“Dow Headed for Worst April Since 1932 as Investors Send ‘No Confidence’ Signal.” A slice:
The Trump rout is taking on historic dimensions.
The Dow Jones Industrial Average shed almost 1,000 points on Monday and is headed for its worst April performance since 1932, according to Dow Jones Market Data. The S&P 500’s performance since Inauguration Day is now the worst for any president up to this point in data going back to 1928, according to Bespoke Investment Group.
“Tariff Uncertainty Clobbers Earnings Optimism.”
But what about his predecessors? How often did they use the IEEPA to raise and lower tariffs?
Not once.
In the nearly half-century since President Jimmy Carter signed that statute, no president ever invoked it to impose tariffs — not against any country and not for any reason. That wasn’t because seven consecutive presidents failed to make use of a powerful tool granted to them by Congress. It was because no such tool exists.
Trump’s assertions notwithstanding, the International Emergency Economic Powers Act does not authorize presidents to singlehandedly change the tariffs charged on foreign imports. Indeed, nowhere in the 3,700-word statute does the word “tariff” appear. Neither does “duty,” “excise,” “impost,” “levy,” or any other synonym for the taxes charged by governments on imports from other countries. The IEEPA has nothing to do with tariffs. It doesn’t even appear in the section of the United States Code — Title 19 — that deals with trade. Rather, it is codified in Title 50, which covers “War and National Defense.”
Congress passed the law in 1977 to enable presidents to deal quickly with a national emergency during peacetime by ordering sanctions against, or freezing the assets of, a hostile foreign power or terrorist organization. The legislative text refers to an “emergency” that gives rise to “an unusual and extraordinary threat” — in fact, lawmakers specified that “emergencies are by their nature rare and brief, and are not to be equated with normal, ongoing problems.” That clearly excludes the supposed emergency identified by the Trump administration to justify its punitive “Liberation Day” tariffs, namely the trade deficits the United States runs with many trading partners. Those deficits have persisted for decades. They are not “unusual and extraordinary.” They are also, nearly all mainstream economists would agree, not a threat.
“The lawsuits challenging Trump’s trade war make powerful legal arguments. Is that enough?” (HT Ilya Somin)
Scott Lincicome reports on the many trade deals that the Trump administration itself agreed to that Trump is now reneging on. [DBx: Note to the many of you who insist that Trump’s high tariff rates are ‘tools’ for him to use to ‘negotiate’ better deals with other governments: Even putting aside questions of just what it is Trump thinks he wants to achieve with his ‘deals,’ no one wants to negotiate, at least not in good faith, with someone known to renege on his promisees.]
Michael Strain tells why “Trump’s tariffs won’t bring back manufacturing jobs.” Two slices:
First, Trump’s tariffs will reduce US producers’ competitiveness. Tariffs are often discussed as a tax on consumption, which of course they are. Less noted is that they are also a tax on business investment. A little over half of US imports are industrial supplies and materials, capital goods, and automotive parts. By making these inputs more expensive, tariffs will make it harder for American manufacturers to maintain low prices and expand output and hiring.
This is not just a theory. Because Trump waged a (relatively scaled-down) trade war during his first term, we have ample evidence to assess the current conflict. US Federal Reserve economists Aaron Flaaen and Justin Pierce estimate that US manufacturing-job losses due to costlier inputs were five times larger than manufacturing job gains from import protection during the 2018-19 trade war.
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Lastly, who is going to take these jobs? America’s unemployment rate is unlikely to be lower than it currently is, at least on a sustained basis – over the last few years, basically everyone in the US who wanted a job could get one. True, a large number of people are out of the job market entirely. But market wages would presumably need to be higher for many of them to enter the workforce.
Boosting manufacturing employment will not fix this problem. In America, the average manufacturing worker already earns less than the average service-sector worker. And if Trump is serious about bringing back factory jobs from overseas, then the average manufacturing wage in the US would drop. [Commerce secretary Howard] Lutnick may want Americans “screwing in little screws,” but businesses aren’t going to pay high wages for that type of work. There are many reasons why we should not wish for legions of Americans to stitch sneakers together in factories, but chief among them is that those are low-wage jobs.
Eric Boehm reports on an American manufacturing CEO who pleads “Stop the nonsense” with tariffs. A slice:
Like pretty much every small business in America, the Plattco Corporation doesn’t have a direct line to the White House, and CEO Michele Derrigo-Barnes can’t call up the president to get special tariff exemptions.
So when I asked Derrigo-Barnes what she would tell President Donald Trump (or his top trade advisor Peter Navarro) if she had the chance, she gave a light chuckle and then took a deep breath.
“Stop the nonsense,” she replied. “I would say, ‘You’re killing the American people.’ We’ve worked hard to get us to a place where we can perform well, and we can take care of our customers, and this is putting that in jeopardy. And the people that we have employed here have really good lives, and you’re putting that at stake.”
Barry Brownstein reminds us of Adam Smith’s timeless case for free trade. A slice:
Does the President think Cambodian and Vietnamese workers have ripped us off? Or is it the factory owners? The Vietnamese government, for example, doesn’t trade with the American government. American businesses voluntarily trade with Cambodian and Vietnamese companies (often owned by foreign investors).
Free trade arguments will not sway the economically illiterate. Their faith in President Trump overshadows their understanding of Adam Smith’s economics and dulls their moral compass. We’re told that America’s interests must come first. Smith would say yes, let’s make America great, but trade, not tariffs, is a pathway to progress.
The protectionists make much of their pretended “nationalism,” and they try to reason out some kind of relationship between the scope of economic forces and the boundaries of existing nations. The argumentation is fatally broken at its first step. They do not show what they might show, viz., that the scope of economic forces on any given stage of the arts, does form economic units. An English county was such a unit a century ago. I doubt if any thing less than the whole earth could be considered so to-day, when the wool of Australia, the hides of South America, the cotton of Alabama, the wheat of Manitoba and the meat of Texas meet the laborers in Manchester and Sheffield, and would meet the laborers in Lowell and Paterson, if the barriers were out of the way. But what the national protectionist would need to show would be that the economic unit coincides with the political unit. He would have to affirm that Maine and Texas are in one economic unit, but that Maine and New Brunswick are not; or that Massachusetts and Minnesota are in one economic unit, but that Massachusetts and Manitoba are not. Every existing state is a product of historic accidents. Mr. Jefferson set out to buy the city of New Orleans. He awoke one morning to find that he had bought the western half of the Mississippi valley. Since that turned out so the protectionists think that Missouri and Illinois prosper by trading in perfect freedom.
Ideas of unfairness are dangerous when not moored to any substantive theory.
Never has there been a better example of a politician shooting himself in the foot, or self-destructing, than Mr Trump‘s tariffs proposal. Even with his pause, he has caused a reduction in economic welfare. A remarkable demonstration of the power of ignorance to reduce economic betterment.
