Andy Kessler is right: “Trump’s tariffs are a wealth killer.” Three slices:
“We will tariff and tax foreign countries to enrich our citizens,” President Trump declared in his inauguration speech. Adam Smith is turning in his grave. Tariffs destroy wealth. No matter, Mr. Trump said he may slap 25% tariffs on Canada and Mexico starting Feb. 1 and 10% on China.
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The General Agreement on Tariffs and Trade was created in 1947 and drove massive postwar trade and growth. But, worried about the Soviets, Congress passed the Trade Expansion Act of 1962 and specifically Section 232, which allowed presidents to restrict imports they deemed a threat to national security. Section 301 of the Trade Act of 1974 authorized presidents to impose tariffs on countries that violate agreements or burden U.S. commerce. The International Emergency Economic Powers Act 1977 allows presidents to regulate trade during national emergencies. Congress sure loves giving its power away. No wonder Mr. Trump has a crush on the word “tariff.”
Notice how everything is now either a national-security concern or an emergency. Tariffs on Canadian bacon for national defense? A national emergency? Hardly.
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The Tax Foundation estimates Trump-Biden tariffs reduced long-run gross domestic product by 0.2%—roughly $58 billion annually. On the flip side, the Peterson Institute for International Economics estimates that free trade since 1950 has cumulatively boosted the U.S. economy by $2.6 trillion, or $19,500 a household. Why go backward? Congress should reclaim its tariff power.
Instead, the backroom begging will start for tariff exemptions—machinery, certain pharmaceuticals, school pencils, cobalt for electric-car batteries, Nike Kobe 5 Protro “Year of the Mamba” sneakers—a lobbyist’s paradise. Free trade, not politicians, is best at allocating resources. Protectionism and mercantilism in the form of tariffs and subsidies, like the British Corn Laws, are inefficient, unproductive, corruption-inducing and wealth-destroying. That won’t make America great again.
The President reiterated his tariff threat in video remarks to the World Economic Forum on Thursday. “We don’t need [Canada] to make our cars. We make a lot of them. We don’t need their lumber because we have our own forests,” he said. “We don’t need their oil and gas, we have more than anybody.”
Mr. Trump is wrong on all three, but we’ll focus on lumber. The U.S. doesn’t produce enough lumber to meet domestic demand and thus imports about a third of the softwood used in home construction, mostly from Canada. Environmental policies restrict logging on public land in the American Northwest. Timber production has shifted to private land in the Southeast, but those forests must be managed so they aren’t overlogged.
[DBx: The here-quoted passages from Trump pack enough economic ignorance that, if released all at once, would cause the economic equivalent of a nuclear blast, spreading destruction far and wide.]
Jon Miltmore reveals how much of the fuel for the L.A. wildfires was supplied by bureaucracy.
Eric Boehm questions the lawfulness of Trump’s attempt to fire a dozen or more inspectors general. A slice:
So far, the second Trump administration seems less interested in draining the swamp than in pushing aside people who might sound the alarm about corruption, illegal actions, and other abuses of executive power.
Juliette Sellgren talks with Anna Claire Flowers about F.A. Hayek.
