Monday, January 30, 2017

President Trump’s predecessors — Bush II and Obama — learned about tariffs the hard way…..

From Mark Perry.
"…. not that our protectionist president Donald Trump will pay attention or learn from the long history of how protectionism weakens, not strengthens, an economy; and how tariffs destroy, not increase, jobs on net. From Yahoo Finance (emphasis added):
In March 2002, President George W. Bush imposed a 30% tariff on Chinese steel. The results were chaotic. In a report put out by Consuming Industries Trade Action Coalition in February of that year, the coalition found the tariffs against China boosted the overall prices of steel and cost the U.S. 200,000 jobs in businesses that buy steel, representing $4 billion.
In another recent situation, in September 2009, President Obama imposed a three-year tariff on car tires from China. Chinese imports went down, but the tires were simply sourced from other countries, the LA Times noted. According to the Peterson Institute for International Economics, 1,200 tire jobs were saved in the U.S., but through costs passed along to American consumers, 2,500 jobs were lost indirectly.
In Bush’s case, seven months after the tariffs were imposed more American jobs had been lost than Americans employed by domestic steel producers. Writing about the trickling effect of trying to help a certain domestic industry, CITAC noted: “In making policy for the revitalization of manufacturing, including the steel industry, our conclusions suggest that the effects across the full industrial spectrum should be considered.”
It is not clear if this full industrial spectrum has been considered by the Trump administration, which said it was considering implementing a 20% tariff on goods imported to the US from Mexico—a move that would require the US leaving NAFTA. “By doing it that way we can do $10 billion a year and easily pay for the wall just through that mechanism alone,” Trump Press Secretary Sean Spicer said Thursday.
MP: As I’ve said before, this is just the “protectionist math” that reflects the economic reality that tariffs inevitably generate significantly more economic costs than benefits, destroy more jobs than are gained, and make the protectionist country worse off on net. It’s a simple economic fact that you can’t artificially raise prices with protectionism and reduce the amount of trade that takes place and make the economy better off on net or increase the net number of jobs. If Trump goes forward with protectionist trade policies, he’ll face the same adverse outcomes as did Bush II and Obama — a net loss of US jobs. There’s just no way to avoid the infallible “protectionist math” that guarantees net job losses from tariffs and protectionism."

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