Mr. Paulson joins the chorus propagating the debunked belief that the “smart use of tariffs” will “restore American manufacturing.” Nothing could be further from the truth. But don’t take my word for it—ask Donald Trump’s own Council of Economic Advisers from when he was president.
In its 2019 report, signed by Mr. Trump, the council details that the tariffs he enacted failed to achieve any beneficial changes in other countries’ trade policies. Quite the opposite: “Canada, China, the EU, Mexico, Russia, and Turkey imposed retaliatory tariffs.” That same year, the Federal Reserve released its own report on Mr. Trump’s tariffs. The result: “U.S. manufacturing industries more exposed to tariff increases experience relative reductions in employment.” This comports with more recent research, which finds that “the costs of US tariffs continue to be almost entirely borne by US firms and consumers” and U.S. tariffs imposed on China are accompanied by “an overall welfare loss of 0.12 percent of GDP.”
Tariffs are a rotten deal for America and its people. We need fewer barriers to trade, not new ones.
David Hebert
American Inst. for Economic Research
Grand Rapids, Mich.
[John] Deere’s competitors are also expanding south of the border. Caterpillar has nearly doubled its workforce in Latin America since 2016. Farm equipment manufacturer CNH plans to shift work from Racine, Wis., to Mexico. Bobcat last year announced a $300 million investment in Mexico for compact construction equipment.
Mr. Trump thinks he can bully Deere as he did Carrier, which in 2016 wanted to move air-conditioning manufacturing from Indiana to Mexico. He threatened to impose tariffs on Carrier imports. Carrier scaled back U.S. job cuts after Indiana dangled subsidies.
But Washington and the states can’t afford to subsidize every U.S. manufacturing job, and slapping tariffs on imports from Mexico would violate the USMCA trade agreement. It would also raise U.S. prices. Meantime, his threats help Democrats argue that Ms. Harris would be friendlier to business.
The circumstances Trump would inherit are far more challenging than those he faced in 2017. Consider government debt. On the eve of the pandemic, outstanding public debt was too high — around $18 trillion — but paled in comparison to the current $28 trillion or so. There’s no reason to trust Trump to cut spending or pass the necessary reforms, in part because he explicitly says he won’t touch Social Security and Medicare, the two main drivers of our fiscal problems.
In addition, even with the economy booming during Trump’s first term, he and Congress nevertheless managed to grow the budget deficit to nearly $1 trillion. It stands at nearly $2 trillion today and is projected to reach $2.8 trillion in 10 years.
Trump may believe he’ll bring enough economic growth to wash away our financial troubles. But he’s mistaken. The scale of the current debt and future indebtedness is so large that economic growth alone won’t be enough. There is a lot of evidence that debt can act as a drag on the economy.
George Will decries Putin’s “military barbarism.” A slice:
Zoltan Barany, a University of Texas political scientist, writes in the Journal of Democracy that Russia’s military “is a quintessential reflection of the state that created it”: corrupt (a Russian prosecutor “admitted that about a fifth of the Defense Ministry’s budget was stolen; other officials said that it could be as high as two-fifths”), brutal, hyper-centralized and institutionally stupid because it is hostile to debate. And until Feb. 24, 2022, inexperienced: Its engagements in Georgia (where Russian officers had to borrow war correspondents’ cellphones to reach troops), Crimea and Syria were “against feeble adversaries and said zero about how Russian forces would perform in a conventional land war against a resolute, well-armed enemy.” Furthermore, “The 2018 decision to revive the post of zampolit (political officer) in units as small as infantry companies harks back to the Soviet era and signals that the state doubts its soldiers’ loyalty.”
Ramesh Ponnuru shares this: “A recent paper showed ‘that top wealth shares have not changed much over the last three decades when Social Security is properly accounted for.’”
Jason Sorens explains an important connection between prosperity and wealth differences.
John Stossel is right that “Robert Reich is wrong about billionaires – and almost everything else.”
