Ignoring The Lessons Of The Past …

hot stoveAs children, we learn by doing.  When we place our hand on the open flame of a gas burner, as I did at about age 4, we learn that it is hot, it hurts, and it gets us yelled at, so we don’t do it again.  Well, most of us don’t.  As adults, we have developed the ability to learn by not only our own past experiences, but also those of others, and at least in theory, we can use our ability to reason to determine likely outcomes for our actions.  So, when I read that cigarette smoking is responsible for certain diseases, then I can make the decision to not smoke, right?  Okay, bad example, for I am a 3-pack-a-day smoker, but you get the point.  We don’t need to drive our car over a cliff to know that it is not a good idea.

However, as you’ve often heard me say, it seems that we … the human race in general … fail to learn the lessons of history.  We keep making the same stupid mistakes, over and over.

Yesterday, Donald Trump imposed new tariffs on Chinese imports, to the tune of $200 billion, in addition to the $50 billion previously imposed.

“Today, following seven weeks of public notice, hearings, and extensive opportunities for comment, I directed the United States Trade Representative (USTR) to proceed with placing additional tariffs on roughly $200 billion of imports from China. The tariffs will take effect on September 24, 2018, and be set at a level of 10 percent until the end of the year. On January 1, the tariffs will rise to 25 percent. Further, if China takes retaliatory action against our farmers or other industries, we will immediately pursue phase three, which is tariffs on approximately $267 billion of additional imports.

We have been very clear about the type of changes that need to be made, and we have given China every opportunity to treat us more fairly. But, so far, China has been unwilling to change its practices. To counter China’s unfair practices, on June 15, I announced that the United States would impose tariffs of 25 percent on $50 billion worth of Chinese imports. China, however, still refuses to change its practices – and indeed recently imposed new tariffs in an effort to hurt the United States economy.

As President, it is my duty to protect the interests of working men and women, farmers, ranchers, businesses, and our country itself. My Administration will not remain idle when those interests are under attack.”

Even on the surface to those of us who are not economists, there are some obvious flaws with his plan. Make no mistake … there is no “if” here … there isn’t much doubt that China will impose retaliatory tariffs. But let’s take a look at another case, one from which we might have learned a lesson.

tiresIn 2009, American tire makers persuaded the Obama administration to impose tariffs on Chinese tires, and imports of tires from China fell sharply. But Chinese companies did not stop making tires in response to the tariffs — they simply moved production to other places, including to the United States.

Chinese tire manufacturer Giti, built a factory in South Carolina to make low-cost tires for Walmart.  Did the move keep some jobs in the U.S.?  Sure, but a study by the Peterson Institute for International Economics (PIIE) showed that consumers paid a hefty price: an extra $1.1 billion on tires as a result of a tariff that preserved, at most, 1,200 jobs. That is almost $1 million per job, for jobs paying an average of about $40,000.

The 2009 tire tariffs — and similar efforts by past administrations to tax everything from socks to solar panels — have generally failed to protect existing factories and jobs. The Chinese factory in South Carolina created new jobs for American workers but, in effect, the tariffs only moved jobs from one place to another … at a very high price.

Steel tariffs imposed in 2002 by President George W. Bush yielded similar results, penalizing not just consumers but companies that use steel to make other products, like construction companies and carmakers.  There are about 140,000 jobs in the U.S. steel-making industry, but by contrast, 6.5 million who work in industries that buy steel and will be hit hard by Trump’s steel tariffs.

GMDid you know that General Motors sells more cars in China than in the U.S.?  What do you suppose happens when China imposes tariffs on U.S. autos?  Or when the Chinese government calls for a boycott on U.S. goods?  As an authoritarian government, they do not operate under the same constraints as the U.S.

Trump claims that thus far his tariffs have not had much impact on the U.S. consumer, but if you are a savvy food shopper and pay attention to prices, you will have noticed that certain items have increased, some by quite a bit.  And … on 18 December 2017, the price per gallon for regular fuel was $2.16.  Today it is $2.84, a 31.5% increase.

