Thursday, March 1, 2018

Trump's tariffs are cause for concern

Every economist worth his salt knows that tariffs are just plain bad policy. They supposedly "help" domestic producers (subsidize would be a better word), but they hurt just about everyone else. Making steel and aluminum more expensive for US consumers may temporarily help US workers who produce the stuff, but it undeniably harms all US consumers of the stuff. Ultimately there will very likely be many more jobs lost in the industries that use steel and aluminum than jobs "protected" in the steel and aluminum producing industries.

And of course the worst thing would be if this is the first salvo in what could degenerate into a global trade war. That is the stuff of nightmares, and it's the sort of thing that can cause global depressions.

Trump has always been partial to tariffs, and has been roundly and justifiably criticized for it. I was hopeful that it was just bluster, and that when push came to shove the smart people surrounding him would persuade him to desist. That seemed to work for over a year, but apparently it's no longer the case.

Will he really do something so stupid? Stock markets are correct to sell off on the news. We can only hope that a hue and cry and weak stock markets convince Trump to back off. It's hard to believe he could pull such a stupid, dumb idea out of his hat just when the economy is about to ramp up as a result of all the good things he has done.

UPDATE: Mark Perry has an excellent post which demonstrates that the losses from tariffs always exceed the gains, and by a huge margin.

UPDATE: Here's how the market is taking the tariff threat as of 8am Pacific, March 2nd. It's a genuine threat, to be sure, but not catastrophic. Trump is getting TONS of pushback, which may persuade him to back off.


WealthMony said...

Scott, I agree with a lot of Trump policies, but this is a bummer. You are right to call it stupid. This one act may not be of major impact, but a word which I do not like comes to my mind as a result---contagion. This could build. Trump is right to call for and work for fair trade, but as Mark Perry demonstrates, tariffs hurt. How much did stock investors lose on Thursday as a result? Costly!

steve said...

“All that will happen with steel tariffs is you will raise prices for all import users and that includes businesses and of course consumers,” Kudlow said. “You will wind up hurting millions of people to help 140,000 people in the steel industry. You will be hurting car buyers. Is that really what you want to do?”

When Kudlow criticizes a DT policy, you know it's BAD. PLUS, Cohn may very well leave abruptly over this issue. DT is basically spitting in his face. If that happens with a tenuous market, look out below. Who then to temporize DT, W Ross? An idiot sycophant if ever one was born.