Thomas Friedman – no doctrinaire free trader – warns wisely against Trump’s incoherent tariff ‘policy.’ Four slices:
The scariest thing about what President Trump is doing with his tariffs-for-all strategy, I believe, is that he has no clue what he is doing — or how the world economy operates, for that matter. He’s just making it all up as he goes along — and we are all along for the ride.
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Trump is threatening to impose tariffs on rivals and allies alike, without any satisfactory explanation of why one is being tariffed and the other not, and regardless of how such tariffs might hurt U.S. industry and consumers. It’s a total mess. As the Ford Motor chief executive Jim Farley courageously (compared to other chief executives) pointed out, “Let’s be real honest: Long term, a 25 percent tariff across the Mexico and Canada borders would blow a hole in the U.S. industry that we’ve never seen.”
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There is no single country or company on earth that has all the knowledge or parts or manufacturing prowess or raw materials that go into that device in your pocket called an iPhone. Apple says it assembles its iPhone and computers and watches with the help of “thousands of businesses and millions of people in more than 50 countries and regions” who contribute “their skills, talents and efforts to help build, deliver, repair and recycle our products.”
We are talking about a massive network ecosystem that is needed to make that phone so cool, so smart and so cheap. And that is Beinhocker’s point: The big difference between the era we are in now, as opposed to the one Trump thinks he’s living in, is that today it’s no longer “the economy, stupid.” That was the Bill Clinton era. Today, “it’s the ecosystems, stupid.”
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Instead, there is a global web of commercial, manufacturing, services and trading “ecosystems,” explains [Eric] Beinhocker. “There is an automobile ecosystem. There’s an A.I. ecosystem. There’s a smartphone ecosystem. There’s a drug development ecosystem. There is the chip-making ecosystem.” And the people, parts and knowledge that make up those ecosystems all move back and forth across many economies.
Scott Sumner is correct: “A VAT is not a tariff.” A slice:
The sky is not green, it’s blue. And a value added tax is not a tariff. President Trump once suggested that ‘tariff’ is the most beautiful word in the dictionary, hence you might expect him to know what a tariff actually is.
You can argue that the president should have a lot of power in order to “get things done.” You can argue that a president cannot be expected to understand basic economic principles. But you cannot argue both points at once.
In my view, tariff is one of our ugliest words, associated with ignorance, xenophobia, statism and nationalism.
On “Face the Nation” Sunday, the network’s Margaret Brennan quizzed Secretary of State Marco Rubio about Vice President JD Vance’s speech in Munich faulting Europe for political censorship. When Mr. Rubio rebuffed her complaint about “irritating our allies,” she invoked the reductio ad Hitlerum: She said Mr. Vance “was standing in a country where free speech was weaponized to conduct a genocide.”
Ms. Brennan would have benefited from a fact-checker. Weimar Germany had laws limiting speech, but their application against the Nazis failed to prevent Hitler’s January 1933 rise to power. His regime suspended civil liberties less than a month later via the Reichstag Fire Decree. Free expression was a distant memory by the time the Nazis begin killing on an industrial scale.
On its own, Ms. Brennan’s comment reflects ordinary inconsistency—she wants to censor speech she finds disagreeable or dangerous.
This latest podcast by GMU Econ alum Dominic Pino is worth a careful listen.
You could demagogue this as some sort of unfair scheme by greedy financiers against the little guy, as [Bernie] Sanders and [Josh] Hawley are doing. But it’s really just a commonsense intuition that banks, which have large sums of money and borrow all the time, are going to be a lot better at paying back loans than are individuals, who have comparatively little money and don’t borrow as often. Money isn’t free, and it needs to be priced somehow. Pricing by risk makes a lot of sense, and you’re a bigger credit risk than a bank is.
Jack Nicastro applauds the advent of economically sensible supersonic air travel.
Wall Street Journal columnist Jason Riley writes insightfully about the constitutionality of birthright citizenship. Two slices:
The Citizenship Clause of the 14th Amendment, which was ratified in 1868, states in part: “All persons born or naturalized in the United States, and subject to the jurisdiction thereof, are citizens of the United States.” The Trump administration argues that the phrase “subject to the jurisdiction thereof” excludes children born to people in the country unlawfully or temporarily. Although the Supreme Court has never addressed the issue directly, lower courts have interpreted birthright citizenship to include the children of illegal immigrants.
The court typically decides to hear a case when there are conflicting lower-court rulings on an issue, but so far there has been little if any such disagreement. Last week, U.S. District Judge Leo Sorokin became the fourth federal judge to block Mr. Trump’s order. “In a lengthy 1898 decision, the Supreme Court examined the Citizenship Clause,” he wrote, “rejecting the interpretation expressed in the [Trump executive order]. The rule and reasoning from that decision were reiterated and applied in later decisions, adopted by Congress as a matter of federal statutory law in 1940, and followed consistently by the Executive Branch for the past 100 years, at least.”
Judge Sorokin was appointed by Barack Obama, but judges appointed by Ronald Reagan, George W. Bush and Joe Biden have offered the same interpretation of the Citizenship Clause in blocking Mr. Trump’s order. The “Executive Order contradicts the text of the Fourteenth Amendment and the century-old untouched precedent that interprets it,” wrote U.S. District Judge Joseph N. Laplante, a Bush appointee, in a ruling earlier this month.
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Mr. Trump and his supporters see birthright citizenship as a reward for breaking the law. Yet the Citizenship Clause concerns children, not parents. The undocumented parents’ status doesn’t change after having a child in the U.S. Parents are still subject to fines, imprisonment and deportation depending on the circumstances.
The administration has said it will appeal the lower-court rulings, and the Supreme Court may yet decide to weigh in. Liberals are in a state of panic, but Mr. Trump campaigned on challenging the policy and there’s nothing wrong with seeking guidance from the judiciary. Most of Mr. Trump’s efforts to secure the border are polling well, but an NPR/Ipsos national survey published this month found that just 31% of respondents backed ending birthright citizenship. Mr. Trump’s gambit doesn’t amount to a constitutional crisis, but that doesn’t make it a wise use of his political capital.
