. Factoring in dryer prices and price increases by domestic brands, the 2018 tariffs on washers imply a tariff elasticity of consumer prices of above one.
We use micro data collected at the border and at retailers to characterize the effects of recent changes in US trade policy — particularly the tariffs placed on imports from China — on importers, consumers, and exporters. We start by documenting that the tariffs were almost fully passed through to total prices paid by importers, suggesting that incidence has fallen largely on the United States. Since we estimate the response of prices to exchange rates to be far more muted, the recent depreciation of China’s renminbi is unlikely to alter this conclusion. Next, using product-level data from several large retailers, we demonstrate that the tariffs’ impact on retail prices is more mixed. Some affected product categories have seen sharp price increases, but the difference between affected and unaffected products is generally quite modest, suggesting that retail margins have fallen. These retailers’ imports increased after the initial announcement of possible tariffs, but before their full implementation, so the intermediate passthrough of tariffs to their prices may not persist. Finally, in contrast to the case of foreign exporters facing US tariffs, we show that US exporters lowered their prices on goods subjected to foreign retaliatory tariffs compared to exports of non-targeted goods.
What about that much-touted (well, by Trump) Phase 1 deal with China? Here’s Chad Bown’s latest assessment (we missed the targets… big time).
The Trump Administration used tariffs as leverage, in the world’s largest consumer market, to get concessions for a more level playing field and stop dumping of aluminum and steel.
PeakTrader: Wow, great success, even before the pandemic! Ouch, look at the data…
https://econbrowser.com/archives/2020/02/iron-and-steel-primary-production-employment
Menzie Chinn, your chart shows Trump stopped the steep decline in employment – the purpose was a more level playing field, not a completely level or fair playing field, and a response to China’s dumping.
PeakTrader is Mr. Magoo?! Do you have a clue what that orange line was. Yea – we had a strong economy in the first Trump year thanks largely to the FED – not Trump’s tariffs. What happened after the tariffs were imposed?
This has a fact packed discussion of developments in the US steel sector:
https://www.factcheck.org/2019/08/trumps-steel-industry-claims/
The story is interesting even if it was written to debunk some of the wild claims by Trump sycophants like PeakCheerleader.
PeakTrader: You know the section 232 tariffs barely touched Chinese steel imports because…Chinese steel was already affected by antidumping and countervailing duties…
Part of this prior post mentioned something called Cascading Trade Protection which was raised in this paper:
https://www.sciencedirect.com/science/article/abs/pii/S0022199617300727
In a world with increasingly integrated global supply chains, trade policy targeting upstream products has unintended consequences on their downstream industries. In this paper, we examine whether protection granted to intermediate manufacturers leads to petition for protection by their downstream users. We first provide a simple model based on the quantitative framework of Ossa (2014) which identifies the key factors and their interactions that cause cascading protection to motivate our empirical analysis. Then, we test our model by identifying the input-output relationships among the time-varying temporary trade barriers of the US using its detailed input-output tables. As predicted by the theory, we find that measures on imported inputs increase the likelihood of their downstream users’ subsequent trade remedy petition over the 1988–2013 period. Moreover, our simulation exercise shows that cascading protection can cause additional welfare losses, and hence we propose that trade policy investigations should take vertical linkages into account.
If that was his plan, it failed miserably. BTW – I challenge your statement that we consume more steel and aluminum. Ever heard of China? And why are you always totally incapable of providing reliable sources of data?
The most idiotic thing about the import taxes on aluminum and steel is that even if it slightly help that sector it is a big drag on our exports of products that are made with aluminum and/or steel. Every producer of those product now face an increased cost and become less competitive in the world markets (including against foreign competitors in the US market). No surprise that our trade deficit has increased.
Exactly. But Wilbur Ross tried to deny the importance of this effect by holding up a can of Coke and a can of Campbells Soup noting that the impact on their prices from higher steel and aluminum prices was quite small. Just imagine dinner time at the Ross house where they worry about all that metal they are consuming with their soup and soda!
