Except that's not what the article says. The tariffs in question don't apply to finished products. So it wouldn't make a Chinese microwave more expensive.
However, if you want to import components to build a microwave and hire US workers to put it together, that is what these tariffs make much more expensive. So instead of hiring US workers to assemble it in the US, you do the whole thing in China and import it with no tariffs.
I don't see how that's relevant to the specific disadvantages the article is pointing out about this tariff in particular.
Yesterday I was trying to explain to a friend about the children separated at the border and how the parents are then being deported alone and have to apply afterwards to try and find their children, and it took about seven attempts. She didn't understand what I was saying at first because she assumed I must have misspoke, as doing that doesn't compute.
The US immigration system has been so screwed up for so long that everyone just keeps kicking the problems down the road. Probably needs a complete deletion and start from scratch re-write, but that almost never works out like one hopes.
So they do cost the public.
In a functioning market, local suppliers are likely to raise prices in response to the tariffs, as they face less competition.
> In a functioning market, local suppliers are likely to raise prices in response to the tariffs, as they face less competition.
Is that entirely bad? The whole "US Made!" tagline of old stopped becoming possible because we couldn't charge wages low enough to compete with foreign dollars or foreign slave wages. Raising the cost of X item so that it is actually able to be produced locally would seem to, conceptually, bring that type of job "back".
With that said, there's the obvious opposite of now every item US made is meaningfully more expensive. Seeing as so much of what we buy is made offshore, this seems to effectively raise the cost of living.
So, I don't really have any answers.. but hey, I don't work in economics :)
Not exactly. For starters being able to buy products for cheap is generally good for consumers. They have more money left over to buy other things...
Secondly, the U.S. have actively fought to keep wages low in developing nations. For example: https://www.thenation.com/article/wikileaks-haiti-let-them-l... It's easy to cry about low wages though and how that "hurts" American manufacturers. So here's the thought experiment, all workers on the planet now make at least U.S. federal minimum wage. We can now compete with Haitians for underwear manufacturing. Underwear now costs a lot more than it used to. That's not a win for consumers. And all those minimum wage underwear manufacturing jobs aren't exactly a boon to the U.S. economy, go figure.
Thirdly, no nation is going to be able to produce every sort of product itself efficiently and cheaply. Trade is and always has been important. Other nations can do some things better and cheaper and it's not always labor costs that are the linchpin of being out-competed.
Fourth, people imagine peak manufacturing as some sort of ideal that we should be tripping over ourselves to get back to. It's a fools errand. No matter what a lot of manufacturing jobs are never coming back, ever. It's never going to be like it used to be, automation will have seen to that.
A lot of people don't understand the economy, but they have an idea how the economy should be. It's more terrifying than my mom offering to fix my computer, because moms know best.
I think the "consumer" is a really bad success criteria. I don't really care about what's good for the "consumer", I care about what's good for "the employee", highly skilled jobs, higher wages, and more jobs. These things can't be driven by lowering the cost to consumers, we'll get what we have now, more money flowing to the 1%, and the middle class being eliminated.
I care about what is good for everyone - employers, employees, the overall country, and the overall world (all these same people in other countries), on a long term sustainable basis.
Whenever one reads these threads, rarely does one encounter someone who's doing anything other than talking their book, or supporting their personal ideology of "how it should be", usually based on reading articles written by others that support their ideology.
I think all of us would be better off if after finishing writing a narrative or explanation that supports our personal ideology, we then turned around and tried to poke holes in it. It's child's play to rationalize why it's a win-win situation to outsource menial labor to 3rd world countries, but what happens when one of those third world countries happens to be a giant, populated by incredibly hard working and historically accomplished people, and a very smart government who remembers mistakes that were made in the past? What happens when this country isn't content being a dumb, low-margin manufacturer, and decides it wants to take over the entirety of the process including the design? Sure, the West currently still holds a lead in much of technology, but where does this bizarre idea come from that it will last forever? Because we're more "creative"? Is there strong evidence for this? And do you also happen to simultaneously hold the belief that the peoples of all nations and cultures are essentially the same (a paradox one commonly sees in liberal leaning technical communities)?
Part B of this rant would be the folly of optimizing for GDP, which is another complicated and potentially very dangerous mistake for what should be fairly obvious reasons. Or the recently popular notion that humanity's highest priority and morally imperative goal should be to normalize GDP and standard of living across all members of humanity on the planet. Different cultures optimize for different things, some things require more work to achieve, but that often means less time for family and leisure. That said, I'm also strongly opposed to certain countries messing things up for entire regions of the world for decades on end with no end in sight.
