Yesterday, MBD made the case for the president to talk about tariffs in a better way. He suggested justifying them on grounds of reciprocity. He also correctly noted that if Trump said he was raising tariffs to the levels that other countries impose on U.S. exports, retaliation by these other countries would seem less justified.
That’s marketing. It’s probably good marketing, even, because no one is against other countries’ lowering their tariffs. While the goal is good, the means are bad since tariffs are taxes on us. Apart from carefully defined national security cases, we shouldn’t tax our citizens who buy imports and import-competing goods just because other governments tax their citizens who buy imports and import-competing goods.
Tyler Cowen says it well here:
You might think there is something to be said for a reciprocal approach to tariffs. Usually it consists of cutting off your nose to spite your face, but if it can sometimes work it requires a president (and Congress) who is predictable and trustworthy.
That is not how foreign nations view the current administration.
Nevertheless, it’s true that if the president had gone with MBD’s plan — which implies that if other countries lowered their tariffs, then our tariffs, too, would be lowered — last night’s outcome would have been better than what we actually got.
I don’t have the room here to offer a full list of the problematic statements the president made yesterday, so here’s just a sample:
But now it’s our turn to prosper.
We are the richest and best country in the world. We have prospered to an extent that most other countries the president complains about can’t even dream of. Trump would have fewer immigrants to complain about if wealth and opportunity here weren’t as great as they are. The notion that America is an economic wasteland — devastated, left behind, and oppressed, requiring salvation through dramatic government intervention — is the right-wing version of the left’s argument that this country is rotten to the core because of structural racism and white privilege that can be ended only by dramatic government intervention. And just as the left failed politically when it acted on its absurd fallacy, so too will the right fail politically by acting on its own.
[We’ll] use trillions and trillions of dollars to reduce our taxes and pay down our national debt, and it’ll all happen very quickly.
Don’t hold your breath. Even if the tariffs were to raise “trillions and trillions of dollars,” those trillions would be paid overwhelmingly by Americans. Let’s be honest about the fact that, yesterday, Trump imposed on us all a $1.8 trillion tax hike over ten years. If you add up all of his tariffs, he jacked up your taxes — in less than two months and without congressional approval — by $3.2 trillion.
Considering that tariffs are regressive taxes, a disproportionate share of the burden will fall on the ordinary, working-class Americans whose cause Trump claims to champion.
Jobs and factories will come roaring back into our country, and you see it happening already.
No, they won’t. At this writing, the Dow Jones industrial average is down by more than 3 percent from yesterday close — which means that most American firms and factories are worth 3 percent less than they were when Trump announced the details of our “liberation” from our freedom to spend our incomes as we choose. Policies that so quickly chop off large chunks, economy-wide, of the market value of businesses are not policies that cause investors and businesses to roar into action.
It’s worth noting, first, that American industry was doing just fine without Trump’s tariffs. It will be harder now that Trump jacked up their production costs — roughly 61 percent of what we import are inputs for U.S. firms. And, second, even if we had a manufacturing boom, most of the production would be automated. That’s what rich countries do.
[Foreign governments] imposed exorbitant VAT taxes to disadvantage our products.
Nonsense. VATs kick foreign countries’ taxpayers in the face as much as they do our exporters. They are a cost of doing business in those countries. They aren’t a penalty imposed on our products. Now, if VAT countries exempted their own products from that tax and charged ours, that would be different. But Trump’s complaint was about VATs generally — and that complaint is nonsensical.
From 1789 to 1913, we were a tariff-backed nation and the United States was proportionately the wealthiest it has ever been. So wealthy, in fact, that in the 1880s, they established a commission to decide what they were going to do with the vast sums of money they were collecting. We were collecting so much money so fast, we didn’t know what to do with it.
This assertion has been debunked so many times that I am not sure what else to say except that if the president wants to shrink the government to its 18th- and 19th-century size, I will shut up about paying for it with tariffs. But because no such shrinkage is in the cards, let me remind everyone that these tariffs are a 19th-century policy — intended mostly to raise revenue rather than to protect industry — applied to a 21st-century economy. The results will be nasty. Stellantis is already laying off 900 U.S. workers in Michigan and Indiana because of the first round of tariffs that affected some of our trading partners. And here are some other signs that American manufacturing will be hit super hard.
The most disheartening part of the whole thing is that the president offered a list of fake tariff calculations based on junk science. The trade deficit is the “sum of all cheating,” we are told. I can’t believe that the Council of Economic Advisers endorsed this deranged interpretation of trade deficits.
In case you want to know how serious these guys are, the administration has put a 10 percent tariff on the Heard Island and McDonald Islands. Do you know who lives there? Only, penguins.
I could go on.
Unveiled yesterday afternoon in the Rose Garden was an economically misguided and destructive economic policy, larger than the devastating Smoot–Hawley tariffs. I wish that the president had stuck to MBD’s messaging rather than to the nonsense we were subjected to.