Peaky really needs to check this document out:
https://www.worldsteel.org/en/dam/jcr:96d7a585-e6b2-4d63-b943-4cd9ab621a91/World%2520Steel%2520in%2520Figures%25202019.pdf
The cover is NYC’s incredible Oculus at the World Trade Center. We did consume some steel making this but check out the data and notice how much steel China uses v. how little we consume.
And I guess Peaky is so uninformed to know that half of the world’s aluminum smelters are in China. Why? Because they import alumina and then convert it for their massive aluminum consumption.
So when Peaky claims the US is the world’s largest market for these two products – he may have eclipsed the other Usual Suspects for the dumbest comment of all time!
the war on steel and aluminum was stooopid. the steel and aluminum industries did not even want this fight. they were damaged by trump. silly boy, peak loser. that is why trump lost the steel and aluminum swing states.
“A key feature of our analysis is accounting for the multiple ways that tariffs might affect the manufacturing sector, including providing protection for domestic industries, raising costs for imported inputs, and harming competitiveness in overseas markets due to retaliatory tariffs.”
Raising the costs of imported tariffs! Your warned us early on to review our notes in the Effective Rate of Production.
And of course the increase in the price of washing machines – which JohnH is convinced is fake news as he actually thinks Lowe’s is taking it on the chin in terms of their high profit margins. He even finds some woman in the retail sector to misrepresent what the research actually says. Go figure!
“we demonstrate that the tariffs’ impact on retail prices is more mixed. Some affected product categories have seen sharp price increases, but the difference between affected and unaffected products is generally quite modest, suggesting that retail margins have fallen.”
So, consumers did not get slammed, as pgl argued, parroting the corporate media’s hysteria about the dire consequences of the tariffs. And China did not pay for the tariffs as Trump claimed.
Sounds about right.
JohnH: The fact that pgl referenced Effective Rate of Protection in his comment meant he was referring to consumers in general, i.e., those who purchase imported goods.
Something tells me that JohnH never read your earlier post – which BTW was excellent. Which of course means JohnH would not understand it even if he read it.
Much of the analysis I have seen does not distinguish between purchasers of intermediate goods consumers as end users. EFT looks at the various steps of the value chain.
However, the corporate media in its sensationalist reporting about the dire consequences of tariffs has seemed to have focused entirely on consumers as end users. I have been concerned about the exaggeration of those claims in articles which have often too often included quotes from economists. That the damage to consumers (end users) pocket books has been wildly exaggerated now seems obvious, though pgl cannot refrain from claiming otherwise.
But the real question is: :Shouldn’t more economists have used EFT analyses early on to be more proactive in countering claims that intimated that a 25% increase in tariffs meant a 25% increase in end user prices?
JohnH: I am sorry. I am not familiar with “EFT” in this context.
If you know the tariff at each point of value added chain and the amount of value added, is it not a simple matter to calculate the theoretical impact of the tariff on the final price? It is hard to imagine a case where a tariff of 25% would lead to a 25% increase in value added, because the final value is added in the United States (marketing, distribution, and overhead) and amounts to a significant portion of the final selling price.
If these calculations are not done, it is easy to understand how economists could buy into the notion that a 25% tariff leads to a 25% price increase to the final end users. However, these calculations are done every day in corporate America. They are known as product P&Ls and are an important part of pricing decisions.
Obviously EFT normally means electronic funds transfer (and I obviously know Menzie is aware of this as well). And I know JohnH didn’t pull this “out of the air”. What I am more curious on and wish JohnH would enlighten us on was the news source or media source that he was using that connected EFT to value chains and the effects on prices??? JohnH, can you let us know what your source was for that?? I am not doubting you got it from somewhere, but honestly just wanting to know the source/media you got it from???
Oh wow, in an effort to bolster his incompetent pal, Moses Senior weighs in and completely crashes both of them with his massive ignorance and stupidity.
No, Moses, “EFT” does not mean “electronic funds transfer,” and your claim that you “obviously” know that Meinzie “is aware of this” is what really brings both of you crashing down in a pile of ignorant stupidity. If Menzie knew this, he would not have asked the question
As it is, “EFT” stands foe “Emotional Freedom Techniques,” nothing to do with eocnomics, much less international trade, at all. You probably confused it with “ETF,” which stands for Exchange Traded Funds, which at least are in the ball park of economics and finance, but not international trade, per se.
