Writing in the Wall Street Journal, Inu Manak rightly criticizes Biden’s Trumpian protectionism. Three slices:
The Biden administration was quick to attack Donald Trump’s recent proposal to place “a ring around the collar” of the U.S. economy by slapping a “universal baseline tariff” of 10% on all imports. White House spokesman Andrew Batessought to distinguish President Biden’s trade approach from Mr. Trump’s, arguing that such a tariff would “stifle economic growth and fuel inflation.”
Economists agree on the Trump proposal. Dartmouth’s Douglas Irwin warned that it would lead to “the end of the trading system” and invite retaliation from trading partners. Dean Baker of the Center for Economic and Policy Research said it’s “too generous to call Trump’s trade policy mercantilism” and characterized it instead as “performative tariffs.”
Yet the White House can’t have it both ways. The Biden administration wants to distance itself from Mr. Trump’s tariff pronouncement while keeping in place the trade policy it inherited from him. Mr. Biden hasn’t lifted tariffs that Mr. Trump imposed on imported steel and aluminum in March 2018, nor has he removed Mr. Trump’s import levies on goods from China later that year. The U.S. International Trade Commission found the steel and aluminum tariffs have had “largely negative” effects on downstream industries. Recent figures put the cost of the tariffs on China at more than $48 billion. That’s a tax paid by U.S. consumers and firms that rely on intermediate inputs from Beijing.
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The Biden administration claims its trade policy is worker-centric, but what does that mean? It isn’t clear that enforcing labor rights abroad, as Mr. Biden pledges to do, will help struggling Americans in any material way. A simpler way to help the working poor now is to reform our country’s tariff regime. As kids go back to school, parents should demand to know why they are paying an average 14.4% tariff on shoes and clothing, with the total cost of tariffs adding up to roughly $726 for every U.S. household.
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The president had a chance to repudiate his predecessor’s antitrade vision when he came into office. Instead, he chose to double down, which makes his spokesman’s repudiation of Mr. Trump’s recent proposal seem an empty political gesture. Americans will continue to pay the price for these failed policies.
With more on the destructive trade policies of Trump-Biden, here’s Scott Lincicome. Three slices:
Anyway, as you can probably imagine, I view the Trump tariff plan as economically ignorant, geopolitically dangerous, and politically misguided. And, per those same reports, plenty of other economists, diplomats, lawyers, and trade wonks tend to agree. So, apparently, does the Biden White House. But underdiscussed—if discussed at all—is how the last several years have paved the way for precisely the type of unilateral tariff mayhem that Trump just proposed, and how the Biden administration itself has greatly contributed to the problem.
Back in this newsletter’s early days, I reviewed the economics of tariffs and the United States’ experiences with them before and during the Trump era, and I’ve done deep dives on China and related tariff stuff both here and elsewhere. So, I won’t dig too deeply into the basics again today. A few points do, however, warrant elaboration in light of recent events and new research.
For starters, it’s important to note up front that—contrary to so much of the protectionist spin you read these days, including from the White House itself—the vast majority of U.S. trade (goods and services; imports and exports) involves countries other than China. According to the U.S. Bureau of Economic Analysis, for example, not-China countries accounted for more than 89 percent of all U.S. trade last year.
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Second, and contrary to what Newt Gingrich might tell you, the United States’ use of tariffs during the 19th and early 20th century is hardly some sort of ringing endorsement for its use today. As I briefly noted a few weeks ago, research shows that the “American system” of protective tariffs didn’t fuel rapid U.S. growth and industrialization during the 1800s (that was mainly from population growth), but it did fuel rampant political corruption and cronyism in the federal government. (For more on that last point, see this relatively new paper on how lobbying—not economics—determined tariff levels in the infamous Smoot-Hawley era.)
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In fact, the Biden administration has fought essentially every U.S. court challenge to the Trump-era tariffs and the U.S. laws that he abused to implement them. They’ve done this when the government has won, and when it’s lost—fighting to keep the tariffs in place, to defend the almost-limitless discretion that these laws afford to the president to impose tariffs, and to ensure that the courts broadly defer to the executive branch’s implementation of these laws.
Japan’s overall environment of low and declining taxes and economic freedom between the 1950s and 1970s, along with high Japanese savings, fueled a legitimate boom in private-sector investment. The Hoover Institution’s David Henderson reports that gross private investment grew from roughly 17% of Japan’s GNP in the early 1950s to 30% in the early 1970s. These numbers dwarf the size of any government investments in the economy during that period.
China’s Belt and Road Initiative (BRI) was supposed to be a masterstroke of geopolitics. China financed and built infrastructure projects in the developing world, buying third-world countries’ loyalty while enriching itself. It made a total of about $1 trillion in loans for infrastructure in poor countries in the past ten years.
Now, while the country’s domestic economy faces its own slate of crises, the BRI is also in trouble. It doesn’t appear to have purchased the geopolitical loyalty that China had hoped. And it’s losing a bunch of money, too.
Speaking of ‘who’d a-thunk it?’ matters, “subsidized flood insurance makes storm damage worse.”
George Will reports on some frequent flim-flammery by ‘higher education’ administrators. A slice:
There is ample evidence that colleges mangle the truth about so many subjects (e.g., history, contemporary life, how literature should be studied, freedom of expression on campuses, etc.) that it should not surprise anyone that the counterintuitive reality about tuition is deliberately obscured — and cunningly complicated.
Fortunately, Dan Currell has entertainingly dispelled the manufactured mists that engulf “The Truth About College Costs,” which is the title of his astringent essay in the summer issue of National Affairs. Formerly a senior adviser at the Education Department, Currell has glad tidings: “Students are paying less for college than they did 15 years ago.”
Gary Galles offers Lockean wisdom.
Bob Graboyes investigates claims of systemic racism.
David Henderson isn’t surprised by the positive correlation between economic freedom and virtue.
John Snow, a hero of 19th-century epidemiology, was a proponent of focused protection. Ironic that the zero-covid cult embraces his name.
