“I do not believe that the solution to our problem is simply to elect the right people. The important thing is to establish a political climate of opinion which will make it politically profitable for the wrong people to do the right thing. Unless it is politically profitable for the wrong people to do the right thing, the right people will not do the right thing either, or if they try, they will shortly be out of office.”
― Milton Friedman

“Human beings are born with different capacities. If they are free, they are not equal. And if they are equal, they are not free.”
― Aleksandr Solzhenitsyn

Sunday, June 10, 2018

This is new

But it still shows President Trump's confusion on trade and tariffs. From whitehouse.gov:
Press Conference by President Trump After G7 Summit

Emphasis mine.
Q Mr. President, you said that this was a positive meeting, but from the outside, it seemed quite contentious. Did you get any indication from your interlocutors that they were going to make any concessions to you? And I believe that you raised the idea of a tariff-free G7. Is that —

THE PRESIDENT: I did. Oh, I did. That’s the way it should be. No tariffs, no barriers. That’s the way it should be.

Q How did it go down?

THE PRESIDENT: And no subsidies. I even said no tariffs. In other words, let’s say Canada — where we have tremendous tariffs — the United States pays tremendous tariffs on dairy. As an example, 270 percent. Nobody knows that. We pay nothing. We don’t want to pay anything. Why should we pay?

We have to — ultimately, that’s what you want. You want a tariff-free [sic], you want no barriers, and you want no subsidies, because you have some cases where countries are subsidizing industries, and that’s not fair. So you go tariff-free, you go barrier-free, you go subsidy-free. That’s the way you learned at the Wharton School of Finance. I mean, that would be the ultimate thing. Now, whether or not that works — but I did suggest it, and people were — I guess, they got to go back to the drawing and check it out, right?
So, they did teach him that tariffs are a bad thing in his Econ 101 course. One would think this attitude would have made NAFTA easy to re-negotiate.

Since this is the first time I can recall any mention of it in the President's otherwise protectionist, multitudinous rants; maybe he's just now remembered it. Better late than never, but his recall is incomplete and confused.

Canada does, indeed, levy a 270 percent tariff on milk imported from the US. However, it is not the US that pays that tariff, it is Canadian consumers. Just like it's American consumers and businesses who pay US tariffs on softwood lumber, steel, aluminum, washing machines, cars, etc., etc..

As to no subsidies: If Canada wants to subsidize US purchases of steel, aluminum, softwood lumber, or cars: I say let them. Those are subsidies given to US consumers by Canadian taxpayers. It's stupid for Canada to do it, but it isn't our problem.

President Trump is confused about who pays tariffs, and he appears to view trade as a zero sum game. If one side wins the other side must lose. Nothing could be further from the truth. By definition, in any freely conducted trade all the traders win.

If he could just remember that lesson from Wharton, he'd be a much better CEO. Maybe he missed class that day.

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