What is obvious to anybody who knows anything about international trade is that probably JohnH got this confused with the Effective Rate of Protection, which Menzie mentioned for good reason. Based on JohnH’s mumblings about value chains and so on, it looks like that is what he has been trying to get at, but ignorantly called it “EFT.” Then, Moses Senior, you weighed in with your rank nonsense to bring both of you crashing down into a heap of ludicrous ridicule. Wow.
“Much of the analysis I have seen does not distinguish between purchasers of intermediate goods consumers as end users.”
Well that is because you only ready tabloid trash skipping reading the actual research the tabloid trash misrepresents. And yet you are so sure that retail profits bore the incidence of these tariffs and not the consumer.
I need to apologize to Bruce Hall. Now he is stupid but JohnH takes Bruce Hall stupidity to an entirely different level.
OK – in my example that 25% tariff was placed on the $80 the producer received and not the $100 the distributor received. So in your mind 25% of $80 = 50% of $100? My goodness. Your EFT analysis just overturned basic arithmetic.
Congratulations JohnH – you have written the dumbest thing of all time!!!!
“It is hard to imagine a case where a tariff of 25% would lead to a 25% increase in value added, because the final value is added in the United States (marketing, distribution, and overhead) and amounts to a significant portion of the final selling price.”
I doubt you have a clue what value added even means in this context. The usual measure of the value added for a distributor is its gross margin. Now if you think the gross margin for selling washing machines is over 25% then you are really incredibly stupid. BTW gross profits captures not only operating profits but also operating expenses the latter being the wages paid to the employees of places like Lowes. So what you are cheering on in your incessant stupidity is the screwing of these workers.
Eon Market Research actually has an analysis on the gross margins for Washing Machines:
https://www.eonmarketresearch.com/global-washing-machines-market-2019-research-report-50395
Of course they want $3400 for their research. Come JohnH – put up the bucks and learn something for a change. Maybe you can even write a research paper for the American Economic Review. Of course something tells me that the AER editor would use your paper submission to line his bird cage.
Way to cherry pick. Provide the entire quote and a link to the actual paper (which you failed to do so originally). Oh wait – you love to lie about things. Never mind.
Let’s see. Chinese producers did not pay the tariff and US consumers did not either. Wow – Lowes profits really suffered. Look I presented a simple example before but because I put this at 1st grade level it went over JohnH’s head. But let me do this very SLOWLY for our village idiot.
A good costs $80 to make, $20 to distribute ($15 in retail wages and $5 in retail profits so it costs the consumer $100.
BAM! 25% tariffs which comes to $20 not the $50 the dumbass in the sandbox named JohnH claimed. And the consumer still pays $100? Seriously?
Oh that’s right. Lowe’s gross profits go from $20 to zero. JohnH is so happy that Lowe’s has to screw their workers just not to go bankrupt. Lowe’s certainly is not take a $15 operating loss.
So morale learned – JohnH thinks it is wonderful that retail workers do not get paid. And the other kids in the sandbox are realized that JohnH is the dumbest person they have ever met.
JohnH: did you know Florida has voted to raise its minimum wage to$ 8.56 and now trails only D.C. and 29 other states–many governed by uncaring corporate Democrats–who failed to vote on raising minimum wages because their brain dead legislators had already done so?
More exciting: this puts Florida ahead of numerous other Southern states who, sure, don’t even have a minimum wage. That’s because brain dead voters–mostly Democrats–don’t care about low wage workers. That means Republicans will have to do heavy lifting to get those minimums up, up up. It’ll happen any day now.
Reading your 1984 paper took me back to the good old days when I first got my degree and start teaching international trade and macro. It is weird that St. Reagan come out of school believing in two things – free trade and tight fiscal policy. But he got surrounded by a bunch of policy hacks in 1981 that convinced him that an obscene fiscal stimulus would lead to more national savings. It crush national savings and lead to a massive appreciation of the dollar. The self imposed current account deficits made these hacks panic and we got a set of ill advised set of protectionist policies. Yea – Reagan brought in Feldstein and Poole to clean up the mess and they hired Krugman and Summers. But it seems the good advice from the CEA fell on deaf ears.