Life is a hell of a lot more complicated than you'd think it is, if all you had to go on was most people's personal perception of it.
it's not clear that we've been optimizing for something that's actually connected to what makes people happy and satisfied with life.
some people absolutely need to be able to say "We're number one! We're number one!"
but other people would be happier to live in country number 17 if it meant they had a steady job with decent working conditions, reasonable health care, more predictability and a lower crime neighborhood.
This is pretty much the essence of what I'm getting at, and to me is what post-secondary educated people on both the left and right seem to be very strongly opposed to on an ideological basis (but for completely different reasons I suspect), as seen in comments like: https://news.ycombinator.com/item?id=17346684
It worries me that almost no one seems to be thinking about the range of possibilities that might lie at the end of this outsource & optimize for GDP/efficiency/profit, rinse and repeat ad infinitum approach to the economy, and that some of the possible outcomes might actually be negative. It's almost like there's this religious belief in the West that negative consequences aren't even possible. Are people's memories really this short?
Or maybe I'm the one that's wrong. I'm more than willing to listen to anyone explain to me at length how success for everyone is inevitable as long as we have unrestricted free trade, but all anyone seems to have to offer is their own personal take on what "a" path to success would look like, which is typically not much more than a vague theory resting on the assumption that recent history is all that's worth paying attention to.
good point. and even when they do think about lost jobs the best solutions they come up with are feeble.
too often it's poorly funded government worker training wherein middle-aged washing machine plant workers who live in upstate Michigan are supposed to learn to code (or something equally likely to fail for the majority of retrained workers.)
another dubious aspect of this policy is that government officials are somehow supposed to both accurately predict the industries where the economic growth will be and what sort of training these industries will actually require from job hunters. that's really really hard. wall street investment firms are constantly trying to that sort of thing, and it's very difficult to get right.
this is where the globalization story unravels. the replacement careers don't materialize for the displaced workers. so the defense of the policy becomes a loud repetition of "it's great for consumers!"
but, somehow, it's "absurd and irrational" to ask if Walmart/Target/Amazon's massive quantities of cheap imported throw-away garbage (aka "consumer goods") are actually useful at all.
It's hard to go back from a race to the bottom
Eventually, it will keep more money in the country, meaning people will also be able to afford more (after all, they'll be being paid the higher, local wages now).
Compare with e.g. Switzerland, where most people have really high salary (by EU standards), and pretty much everything is really expensive, but because of the high salaries people can afford it.
So, if we're going to follow Switzerland's lead, we would roll back tariffs.
Switzerland is more akin to the EU's version of Massachusetts or New York, and Zurich is the EU's version of Manhattan or SF. It's the sort of economic zone that will always exist in a large economy like the US or the EU. The population is disproportionately made up of citizens from one or two cities/metro areas, and those cities have a high concentration of highly educated and highly paid individuals typically focused on one of a few industries. Consequently, even those employed outside of these high-paying industries make more than average compared to the rest of the country/bloc.
Situating ourselves similarly to Switzerland requires placing the US very high in the global value chain while maintaining a global order of very low trade barriers. Which has always been the neoliberal agenda, at least ostisibly.
In other words, if we want to emulate Switzerland, we have to do exactly the opposite of the Trump plan -- continue offshoring anything lower in the value chain, continue insisting on low trade barriers, continue dominating everything higher in the value chain. Obviously, even if this strategy works for the country in aggregate, it's going ot have definite losers in a country as large as the US.
On a (very!) related note, the US and Switzerland currently have basically the same PPP.
True, they're not part of the Euro zone. They're part of the Schengen area (common immigration zone), the EFTA (free trade area), signed the EEA, and adopted by themselves most EU regulations. [1] While not an ECJ member, they are softening their stance on that also [2].
[1] https://theconversation.com/what-is-the-swiss-model-of-co-op...
[2] https://www.ft.com/content/17d840b6-209b-11e8-a895-1ba1f72c2...
Seriously, what's with all the weasel words? Switzerland is not an EU member. End of.
Does it mean you can move freely from country to country? (You can, it's Schengen)
How about goods? (They can, they're in the single market)
How about animals? Pets? (Switzerland accepts EU pet passports)
How about laws? Switzerland has many of the same EU laws.
How about judiciary? They're moving to accept the ECJ.
At what point does it matter if they're EU or not if all the other rules apply? If you didn't know, you'd probably wander around Switzerland thinking it was EU. That's my point. I'm not claiming they're a member state. I specifically said that, in the first line. What I am saying is that they're hardly independent of the EU, and that makes a big difference.
