Townhall.com
Walter williams

The Canadian government, lining the pockets of its dairy producers, imposes high tariffs on American dairy imports. That forces Canadians to pay higher prices for dairy products. For example, Canadians pay $5.24 for a 10.5-ounce block of cheddar. In Washington, D.C., that same amount of cheddar sells for $3.64. Canadians pay $3.99 for a 1-pound container of yogurt. In Washington, D.C., you can get nearly twice as much yogurt for a little over $4. It's clear that the Canadian government's tariffs screw its citizens by forcing them to pay higher prices for dairy products.

What should the U.S. response be to Canada's screwing its citizens? If you were in the Trump administration, you might propose imposing tariffs on soft wood products that Americans import from Canada -- in other words, retaliate against Canada by screwing American citizens. Canadian lumber -- such as that from pine, spruce and fir trees -- is used in U.S. homebuilding. Guess what tariffs on Canadian lumber do to home prices. If you answered that they raise the cost and American homebuyers are forced to pay higher prices, go to the head of the class.

This retaliation policy is both cruel and not very smart. It's as if you and I were in a rowboat out at sea and I shot a hole in my end of the boat. What should be your response? If you were Secretary of Commerce Wilbur Ross or Secretary of the Treasury Steven Mnuchin, you might advise retaliating by shooting a hole in your end of the boat. If I were president, I'd try to persuade officials of other countries not to serve special producer interests by forcing their citizens to pay higher prices. But if they insisted, I'd say, "Go ahead, but I'll be damned if I'll do the same to Americans!"


The ruse used to promote producer interests through tariff policy is concern about our large trade deficit. It's true that we have a large current account trade deficit. However, that's matched exactly by a very large capital account surplus. Translated, that means Americans buy more goods from other countries than they buy from us; that's our current account deficit. But other countries find our investment climate attractive and invest more in the U.S. than we invest in other countries; that's our capital account surplus.

Have you ever wondered why foreigners are willing to invest far more money in Texas and California than they are willing to invest in Argentina and Venezuela? Do you think it's because they like North Americans better than they like South Americans? No. We've always had an attractive investment climate, and we've had current account deficits and capital account surpluses throughout most of our nation's history. In fact, the only time we had a sustained current account trade surplus was during the Great Depression, when we had a surplus in nine out of 10 years, with 1936 being the lone exception.


Let's delve a bit into the politics of trade tariffs. Whom do we see spending the most resources lobbying for tariffs on foreign steel and aluminum? Is it American users of steel and aluminum, such as Harley-Davidson and John Deere? Or is it United States Steel Corp. and Alcoa? Of course it's U.S. Steel and Alcoa. They benefit from tariffs by being able to sell their products at higher prices. Harley-Davidson and John Deere lose by having to pay higher prices for their inputs, steel and aluminum, and their customers lose by having to pay higher product prices.

There's a lot of nonsense talk about international trade, which some define as one country's trading with another. When an American purchases a Mercedes, it does not represent the U.S. Congress' trading with the German Bundestag. It represents an American citizen's engaging in peaceable, voluntary exchange, through intermediaries, with a German auto producer. When voluntary exchange occurs, it means that both parties are better off in their own estimation -- not Trump's estimation or General Motors' estimation. I'd like to hear the moral case for third-party interference with such an exchange.

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I am still not clear on this.

A lot of noise is on social media about how much lower our tarriffs are than our trading partners'. Why in the hell are our tarriffs suddenly evil? Why are everyone else's existing tarriffs not subject to debate?

And why not just strictly mirror tarriffs from other countries? Fair is fair, right?

Or is there some economic magic I'm missing? Not my bailiwick, so please take this as an earnest question.

They're blaming Trump for trade issues that should of been addressed when the original restrictive Tarriffs were applied by the other countries.

Walter Williams doesn't seem to offer any alternative just- It's bad. How is one supposed to address trade imbalances when it isn't a level playing field?

