David Henderson explains some of the harm destined to be done by Trump’s protectionism. Two slices:
Economists who write about trade have tried to offset the information asymmetry by noting the high cost per job saved that comes about due to restricting imports. The costs are often gargantuan.
The table in this 2017 study by Mark J. Perry, an economist with the American Enterprise Institute, shows that in every examined case of protectionism in the 1980s, the benefits created for the protected workers and companies were less than the costs to consumers. That makes sense. Because protectionism substitutes higher-cost domestic production for lower-cost foreign production, the benefits to domestic producers are necessarily less than the costs to domestic consumers.
The table shows something else interesting. The losses to consumers per job saved, in 2016 dollars, can be greater than $1 million per year. Protecting carbon steel production from foreign competition, for example, cost $1,642,500 per job saved. Protecting specialty steel cost a whopping $2,190,000 per job saved.
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Trump has made a superficial argument: namely, that the United States should have reciprocal tariffs. If country A has 10 percent tariffs against their imports of our goods, then we should have 10 percent tariffs against our imports of their goods. But calling it an argument is too generous. He hasn’t made an argument for reciprocal tariffs. Such an argument would be hard to make. As noted earlier, when our government imposes new tariffs, we are hurt, no matter what the other government is doing. As Reason writer Eric Boehm noted, if Trump’s claims about the expected tariff revenues are correct—they’re not—he would be imposing the largest tax increase since World War II.
Moreover, I don’t think Trump believes in his own proposal. As Cato Institute scholar Scott Lincicome recently pointed out, forty-four countries have average tariff rates that are less than America’s average tariff rate. Most of those are small countries, but they also include Canada, France, Germany, Italy, and Japan. Will Trump start to lower tariffs against those countries? I’m betting not.
Peter Earle takes a close and critical look at Trump’s proposal for “reciprocal tariffs.” A slice:
Even when one country implements tariffs, unilateral free trade remains beneficial. Avoiding counter-tariffs keeps domestic prices lower, benefiting consumers and businesses reliant on imported goods. Not retaliating also prevents damaging trade wars, which have historically had negative economic consequences (consider the Smoot-Hawley Tariff Act, which exacerbated the Great Depression). In addition, there is the not-inconsiderable moral high ground: a nation committed to unilateral free trade can position itself as a stable, open-market economy, attracting investment and diplomatic goodwill. From this perspective, free trade is the ideal arrangement regardless of how other nations act.
Clark Packard reveals “the high costs of eliminating de minimis shipping.”
Charles Cooke is understandably fed up with the absurd attempted justifications for Trump’s incoherent ‘policies.’ Two slices:
Trump plays 4D chess on lots of different boards. Sometimes, for example, he says that tariffs are excellent and wealth-generating and that the United States should impose them so widely that it is able to replace the income tax with them. At other times, he says that tariffs are really bad, obviously, and that this is why he’s not imposing them, but that he had to say they were good for a while to get other countries to do the unrelated things that he wanted them to do. That’s classic 4D chess, whichever way you look at it, and, unless you internalize that and recall it at every juncture, you might end up confused by his behavior.
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Occasionally, Trump has been known to play 5D chess, and even 6D chess, and there’s a rumor that he’s working on his 7D skills. This is mostly a good thing, but it does make it quite difficult for the citizens of the republic to judge him, as, over the years, they have become accustomed to doing with their presidents. Historically, Americans were able to say that they liked or disliked this or that part of the president’s conduct, and that, in their estimation, he had got some policies right but erred with others. Now, they cannot. Sometimes, this is because they are suffering from Derangement Syndrome, which is a disease that only affects critics of this administration and has never been seen before anywhere in the world. Most of the time, though, it’s because Trump is playing chess in a whole host of complicated dimensions, and because you, the lowly voter, are simply incapable of following along.
Some of what Trump & Co. are doing is indeed applause-worthy, as explained here by the Editorial Board of the Wall Street Journal. A slice:
A century of evidence refutes Wilson’s premise, and Mr. Trump is now challenging it head-on. His argument, echoed by many modern conservative scholars, is that insulation from presidential authority runs counter to Article II’s command that the President “take Care that the Laws be faithfully executed.” If Congress has charged such agencies with enforcing laws, then the President should be able to supervise how they do their job.
As Mr. Trump’s order explains, “previous administrations have allowed so-called ‘independent regulatory agencies’ to operate with minimal Presidential supervision. These regulatory agencies currently exercise substantial executive authority without sufficient accountability to the President, and through him, to the American people.”
No more. His order requires these agencies to submit proposed and final rules to the Office of Information and Regulatory Affairs in the White House. OIRA, which is part of the Office of Management and Budget (OMB), will review rules to ensure their cost-benefit and legal analysis is rigorous and that they hew to Mr. Trump’s priorities. His order notably includes the Fed’s financial regulation, though not its interest-rate or monetary policy functions.
Mr. Trump’s order also states that OMB “shall establish performance standards and management objectives for independent agency heads” and adjust their funding “by activity, function, project, or object, as necessary and appropriate, to advance the President’s policies and priorities.”
This will give the President enormous leverage over agency leaders and their priorities. OMB could block agency money for rule-makings or enforcement activities—say, crypto regulation—that don’t jibe with Mr. Trump’s policies.
Progressives are calling this a power grab, but if so it is restoring the vision of the Founders who gave the President control over the executive branch.
Jack Nicastro is rightly critical of Trump’s unfortunate Biden-esque choice of FTC chairman. (See also here.)
Juliette Sellgren talks with Get Married author Brad Wilcox.
Brian Albrecht busts the myth that egg prices are being driven higher by “market power.”
David Henderson isn’t much worried about an asteroid hitting earth in 2032.