Nonetheless, Switzerland has a relationship with the rest of the EU that is analogous to the relationship between a small, dense US state and the rest of the USA.
Nonetheless, Zurich has a relationship with the rest of the EU that is analogous to the relationship between NYC and the rest of the USA.
This issue of whether Switzerland is properly considered "part of" the EU regardless of its membership status seems like quite the diversion from my actual point and is not at all relevant to the parallel I was drawing.
See e.g. https://www.theguardian.com/world/2016/sep/22/switzerland-vo...
More than 120 treaties as of that writing, with guillotine clause - break one, break them all.
They're both instances of a relatively small area with very tight historical ties to a much larger region. The relationship between the local economies and the regional economies bears enlightening similarities.
US states are not sovereign nations. but the analogy b/w EU member states and US states still makes perfect sense in some economic discussions.
The analogy is useful. A more apt criticism of the analogy might be "Switzerland's economy is not tightly integrated and dependent on the EU's economy" or "Switzerland has lots of tariffs", but neither of those things is true.
In practice your tariffs will also reduce your exports since you can generally expect reciprocal tariffs from your trading partners amply demonstrated right now.
Maybe this policy forces Americans to buy American but unless we make up every lost export with a domestic purchase it only hurts.
And this is before we even consider retaliatory tariffs.
The millions of unfilled manufacturing "jobs" are ~$14 an hour jobs that have significant upfront training requirements, so I doubt that onshoring lower skilled manufacturing is going to lead to much of a renaissance.
What I'm arguing is that there are always winners and losers to trade barriers. Tariffs make it easy to understand and quantify this, because they are explicit and straightforward. They're flexible and leave less legacy or mess. It's always clear what they are trying to achieve, and how.
This is not an argument for trade barriers, it's an argument for how trade barriers should be implemented if they are implemented.
"U.S. consumers are willing to pay more for “Made in America” goods, according to a recent nationwide survey"
https://morningconsult.com/2017/11/21/poll-support-for-purch...
2.) tariffs encourage reshoring and new robotics/automation factories, which is still net jobs for US. which also makes prices back to where it was before tariffs (maybe even less)
"171,000 JOBS COME HOME TO USA IN 2017" http://yonkerstimes.com/171000-jobs-come-home-to-usa-in-2017...
3.) in a perfectly competitive market, price always goes to equilibrium. which would discount tariffs
2) The source for that number shows that reshoring has been steadily increasing for years [1]. So why the need for tariffs now? Hell, seems like you'd just want to keep up the previous administration's polices - clearly they're working.
[1] http://reshorenow.org/blog/reshoring-initiative-2017-data-re...
Tariffs are imposing taxes on the very businesses we're supposedly trying to save!
However, we don't seem to talk about tariffs the same way we talk about other taxes. Trade policies are considered good if they're good for the economy and bad if they're bad for the economy. The revenue aspects tend to get swept under the rug.
I wonder if this is just an example of successful marketing by large corporations (who are the ones who bear most of the cost of tariffs and trade barriers); that they've managed to get people who are otherwise fine with taxing corporations to be opposed to taxes when trade is involved.
That said, I agree with Bunnie that imposing tariffs on components but not finished goods is dumb, and will hurt hobbyists and companies that assemble electronics in the United States.
are you talking about increasing GDP or some other meaning of "good for the economy"?
what i see is people talking about tariffs as good for a certain sector's workers or bad for consumers or safeguarding US military capabilities or something like that.
If the US were primarily harming itself with tariffs, other nations wouldn't be reacting the way they are. They all know the game is up and they're all desperately looking to hold onto their advantages.
US manufacturing costs are nearly on par with China at this point because of the vast inflation in costs that have occurred in China over the last 20 years, including in wages. That's particularly the case when you account for the cost of foreign transport/distribution.
Chinese manufacturing will only get more expensive over the coming decade, increasing US price competitiveness (whereas there was previously a vast gap between the two, eg just as recently as 2005).
It's ideal to begin competing with China using the same tactics they've been using to compete with everyone else for decades. China is no longer a tiny developing economy, they're an economic superpower and still rapidly expanding.
The US should spur domestic manufacturing, by increasing the cost of Chinese products. Over time, the net benefit will be to increase domestic manufacturing and reduce Chinese imports.
Worst case scenario, the US redirects trade to other developing nations, such as Vietnam, and away from China. That's also a dramatic benefit to the US, as Vietnam can never be a superpower rival.
Invalid argument. You could easily have a policy that harms yourself and others.
Don't knock it, that game made the US the richest country in the world.