Canadian Lumber- My Dad was in Nova Scotia and looked to buy some "quality" lumber- Turns out the lumber offered was from the USA.

The short version is that each of us view these things through the narrow prism of our own perception of our own self interest.

If you own a steel mill, it is hard to compete, sell your steel and make a profit if foreign mills make and sell steel here cheaper than you can. Those foreigners have hideously low labor costs, work rules taxes, maybe even subsidies from the government. You and your buddies who own mills point out the unfairness of this, how you could employ a great many more workers at high wages, veterans, loyal American taxpayers and voters and a Congressman who can’t understand this probably needs to look for another job.

If you are a worker, you see, thanks to learned commentators, that wages could be much higher if it wasn’t for those bleeping foreigners dumping products made overseas in sweatshops paying a dime a day.

If you are a taxpayer, it is stressful to think of all the taxes you pay while these miserable foreigners are raking in fortunes and getting off tax free or nearly so, and don’t forget balance of payments problems which make ski vacations in Switzerland so expensive.

A Patriot implores you to “buy American” as a duty.

More later.

I posted in the Trump thread how Herr Merkel is now open to lowering tariffs on US cars. The globalists like Shapiro cry bloody murder while selling out the US workers.

quote:

Originally posted by JALLEN:
Guess what tariffs on Canadian lumber do to home prices. If you answered that they raise the cost and American homebuyers are forced to pay higher prices, go to the head of the class.

Unless, of course, you do something silly like start cutting again the trillions of board feet of lumber WE have inhabiting our forests. What would that do? Make the forests more healthy, reduce the fire dangers, employ thousands of people, stimulate local economies, and, oh yeah, decrease the cost of lumber.

That would make far too much sense though.

So I’m the furthest thing from a communist/labor/“worker rights” person, but isn’t the logical outcome of a current account trade surplus that wages are depressed in the country that imports goods?

And following up, if there is a significant capital account surplus, the logical outcome is that investment opportunities become more expensive, including real estate? So the average worker in the US faces stagnant real wage growth, but rising costs of living?

Adam Smith, Milton Friedman, Thomas Sowell, this Walter Williams and others have made these points over and over, about the most efficient, effective state is trade free of barriers like tariffs, subsidies, other impediments, much better than me trying to regurgitate my cruder understandings.

What I understand from Trump’s tactic is to get to free trade by insisting on “fair trade” which makes no one happy.

The purpose of the import tariffs are to bring the other countries to the bargaining table. They have import tariffs on our products. We impose a tariff on their imported products, which will increase the price of their products, which will decrease the demand for said products.

In the short run, everyone pays a higher price. However, if this approach brings them to the bargaining table, and they agree to reduce or eliminate their import tariffs on our products, everyone will pay a lower price in the long run.

I don't think the tariffs are a long term solution, just a stick to get them to reduce their tariffs. Short term pain for a longer term gain.

quote:

Originally posted by braillediver:
They're blaming Trump for trade issues that should of been addressed when the original restrictive Tarriffs were applied by the other countries.

Walter Williams doesn't seem to offer any alternative just- It's bad. How is one supposed to address trade imbalances when it isn't a level playing field?

Canadian Lumber- My Dad was in Nova Scotia and looked to buy some "quality" lumber- Turns out the lumber offered was from the USA.

Yeah, it's fine for everyone to jump on tarrifs by the United States as being wrong, evil, etc., but hardly, if ever, a word against what other countries do against us in trade. Obviously the carrot hasn't worked so it's long overdue for the stick.

Rather than let you lot fear monger each other into a frenzy. watch the good Dr.

quote:

Originally posted by 1967Goat:
The purpose of the import tariffs are to bring the other countries to the bargaining table. <snip>

My take, too. President Trump said; “Trade wars are easy [for us] to win.”

Milton explains these things so even a lawyer can understand them.

Here is another one even more apt.

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Jallen & FenderBender - I think what you are not getting is that free trade or fair trade would be great - if it's a two-way street. Previously and currently that is not the case. What other means do we have to get other countries to be more free/fair in trade besides tarriffs if they will not do so of their own accord?

