A new report from the U.S. trade representative’s office finds that President Donald Trump’s tariffs on Chinese products reduced Americans’ real incomes and depressed investment but didn’t increase manufacturing employment. Though China made some changes to its abusive trade practices in response to the tariffs, it “largely took superficial measures aimed at addressing negative perceptions.”
Having reached these dismal conclusions, the report recommended not just keeping the tariffs but also adding new ones, which is what the Biden administration has done.
That’s the way it goes in the strange world of trade, where policies can succeed politically not only in spite of, but even because of, their economic failures.
This story did not begin with Trump and President Biden. George W. Bush was one of many presidents who imposed tariffs on imported steel. Those tariffs cost more jobs in steel-consuming industries than they saved in the steel-producing industry. But they had bipartisan support, and Bush took at least as much flak for lifting them as he had for levying them in the first place.
While he was in office, Barack Obama placed tariffs on Chinese tires, costing Americans an estimated $900,000 per job saved (about $1.2 million in today’s money). Most people never heard about this misadventure because Republicans didn’t find it worthwhile to mount strong opposition to it.
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The candidates’ positions mean we will not have a debate between protectionism and free trade this year. Instead, Biden’s aides are setting up a contrast between his allegedly smart and strategic tariffs and Trump’s indiscriminate ones. But Biden’s strategy is mostly, and fairly obviously, about winning crucial industrial states in the November elections — especially Michigan, Pennsylvania and Wisconsin. It’s based on traditional vote-buying, not some sophisticated economic theory.
Tariffs can sway votes in these states even if they don’t boost the national economy. Achieving some of the tariffs’ stated goals would undermine their political benefits. Imagine Trump’s tariffs had forced China to make real concessions: cracking down on intellectual-property theft and forced technology transfers in return for the lifting of those tariffs. That deal would have been great news for Hollywood and Silicon Valley. But they’re both located in a state that is not up for grabs in the election. The heartland states that will swing the election, on the other hand, would have less to gain from that settlement.
But there was never going to be a settlement. In the political logic of a trade war, the last thing a politician wants is a victory.
Insight from the Editorial Board of the Financial Times about trade. (HT Bill Evers) A slice:
First, investments under the IRA and Biden’s Chip Act, which seek to boost American semiconductor production, are also throttled by skills shortages, lengthy permitting processes and political uncertainty. Second, global supply chains are notoriously nimble. After earlier US efforts to block cheap solar panels, some Chinese firms began rerouting panels via south-east Asia. This raises the question of how well America enforces rules for transshipped and lightly processed Chinese goods from third countries.
Andrew Stuttaford reviews Marc-William Palen’s Pax Economica: Left-Wing Visions of a Free Trade World. Two slices:
The 19th century was a time when governments relied on tariffs for a significant portion of their income, and most of Mr. Palen’s free-traders did not envisage sweeping away all tariffs. Instead, they wished them to be set at levels designed solely to raise revenue, rather than for protectionist purposes—levels that would be kept even lower if, as they sought, expenditure on imperial defense and the military was reduced. They were involved in what Mr. Palen calls, somewhat anachronistically, an “intersectional fight for free trade, anti-imperialism, and peace.”
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Mr. Palen writes from quite some way to the left, which is hard to miss. His book records the left’s turn away from trade liberalization, but he himself laments how free trade was swallowed up by “neoliberalism” (that always reliable boogeyman ideology). In particular, he blames neoliberalism for the failure of free trade to deliver on Cobden’s promise of peace. And then Mr. Palen notes current complaints that free trade is not Fair Trade, a trading regime aimed at “peaceful and equitable global economic interdependence”—which is just as well, because if it were, trade would be less free, and there would be less of it.
Jessica Melugin’s letter in today’s Wall Street Journal is superb:
The only remedy Reps. McMorris Rodgers and Pallone Jr. offer for online harms is to turn the plaintiffs’ bar loose on tech companies, a curious solution for Republicans who historically favor tort reform. Eradicating or curtailing Section 230 will ensure that only those companies already big and rich enough to pay legal-defense bills will survive.
The First Amendment already ensures that social-media companies don’t have to carry any content they don’t wish, but Section 230 makes it fiscally safe to carry content they might not otherwise. Changing that should worry those concerned about the removal of online conservative speech, as those sentiments might be the first to go under the justification of increased legal risk.
Those same tech giants will also, inevitably, be the ones with seats at the table crafting a new regulatory regime during the 18-month window after repeal, likely leaving nascent and yet-to-be-founded firms at a disadvantage. Today’s most successful platforms benefited greatly from the liability shield, but they would have every incentive to deny it to future competitors.
Eliminating Section 230 won’t solve the already illegal harms the authors mention, but it will kill innovation that could result in better social-media options in the future. Better to avoid unintended consequences and increase funding to law enforcement rather than lining the pockets of trial lawyers.
Jessica Melugin
Competitive Enterprise Institute
Also warning against ending Section 230 is J.D. Tuccille.
Martin Gurri is insightful. A slice:
The normies want to get on with life. They want to work, get married, have children—boring stuff. That’s what normal means.
The elites, for their part, wish to change everything: sex, the climate, our history, your automobile, your diet, even the straws with which you slurp your smoothie. For them there is no good and evil, no right and wrong—only oppressors and oppressed. Every transaction demands their intervention to protect designated oppressed groups. “Social justice” translates neatly into “elite control.”
Juliette Sellgren talks with Katherine Mangu-Ward about AI.
My Mercatus Center colleague Dan Rothschild explains that “abundance is a choice.”