Simply put, tariffs are taxes ultimately paid by American consumers, in the form of higher prices. In addition to the latest round of tariffs on China, there are the steel tariffs on nearly every nation, plus the retaliatory tariffs imposed on the U.S. by other nations.  Remember back when Trump said that trade wars are ‘easy to win’?  Guess what, folks … there are no winners.  Trump has not only failed to learn the many lessons of history but is seemingly unable or unwilling to apply reasoning and logic in his decision-making process.  And guess who’s going to pay the price, my friends.  Not Trump, not his rich cronies …

12 thoughts on “Ignoring The Lessons Of The Past …

  1. Tariffs= Counter Tariffs (usually for domestic popularity)=Drop in Trade= Loss in Jobs.
    Of course I wouldn’t expect comprehension from a person born to privilege who has made a living out of the nebulous world of commercial property deals, avoiding paying for things and and self-publicity in the shallower end of the entertainment industry.
    Perhaps there was a spelling mistake. Maybe his initial slogan was originally ‘Make America Grate Again’?

    Liked by 1 person

    • Billionaire Wilbur Ross, whose net worth is around $2.9 BILLION, said that consumers would barely even notice the effects of the tariffs. That sent me into a fury, for this man has never … NEVER had to go without food, be homeless, or struggle just to survive (I’ve done all of the above!) and yet he has the unmitigated gall to make such a statement! It exemplifies how far our “leadership” is removed from We, the common People. You aren’t the first person to suggest that was the original slogan! 😉

      By the way … I need you to talk to the moggies again … a 3-cat fight tonight has left mine and Miss Goose’s arms literally shredded and both of us in tears! First fight in a couple of weeks, but WOW … the most vicious I’ve ever seen! BAD KITTIES!!!

      Liked by 1 person

  2. Dear Jill,

    The CEOs made their bed with President Trump but we are going to pay the price for their foolishness in higher costs, less consumer protections, less clean air and waters, etc., etc. But they got their coveted tax cuts and steps to de-regulate wherever and whenever possible, as their wages continue to stagnate.

    I wonder if these CEOs will continue to wonder why average Joe workers might be furious with them and their Republican Party.

    Hugs, Gronda

    Liked by 1 person

    • You are so right. There can no longer be any question that the United States is a plutocracy — government by the wealthy. Used to be “by the people, for the people and of the people”. Now it’s “by the rich, for the rich, and of the rich”. I would almost like to see a nationwide labour union strike along about Thanksgiving … see how they like it when their holiday season is ruined. I think it is more imperative than ever that the democrats gain a majority in at least one chamber of Congress in the November mid-terms. I would like to say both the Senate and the House, but the odds are against it in the Senate. Still, one can hope that by November 6th the citizens of this nation are finally angry enough to throw all the bums out!

      Hugs!!!

      Liked by 1 person

  3. Jill, per earlier reporting and advice from economic experts and CEOs, the President continues to go down a fraught path with a surprisingly poor understanding of trade and tariffs. He does not fully recognized the intricacies of a global economy and is more concerned with optics to his base – which has time and again been a poor decision making motive.

    Many things trouble me from Bob Woodward’s book “Fear,” but one that surprises is how Trump took delight in watching the stock market fall after announcing a round of tariffs. It is akin to him wanting a government shut down, which hurts people. Keith

    Liked by 1 person

    • Do I vaguely remember sometime back in 2016 when he said he would surround himself with the best advisors, or did I dream that?

      Yes, that surprises me too! It’s almost as though he wants to take this country back 50 years. Is that what he meant by making America “great”?

      Like

  4. We have a problem in the rich western nations in that workers earn much more to maintain a much higher standard of living. That means everything that is manufactured in rich countries costs more money to produce , and must be sold at a higher price. Buy a cheap shirt and it may have been made by child labour in India or China.
    I loved your Wal-Mart example it shows how market forces are beyond our control and we know Donald Trump is intent on controlling the world for the benefit of America.
    Now that the poorer countries like China and India are becoming industrialized they can make goods much cheaper than the old industrialised nations with high wages and endless regulations. Of course this will not last as their workers will wise up and standards will slowly rise.
    For me it is another example that to every action people or governments take there is always an unforseen consequence, which leads me to ask just how much we are in control of our world.

    Liked by 1 person

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