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Rant 791: Why Tariffs?

5/28/2024

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​When he was running for President in 2020, Joe Biden severely criticized the $300 billion in tariffs Donald Trump imposed on Chinese products. He correctly noted that this amounted to a major tax increase on ordinary Americans. Add to that the tens of billions Trump sent to rural America to ease the plight of farmers affected by China’s retaliatory tariffs and you get an added burden on U.S. taxpayers.
 
Once in office, Biden reversed course and retained the Trump tariffs. Bad enough. But now, Biden is compounding his protectionist policies by imposing additional tariffs on Chinese goods.
 
A trade war with China is not going to end well for the U.S. Not only because trade wars never end well, but also because of the squeeze that higher prices for heretofore cheap Chinese goods will put on American consumers.
 
While some of the Biden tariffs may be justified on national security grounds, others are just plain foolish. Before Biden’s recent announcement of new tariffs, Chinese automakers paid a 25 percent tariff on cars exported to the U.S. Now that tariff will skyrocket to more than 100 percent. You won’t see many Chinese cars on our highways henceforth. The argument the administration and Detroit make is that Chinese car manufacturing is heavily subsidized by the Chinese government and that this unfair trade practice discriminates against U.S. automakers. Conveniently absent from this claim is that the U.S. government also subsidizes American car manufacturers. It was not so long ago, in fact, that Washington poured billions of taxpayer dollars into Detroit coffers to “save” the American auto industry.” In addition, large tax credits for purchasing electric vehicles are also a government subsidy.
 
A better policy would be to cap the number of Chinese electric vehicles allowed into the U.S. market, with the cap rising every year. This would serve to incentivize U.S. automakers to accelerate their efforts to become more efficient and be able to charge less for their EV models and thus compete with Chinese vehicles. It would also prompt Chinese EV manufacturers to follow the example of Toyota, Honda, Volkswagen, BMW, Mercedes, Subaru, Hyundai and other foreign automakers that built manufacturing plants in the U.S. This has been a job-creation bonanza for American workers as well as the U.S. economy.
 
The history of American tariffs is uneven. When the first several Congresses piecemeal adopted Alexander Hamilton’s proposed tariffs, they served to protect fledgling American industries when they needed it most. Jump ahead 140 years to the Smoot-Hawley tariffs of 1930. They made imported goods unaffordable for all but the wealthy, dramatically decreased U.S. exports and contributed significantly to the advent of the Great Depression.
 
Trump, whose ignorance about tariffs (and everything else) is colossal, says that if he returns to the White House, he intends to impose a 10-percent across-the-board tariff on all foreign imports and a 60-percent tariff on all Chinese goods. Add this to the endless list of reasons this man should never be president again.
 
Tariffs are usually a bad idea anytime. In a time of rising prices for basic goods, they make even less sense.
 
Dick Hermann
May 27, 2024


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    Author

    Richard Hermann is the author of thirteen books, including Encounters: Ten Appointments with History and, most recently, Mother's Century: A Survivor, Her People and Her Times. Soon to be released is his upcoming Close Encounters with the Cold War, a personal reflection on growing up in the nuclear age. He is a former law professor and entrepreneur, and the founder and president of Federal Reports, Inc., a legal information and consulting firm that was sold in 2007. He has degrees from Yale University, the New School University, Cornell Law School and the U.S. Army Judge Advocate General’s School. He lives with his wife, Anne, and extraordinary dog, Barkley, in Arlington, Virginia and Canandaigua, New York.

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