If the leftist framing of the typical Trump supporter as a pickup-drivin’, gun-totin’, beer-drinkin’ middle-American is applicable, then Mr. Trump might be in trouble for his newest tariff idea.
Two weeks ago, he unilaterally and unconstitutionally imposed tariffs against imported washers and solar panels, and, drumroll… the latest in his “I’m-Doing-This-For-Your-Own-Good” stunts is to push for a twenty-five percent tariff on all imported steel and a ten percent tariff on all imported aluminum. The argument he offers is that it will revitalize the American steel and aluminum industries. And, of course, the idea is counter-productive and anti-economical, focusing on two specific industries at the expense of higher prices for consumers and the economy as a whole.
Already, people who understand the two core axioms of fundamental economics -- that humans are subjective and generally try to get more for their toil, not less -- are warning Mr. Trump that to impose a government tax on imported steel will drive up the costs of US-made autos and anything else utilizing steel in its manufacture. But perhaps, just perhaps, when the warnings of Jim McGreevey, the president and CEO of the industry group called The Beer Institute, are shown to have been right, some supposedly “patriotic”, "beer-drinkin'" folks who supported Mr. T’s idea about aluminum might end up pitying that foolish move as well.
As Eric Boehm writes for Reason, Mr. McGreevey knows that the government can’t help the economy as a whole by focusing on protectionist tariffs to stop less expensive foreign imports of metal. Such a thing would be like one of your next-door neighbor taxing you for getting a kid from down the street to paint your picket fence, so that you’ll choose the more expensive offspring in his or her own home. It helps his or her child, but now you’re out extra money for the same job, money that you could have spent on something else, something that could have employed another person or new business idea.
As McGreevey notes:
President Trump's announcement today that he plans to impose a 10% tariff on aluminum imports will increase the cost of aluminum in the United States and endanger American jobs in the beer industry and throughout the supply chain.
In fact, President Trump’s plan would more than double the tariff of the metal that beer makers use to contain their product. After all the time the beer-makers spent to reduce costs, all the investments in tech and shipping, and decreasing waste – every nuance of which is done to attract customers who, themselves, try to save in their own purchases – Mr. Trump is going to tell them, “Nope. You have to spend more, and the feds will pocket it.”
According to the U.S. International Trade Commission's Harmonized Tariff Schedule, most aluminum products currently have tariffs set between 2 percent and 4 percent.
Can you imagine building a business, and then seeing marauding politicians tell you they’re going to reverse countless hours of your work to lower costs? And can you imagine if the politicians did it because they knew they could curry favor with certain people for political support?
That’s how tariffs have historically been used in the US since its inception. In fact, it’s one of the reasons the colonists rebelled against the UK, and the central reason the Confederacy formed: to get away from predatory tariffs imposed by Abe Lincoln and the northern industrial interests.
Keep in mind, the folks in the less competitive, more expensive US steel and aluminum industries will applaud the tariff against less expensive imports, and some reporters and politicians might focus on the “revitalization” of a “dying industry”. But this will be an example of that great economic folly that the legenday economic thinker Frederic Bastiat called, “What Is Seen and Not Seen.”
The cameras and speechwriters will focus on the fact that the U.S. jobs in the protected sector are “thriving,” but will not show the multitudinous opportunities that have been lost for consumers to spend the money they would have saved, to spend that cash in other areas that will now never exist, or not exist to the extent that they could, because of the new, wasteful costs imposed by the politicians.
And it’s a mistake the great James Bovard explained in his book, “The Fair Trade Fraud”, costs consumers approximate 8.8 times more from their wallets than what is garnered by the industry the politicians are trying to help.
That’s a lot of cash that could have done good work starting new businesses and employing people in those, rather than in the non-competitive ones the politicians try to prop up.
The final argument protectionists like Mr. Trump offer is that this or that industry is “vital” to America. They either overtly tell us or imply that if American consumers are allowed to continue on their ill-informed, merry ways, buying “cheap foreign goods”, America will lose a key industry, and then those evil foreigners will suddenly raise their prices once they dominate.
But this is its own economic fallacy.
Economic history shows us that as long as a market is not blocked by law, there is always the possibility that a new competitor could join in the game. So, what happens if foreign aluminum makers start to raise prices? This sends a signal to potential investors and business people that there is a profit to be made in that field, and, guess what happens?
New competitors enter the field, competing, and driving prices back down.
This is why, as authors such as Burtom Fulsom noted in his monumental book, “The Myth of the Robber Barons,” even people like JP Morgan did not raise prices as they gained market share. They gained market share and continued to lower prices.
Again, simple economics.
If only politicians would stop trying to play God in the field of our own choices in the market. We can decide very well, thank you, and we don’t need insults from political figures to tell us differently and drive us to choose what they prefer.
As popular as Mr. Trump is, and as popular as many of his ideas are, this is one area where he needs to be schooled.
Beer drinkers in the U.S. will be, that’s for sure.