Friedman is great. However, I am reminded of many examples while studying physics. Each example always starts with caveats, such as a "friction-less" environment. Or "in a vacuum".

You need to get both sides to play by the same rules, which is the hard part.

Imagine playing a football game with no referees. Or perhaps you have referees, but they are not allowed to assess penalties. You have one side that plays by the rules. The other side cheats, because there are no consequences to their bad actions. no matter how hard the non-cheating side tries, they are not able to win, because not everyone is playing by the same set of rules.

So, you decide to cheat back. Eventually, the game will deteriorate into a melee, which is not sustainable in the long run. The solution is to penalize each side until they both agree to play by the same rules.

It certainly seems like a complex situation and maybe not one that is addressable with broad brush strokes but rather one that requires fine, detailed combs.

For example, Japan initially had high tariffs which afforded local companies an opportunity to improve which I think turned out well. Otherwise, perhaps today there would be no Toyota/Lexus and we'd all be driving Chevy. Or no Sony TVs and we'd be watching Zenith.

On the other hand, it seems we have woefully insufficient relative tariffs with PRC which I think has been detrimental globally except for execs in certain industries (ie - textiles, etc).

This should be a tool to enable better products and associated availability over time. Not to enable flooding the market with cheap crap.

quote:

Originally posted by marksman41:
Jallen & FenderBender - I think what you are not getting is that free trade or fair trade would be great - if it's a two-way street. Previously and currently that is not the case. What other means do we have to get other countries to be more free/fair in trade besides tarriffs if they will not do so of their own accord?

Oh, I get it.

It is a state of affairs that has not existed in real life, as politics inevitably gets involved as Friedman explains.

The task of leadership is to promote and work toward a better way.

In shopping for best bang for the buck.....
High prices casus less sales. Tax em out of business.
Strong negotiation tool, imo

quote:

Originally posted by JALLEN:

quote:

Originally posted by marksman41:
Jallen & FenderBender - I think what you are not getting is that free trade or fair trade would be great - if it's a two-way street. Previously and currently that is not the case. What other means do we have to get other countries to be more free/fair in trade besides tarriffs if they will not do so of their own accord?

Oh, I get it.

It is a state of affairs that has not existed in real life, as politics inevitably gets involved as Friedman explains.

The task of leadership is to promote and work toward a better way.

Like I said before, the carrot hasn't worked. The United States taking it in the shorts on trade deals for decades has only made things worse. Things needed to be rebalanced long ago and tarriffs are the tool. Standing up to unfair practices and making it painful for the other side is an effective way to make change happen. Is there another, less controversial method that we haven't tried that would be as fast and effective as tarriffs at getting the other countries to make the necessary corrections?

quote:

Originally posted by marksman41:

quote:

Originally posted by JALLEN:

quote:

Originally posted by marksman41:
Jallen & FenderBender - I think what you are not getting is that free trade or fair trade would be great - if it's a two-way street. Previously and currently that is not the case. What other means do we have to get other countries to be more free/fair in trade besides tarriffs if they will not do so of their own accord?

Oh, I get it.

It is a state of affairs that has not existed in real life, as politics inevitably gets involved as Friedman explains.

The task of leadership is to promote and work toward a better way.

Like I said before, the carrot hasn't worked. The United States taking it in the shorts on trade deals for decades has only made things worse. Things needed to be rebalanced long ago and tarriffs are the tool. Standing up to unfair practices and making it painful for the other side is an effective way to make change happen. Is there another, less controversial method that we haven't tried that would be as fast and effective as tarriffs at getting the other countries to make the necessary corrections?

I think that is what I think. Like Christopher Columbus showed, sometimes you go west to get to the east. Trade agreements have become unfair, if not always so, nobody wants to drop tarifs to go to free trade, which is also fair, and therefore it is necessary to get to free trade by going to fair trade.

Once they see how much they don’t like “fair” they will like free a lot better!