And yes, that game does look just about done right now.
i think we're going through a process of reexamining the relevance of that notion. we've quite possibly optimized for the wrong variable.
people in the middle class feel a weaker grip on their long-term stability. the inequality between the richest and poorest in the US is extreme. the social safety net is full of holes. a huge fraction of the US population has less than $1000 set aside for an emergency. health care expenses are simply unmanageable for many many people. and educating the next generation is also so expensive that many students can't pay back their loans.
Wavepool, Maytag, etc.. Americans washer and dryer cloth machines pushed for Tariff from the Obama administration to fight against Samsung and other. The tariff target machine coming out from specific countries so Samsung and other moved to other South Eastern companies such as Vietnam.
So the American companies pushed for tariff for all incoming washing machine that aren't American. Trump administration gave that to them. The result is Samsung and other moved to America for manufacturing. But these companies got HUGE tax breaks incentive to move their company to their states while the American companies aren't getting anything.
This is on top of the prices of metal going up. There is a $100 extra on top of washing/drying machines now.
I'm not a libertarian but The Wealth of Nations by Adam Smith states that all country will have certain expertise they are just good at. Wether it is because the geography that enable them to be better than other or other things, because they're good at certain thing, countries should play to their strength and trade for what they need.
Samsung and other non USA companies are just better than US manufacturer in building washing/drying machine. That's just a fact and this tariff thing is only costing the consumer. The consumers are the losers.
These are the sources before the effect of the tariffs:
https://www.assemblymag.com/articles/94166-washing-machine-t...
https://www.nytimes.com/2018/01/22/business/trump-tariffs-wa...
I don't recall where I got the sources of LG and Samsung moving to USA but it could be PBSnews.
I don't have strong opinions about trade barriers, but I generally fall on the "no barriers" side.
That said, implementation matters. Badly implemented barrier reduction policies will be worse than well implemented barrier raising policies. Policies are like everything else, in this respect. We just get more list in the high falutin debate more often, when it comes to politics.
I'm arguing that if trade barriers are going up, tariffs are the better implementation.
yes. the consumers are the losers.
OTOH, the US is now in a position to question and modify the consumer-centric policies the US has embraced for decades.
the US is beginning a real-life experimental modification of the policy of prioritizing low consumer prices over other things.
this will have upsides and downsides.
I only figured this out after finding a service manual, as I did not want to risk destroying a dryer to figure out how to fix it. A new heating element was $80 off the grey market. I wanted to see how much it would be to get it fixed by a service place, and any service place I went to wanted to charge $100 just to look at it!
When I saw a new dryer was $400, I just decided I did not want to deal with it anymore and bought a new dryer.
I will not be buying Samsung products again.
And I did take the thing apart to see what needed fixing -- it would have been much more expensive to fix it rather than replace it.
is it necessarily a bad thing that, for some products in some times/places, people find repairing their own products the best option?
Unfortunately most makers are at this game now. No surprise that it promotes a lot more replacements when you can't change the £20 broken part but have to get some £250 thing that includes lots else.
And I am not against free trade (well, with reservations), but I think this idea has been proven wrong historically. I think countries that try to do a bit of everything, be self-sufficient, and perhaps specialize only in some very specific areas are generally more successful.
Just look at the U.S. as an example - if they followed Smith's advice, they would still continue to trade cotton. This advice will never let countries to build up an industrial base. (Or funny you mentioned LG - they were originally a textile corporation but the government forced them into electric industry.)
In my view, a country should have as many diverse industries as much it can keep all the specialists busy (the same is true for companies, by the way). That means to try to produce locally everything that is sufficiently consumed locally.
The reason why is that there are strong network effects in diversification. It's great if you e.g. produce agricultural machinery and you can talk directly to the farmer, who is going to use it. If you sell this machinery to people on the other side of the planet, with a cultural barrier, this gets much trickier.
The US is (still) the third largest cotton producer in the world.
https://en.wikipedia.org/wiki/Cotton_production_in_the_Unite... https://www.npr.org/2013/12/02/248243399/technology-subsidie...
Not to mention the chicken and egg problems - are they dysfunctional because of monoindustry or monoindustry because they are dysfunctional? Dysfunction leads to monoindustry since the base cannot be lost to war - see conflict minerals. Everyone wisely stays away and refuses to trade with smash and grab warlords and despots out of self preservation alone - owners wisely do not want to legitimise that sort of capital seizing for the same reason one doesn't try to work for a non survival desperation cannibal. They did it before and will probably do it again to you when convenient.