Of course Trump relied on the Three Stooges – Kudlow, Moore, and Navarro. It is time for a President who will listen to competent people.
https://talkingpointsmemo.com/news/navarro-calls-postpone-georgia-runoff-boost-trumps-fraud-delusion
Don’t expect Navarro to weigh in here as it seems he is busy down in Georgia promoting voter fraud “research” from John Lott:
White House trade adviser Peter Navarro on Tuesday suggested that the Senate runoffs in Georgia should be postponed in an apparent effort to reinforce false claims about voter fraud in the state after last month’s election delivered a win to Democrat Joe BiNavarro’s call to postpone the runoffs amid baseless claims of voter fraud was in reference to a recently published report by John Lott, a researcher who has done work for the National Rifle Association and whose studies on crimes committed by undocumented immigrants were debunked by the Cato Institute. Lott’s paper used data from counties in two critical battleground states lost by Trump to point at “an unusual drop” in Trump’s share of absentee ballots. He claims that the drop in the Peach State’s Fulton County alone would account for 11,350 votes. Biden won Georgia by 12,760 votes.
I am certain some will call me sick and jaded for asking this question. Be that as it may, I’m left wondering what Republican Mr. Letlow’s personal/public stance was on wearing surgical masks and social distancing before he acquired the virus???
Oh wait…….. you can find these things out online:
https://twitter.com/LukeLetlow/status/1323028326823448580
Letter/ condolence note to Luke Letlow’s children:
“Dear children, sorry your father was such an incredibly dumb and selfish man. I hope he didn’t give it to your maternal or paternal grandparents before he died, or to any of his age 50+ constituents that it killed them and the chain of others they socialized with. I am sorry you will now go without a father in your life because your Dad thought politics were more important than caring and being there for his family. I’d say I’m as sad as you are at this moment, and will be as the years wear on without your Dad at important moments in your life—but all I feel right now is anger to how pathetically people act, even after having attained a 4-year university degree and seemingly should have known better. Please learn from this, and have your Mom pass this on to all her Republican friends, so other children don’t end up losing a father or a mother because they wanted to ride the MAGA wave.
Much empathy,
Uncle Moses.
Folks, it looks like all the problems Barkley Junior has had with bad breath have FINALLY paid off:
https://actascientific.com/ASDS/pdf/ASDS-04-0991.pdf
https://www.forbes.com/sites/judystone/2020/08/27/mouthwashes-are-a-cheap-tool-in-the-fight-against-coronavirus/?sh=342fbd8d6306
I know Barkley Junior likes to make up stories about some colleagues he’s jealous of, like Paul Krugman not giving proper credit to colleagues (the same ones he mentioned in his Nobel speech, and worked with on research papers both before and after Krugman gave his Nobel speech. And I know when Barkley isn’t mentioning colleagues still very much alive as dead, or misspelling respected colleague’s names the 3rd time after being corrected, he feels kind of bitter about things. I think Barkley’s bad breath issues could in fact be his one chance for a Nobel, in Physiology or Medicine. Cross your fingers.
For the record, Barkley Junior informs me he doesn’t think wearing leather pants in the classroom will aid in avoiding Covid-19.
December 29, 2020
Coronavirus
US
Cases ( 19,977,704)
Deaths ( 346,579)
India
Cases ( 10,245,326)
Deaths ( 148,475)
France
Cases ( 2,574,041)
Deaths ( 64,078)
UK
Cases ( 2,382,865)
Deaths ( 71,567)
Germany
Cases ( 1,686,154)
Deaths ( 32,111)
Mexico
Cases ( 1,389,430)
Deaths ( 122,855)
Canada
Cases ( 565,506)
Deaths ( 15,378)
China
Cases ( 87,003)
Deaths ( 4,634)
December 29, 2020
Coronavirus (Deaths per million)
UK ( 1,051)
US ( 1,044)
France ( 981)
Mexico ( 948)
Canada ( 406)
Germany ( 383)
India ( 107)
China ( 3)
Notice the ratios of deaths to coronavirus cases are 8.8%, 3.0% and 2.5% for Mexico, the United Kingdom and France respectively.
https://news.cgtn.com/news/2020-12-30/Chinese-mainland-reports-24-new-COVID-19-cases-WDpetYu0Ew/index.html
December 30, 2020
Chinese mainland reports 24 new COVID-19 cases
The Chinese mainland recorded 24 new COVID-19 cases on Tuesday, of which 7 were locally transmitted and 17 from overseas, the National Health Commission said on Wednesday.
