About those tariffs

 

Whatever the notion of economic goal that a tariff could accomplish or assist, you cannot control how other people or other countries react. This is why tariffs are terrible policy—because you don’t have power to tell another country what to do. This is the version of I’m going to walk up and sucker punch you in the face, but you’re not allowed to kick me and you’re not allowed to bite me and you’re not allowed to get a friend to help. You don’t get to dictate rules in a street fight that you started.

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And it might be why tariffs aren’t vested in the power of the executive and the Constitution. You put them with Congress where they have many people contributing, where you have negotiations that had to be held, where you have to get people on board with your plan. [...] You don’t want so much economic policy being shot from the hip of someone who has a temper, and that’s why most economic policy doesn’t flow through the president most of the time.

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[Y]ou’re also seeing from all of this the heart of the problem of his executive power: There’s no points of leverage over him. He doesn’t take constituent calls. He doesn’t go out into his district and have to meet people who run coffee shops and people who run tea houses and people who are small manufacturers who are seeing their supply chain hit. This is just a personality fight, an ego fight. Whereas your members of Congress, like it or not, even if they don’t agree with you, do have to ask you for a job and do have to answer to you.

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[T]ariffs can be incredibly destructive to a small set of people. For example, you’ve got a supply chain that rests on one good from one country, and it becomes 50 percent more expensive—your whole business model then is out the window.

  New Republic

And, what's the goal, anyway? We don't really know. It could be to get manufacturing back to the US (pipe dream), or it could be to make imports cheaper (a game of chicken).

I was on a WNYC show that was a call in, and one of the people who called into the show about tariffs is starting his first board game company. He has investment money and he’s contracted with a board game manufacturer in China to make the game. But of course, now that tariffs are announced, he has no idea what his production costs will be or if he’ll able to afford to launch his company, his new game. I think that this is a great case study of what a tariff is supposed to do.

In one version of the world, tariffs are meant to onshore domestic production of board games, so we’re going to close off trade relations with China in order to protect the domestic board game industry. In that version of the world, you’ve got to find a factory, find investors, find equipment, find people, get it all started. And then you can start making board games—lots of which are really hard to do if the market is tanking and there’s not a lot of investor funds to be had.

In the other version of the world, if it’s not to build out domestic board game manufacturing, tariffs are just a negotiating chip. In which case, any type of movement toward domestic production would be immediately superseded by renegotiating a deal with China. It then wasn’t about getting board game production to the U.S.; it was about just making board game imports cheaper. [...] And certainly in the case of the former, if you did want to grow domestic board game production, you would do all of those things before the tariff. The tariff would be the last thing you did when you had the factory and the machines and the people and you were all ready to go. So it’s a struggle to find a coherent economic policy from this because manufacturing and negotiation are in conflict.

Trump has no plan. He only has instincts and thin skin. Or perhaps someone told him that when the market crashes, he can "buy the dip" (as Eric Trump recently told everyone to do) and make a killing when it eventually (maybe!) goes back up.

We have shoes now. We had shoes in 1925. We’ll have shoes in 2125. If you imagine a shoe factory a hundred years ago versus a shoe factory a hundred years from now, I can bet that the first picture you think of is a grainy black and white photo with 200 people bent over a production line. And in 2125, I doubt there’ll be a person in the room. This is a lot of economic pain to throw around for an industry that decreasingly uses people.

And if you really wanted to have good middle-class jobs in the U.S., you would identify the jobs that can’t be exported and replaced by a machine, and you would ensure that those jobs are high quality and well-paid. What made a manufacturing job good is that they were high-paying, had health, and had retirement. That’s not special to manufacturing. That’s just special to labor economic policy.

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Are we really going to sacrifice all of our economy to bring back unionized manufacturing jobs as opposed to thinking of something more creative? Are we really going to bankrupt the federal government for a tax cut that serves very little articulated economic purpose? At some point, are we going to address problems of basic rights in our labor market for workers that have long been not addressed? We don’t have paid sick days. We don’t have childcare. We’ve got a very aging population, and none of their kids have paid family leave to take care of them as they die.

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We have a massive sprawling low-wage service sector. You could make that into the middle class if you really wanted to, but I don’t think we want to. I think we prefer to lament about the lost past, but it cost a lot to destroy the future.