Causation and correlation with such messy subjects that I can see your point even if I disagree with the cause.
[1] https://en.wikipedia.org/wiki/Comparative_advantage#Criticis...
On the other hand having a closed border and expecting to do everything yourself leaves you exposed to potential famines and in a general state of poverty, see North Korea for an example.
Oh? Which countries have been successful as you describe?
>Just look at the U.S. as an example - if they followed Smith's advice, they would still continue to trade cotton. This advice will never let countries to build up an industrial base. (Or funny you mentioned LG - they were originally a textile corporation but the government forced them into electric industry.)
Wrong. Smith's advice isn't arguing for static stagnant maintenance of the status quo. Economies, markets and products are always evolving. There's always opportunities to grow and change. That doesn't mean there's always an opportunity at every moment to outcompete a dominant foreign manufacturer.
>In my view, a country should have as many diverse industries as much it can
Countries do this already. If it's a capitalist economy and there's opportunity people will give it a go. I think you're grossly oversimplifying this and don't really understand how huge the market is and the number of industries there are.
I think you'll find it's much harder to manage your fantasy in reality than you imagine.
>It's great if you e.g. produce agricultural machinery and you can talk directly to the farmer, who is going to use it. If you sell this machinery to people on the other side of the planet, with a cultural barrier, this gets much trickier.
And yet people do sell all sorts of things on the other side of the planet, all the time, because while it may be "trickier" it means they have a much larger market, and greater opportunities for revenue and growth.
Frankly if your vision was at all workable it would have been settled upon by now.
Edit to add: Michael Porter (one of the most influential living economists) made is career studying the economic theory of competitive advantage.
"clusters: critical masses—in one place—of unusual competitive success in particular fields."
Link: https://hbr.org/1998/11/clusters-and-the-new-economics-of-co...
Weird that Porter doesn't cite Smith.
==
According to standard economic theory, factors of production—labor, land, natural resources, capital, infrastructure—will determine the flow of trade. A nation will export those goods that make most use of the factors with which it is relatively well endowed. This doctrine, whose origins date back to Adam Smith and David Ricardo and that is embedded in classical economics, is at best incomplete and at worst incorrect.
In the sophisticated industries that form the backbone of any advanced economy, a nation does not inherit but instead creates the most important factors of production—such as skilled human resources or a scientific base. Moreover, the stock of factors that a nation enjoys at a particular time is less important than the rate and efficiency with which it creates, upgrades, and deploys them in particular industries.
==
Their disagreements aside, the two theories line up fairly well. Smith argues that competitive advantage is inherent based on natural factors, Porter says that it is a by-product of investment. I would argue that the reality falls somewhere in the middle.
Take the Chicago region, we have a commodities cluster. It includes institutions like CBOE, CME and the University of Chicago and companies like ADM, State Farm, John Deere and Caterpillar. Porter would say the cluster exists due to all of these institutions and knowledge. Smith might argue that those only exist in Chicago due to the natural factors of fertile land, centralized location, fresh water and navigable rivers. In this way, both Smith and Porter are correct.
[1] https://hbr.org/1990/03/the-competitive-advantage-of-nations
In other words you think that subsidies and senseless bureaucratic obstacles are better than tariffs?
The OP is not saying that tariffs are a good thing, he's saying that tariffs are so obviously bad & stupid that they're easier to get rid of and negotiate away. Subsidies and senseless bureaucratic obstacles are just as damaging as tariffs but they are harder to get rid of.
One advantage of tariffs is that they let you have product safety and environmental standards that were designed for consumer & environmwntal safety instead of an ulterior motives. The most obvious example is the entirely estranged European & American dairy regulations which started as a way of protecting consumers but are now a way of protecting industries.
My argument is that if you could just admit that an industry is being protected, and have tariffs then we could enjoy eachothers' cheeses (at a higher price). We'd also raise tax revenue and probably have better consumer safety regulations, since they wouldn't have to (disingenuously) make the case that the way cheese is made in Scotland or prosciutto is made in Italy is fundamentally unsafe.
The alternative is subsidies, quotas or "unofficial" barriers like product safety rules or other burry-you-in-bureaucracy setups. Tariffs bring in taxes (as opposed to costing the public) They're easier to understand. This one makes Chinese microwaves x% more expensive. It's clearer who is paying for it (consumers) and who benefits, as opposed to pretending a policy is intended to protect consumers. Importantly, they are easier to change. Politicians can make a decision and do it. With other options, it's harder to implement patches or predict the results of any change.
Basically, they're simpler, more explicit and more honest than any other approach. ..if you've already decided to have trade barriers.