Five domestic cases were reported in northeast China’s Liaoning Province, 1 in Beijing and 1 in northeast China’s Heilongjiang Province.
17 new asymptomatic COVID-19 cases were also recorded, while 269 asymptomatic patients remained under medical observation.
No COVID-19 deaths were registered on Tuesday. Meanwhile, 16 patients were discharged from hospital. The total number of confirmed COVID-19 cases in China reached 87,027, and the death toll stood at 4,634.
Chinese mainland new imported cases
https://news.cgtn.com/news/2020-12-30/Chinese-mainland-reports-24-new-COVID-19-cases-WDpetYu0Ew/img/2eea437b5c10449c9095e5b1b0d3c9f2/2eea437b5c10449c9095e5b1b0d3c9f2.jpeg
Chinese mainland new asymptomatic cases
https://news.cgtn.com/news/2020-12-30/Chinese-mainland-reports-24-new-COVID-19-cases-WDpetYu0Ew/img/f3c1a1aa6e2743bc92dd050f91d1970f/f3c1a1aa6e2743bc92dd050f91d1970f.jpeg
[ There has been no coronavirus death on the Chinese mainland since the beginning of May. Since the beginning of June there have been only limited community clusters of infections, each of which was an immediate focus of mass testing, contact tracing and quarantine, with each outbreak having been contained. Symptomatic and asymptomatic cases are all contact traced and quarantined.
Imported coronavirus cases are caught at entry points with required testing and immediate quarantine. Cold-chain imported food products are all checked and tracked through distribution. The flow of imported cases to China is low, but has been persistent.
There are now 356 active coronavirus cases in all on the Chinese mainland, 6 of which cases are classed as serious or critical. ]
http://www.xinhuanet.com/english/2020-01/11/c_138696973.htm
January 11, 2020
World’s largest radio telescope starts formal operation
China put world’s largest and most sensitive radio telescope into formal operation on Saturday. The Five-hundred-meter Aperture Spherical radio Telescope (FAST) will provide astronomers around the globe with a powerful tool to uncover the mysteries surrounding the genesis and evolutions of the universe.
GUIYANG — China completed commissioning of the world’s largest and most sensitive radio telescope on Saturday, putting it into formal operation after a productive three-year trial….
https://news.cgtn.com/news/2020-12-17/FAST-World-s-largest-dish-in-China-opens-to-international-scientists–WhOzk5Nqr6/index.html
December 17, 2020
FAST: World’s largest dish in China opens to international scientists
Researchers in southwest China are set to open a giant radio telescope to international scientists. It’s the biggest dish in the world. The Five-hundred-meter Aperture Spherical Telescope, or FAST for short, is now the only instrument of its kind, after the collapse of the Arecibo Observatory in Puerto Rico earlier this month.
https://news.cgtn.com/news/2020-12-28/Chinese-astronomers-discover-591-high-velocity-stars-WAefTZhM0o/index.html
December 28, 2020
Chinese astronomers discover 591 high-velocity stars
A Chinese research team has discovered 591 high-velocity stars based on data from the Large Sky Area Multi-Object Fiber Spectroscopic Telescope (LAMOST) and the European Space Agency’s Gaia satellite.
High-velocity stars move faster than 65 km/s to 100 km/s relative to the average motion of other stars, and may at some point escape their galaxies. Of the newly discovered stars, 43 may escape the gravitational constraints of the Milky Way galaxy in future and fly into intergalactic space….
December 29, 2020
Coronavirus
Massachusetts
Cases ( 361,079)
Deaths ( 12,218)
Deaths per million ( 1,773)
————————————
December 29, 2020
Coronavirus
New York
Cases ( 984,638)
Deaths ( 37,681)
Deaths per million ( 1,937)
A tragic public health failing, that sorely needs to be examined.