Eek, Tariffs!!

You want tariffs, let’s take a spin through JOE BIDEN’S tariffs. Let’s see . . . Steel and aluminum, 25 percent; Electric vehicles, 100 percent (wow); Semi-conductors, 50 percent . . . Etc. etc. Seems high, no?

There can be a good case for tariffs, given the details and context. I’m not judging the merits of any of them. I do think there is silliness among Democrats who gleefully regale us with predictions of price increases under Trump’s tariffs. I’m provoked by an appearance on Chris Hayes’s “All In” on MSNBC by the husband-wife, or wife-husband, if you like, team of Betsy Stevenson and Justin Wolfers. They are both good economists, no argument there, and they hardly need my endorsement. It’s just that the hype in their discussion kind of skated past the Biden Tariffs.

Stevenson in particular offered up the standard econ motivation for gains from trade, a principle to which I fully subscribe, if only in the abstract. Problem is, her rap is also a good explanation for the collapse of the Democratic vote among workers hit hard by the diminution of manufacturing jobs, including in the wake of the “North American Free Trade Agreement.” I was there for “NAFTA, we don’t hafta.”

There is also a misunderstanding of Trump’s tariff strategy. I’m not suggesting it’s a good strategy. In fact, I expect it will be a debacle. Trump thinks he is a genius negotiator, but his negotiating strategy comes down to trying to jam his negotiating partners. His threats of huge tariffs are largely a bluff. Sometimes this can work when there is a power imbalance.

I doubt it can work with the Peoples Republic of China. There is no power imbalance. Each nation needs the other. Second, I am quite certain that the PRC’s leaders are smarter than Trump, so I doubt he will outfox them.

Other reasons to doubt the tariff strategy. Other countries can retaliate, creating blow-back in domestic politics. In his first term, Trump addressed this with a huge welfare program for U.S. farmers. He will need more dough to compensate new victims of his machinations, and he has already committed big dollars to assorted ambitions. Tax cuts, mass deportation, defense spending. Second, Biden has already picked some of the low-hanging fruit, any benefits of which will of course be claimed by Trump. so the scope for new action is reduced. Third, of course the price increases resulting from higher tariffs will be noticed. Trump will say that’s just temporary, but there will be a political cost. Fourth, some of the U.S. victims of Trump’s unilateral tariff moves will just buy their way out. Some probably had done so already.

Personally I am looking forward to the news photos of gas station prices. Today, where I live, gas is close to three bucks a gallon. Watch this space.