Sunday, December 2, 2018

Trump’s Tariff Talk - Lies, Lies, Lies

As Trump has been selling his use of tariffs to punish those, especially China, who he feels, with some justification, do not play fair in the trading game, he makes two statements.  First, he says that he is punishing them so that they will come around and give the U.S. a better trade deal.  Second, he talks about the billions of dollars that China is paying into the U.S. Treasury’s coffers because of the tariffs.

As to the first argument, tariffs have been used traditionally to protect local industry from foreign competition.  Since the external goods weren’t needed, making them more expensive, by imposing tariffs, made them less competitive and reduced their sales.  

In the current situation as pertains to China, Trump is trying to improve the balance of trade by reducing U.S. purchases of Chinese goods.  The difference now is that Chinese product is needed; there isn’t a domestic replacement.  Whether it’s product that U.S. industry needs or that consumers purchase, there really isn’t an alternative.  The impact of globalization has destroyed that.  Therefore, industry pays more for the product making their end product correspondingly more expensive and less competitive.  Or the U.S. consumer pays more for the Chinese product or perhaps goes without if it can’t be afforded.  

In both cases, the parties who are made to suffer by the tariffs are Americans … industry and consumers … not the Chinese.

It must be said that this method was more effective in dealing with the E.U. because the European countries on the one hand need us more and on the other we need them less.  We both are in a similar globalization status; we produce similar goods. 

As to the second argument, China isn’t paying anything into the U.S. Treasury.  That’s because tariffs are imposed when a product comes into the U.S. and they are paid by the importer.  The importer is never China.  It is a U.S. or other company that is importing the product and is therefore paying the tariff.  Again, it is American business that is suffering, not China.

And then there’s the suffering China’s retaliatory tariffs and actions are causing American exporters, particularly farmers.  For example, China has stopped purchasing American soybeans.  And so the government is spending billions in subsidies to protect farmers from what would otherwise be catastrophic losses.

That Trump has been able to control the message on this, as with many other issues, is beyond frustrating.  Yes, there have been many articles in newspapers, and I assume on the news and internet, regarding how American companies, farmers, and consumers are paying the price of this trade war.  But there is no personage, no presence, to effectively counter Trump’s bluster and lies.

Some august group of personages from both the Republican and Democratic parties must come together to issue statements as needed that put the truth before the American public.  A bi-partisan Truth Commission must be formed to keep the public informed.  Nothing will change Trump’s method, but the public can be protected with an appropriate countervailing force.