7 ms·

For the benefit of HN readers, no serious economist supports tariffs in any form. Tariffs appeal to the naive idea that trade imbalances between two nations ar

For the benefit of HN readers, no serious economist supports tariffs in any form. Tariffs appeal to the naive idea that trade imbalances between two nations are a bad thing. They simply are not a bad thing. But due to the political history of tariffs it becomes possible for politicians to claim (falsely) that tariffs will benefit the economy, when in fact they are (at best) a handout to specific industries. What really boggles my mind about the groundswell of support for tariffs is that much of it is coming from people who would traditionally have frowned upon receiving welfare. Yet they are happy to receive it when it's called tariffs and also happy to receive bailout money when their industry is harmed by the tariffs. Put another way, tariffs are simply a way of introducing the government into economic transactions. If a foreign government foolishly decides to tax its citizens via a tariff on US goods, this harms the foreign citizens. When the US then plays tit-for-tat and adds its own tariff, this punishes American consumers in an attempt to harm foreign exporters. But I repeat, no serious economist (someone who studies the economy scientifically) supports tariffs. They are a political phenomenon and the rhetoric used to support them has no basis in reality. There have been countless blog posts and articles from economists since the president began talking about tariffs that have pointed out the many ways in which the president confuses the meaning of some of the big numbers he presents as justification, etc. The understanding that tariffs are foolish is a universal among economists and is not remotely a partisan issue. It's one thing to want to grant welfare to a specific industry for some political reason, but completely another to introduce a distorting factor like a tariff. I have a trade deficit with my grocer, for example. Why? Because I chose to exchange money for groceries. How is this bad? The same applies to nations.

Nokinside 8y ago
The real weakness of democratic societies is that the general understanding of the world don't transfer into politics. Mercantilism as a zero sum game where you export more than you import and then you get rich reasonable first theory if you start to think trade from the scratch, but it's wrong. It was already debunked by Adam Smith in "The Wealth of Nations" 1776. Then came Ricard's comparative advantage (1817), the emergence of Classical Theory Of International Trade, then New Trade theory then New New trade theory. Every area of politics that touches issues like medicine, chemistry, genetics, climate science, macro economics, trade economics, urban economics, etc. is always facing arguments that were outdated hundreds or thousands of years ago.
commandlinefan 8y ago
> traditionally have frowned upon receiving welfare You weaken your (otherwise solid) argument when you do that. Tariffs and welfare are two different things, and you know that, and everybody reading this knows that, but you try to sneak in a conflation anyway. They're both bad, but they're bad for different reasons: accepting that taxation is a necessary evil (I'm not sure I do, but set that aside), welfare involves paying out of tax revenues into individuals pockets. Tariffs are exactly the opposite - tariffs involve increasing tax revenue by collecting taxes on imports, and then using that tax revenue for whatever you use all the other tax revenue for. Trying to imply that they're the same just looks like you're trying to score cheap points with people who have poor critical thinking skills.
- EvilEndures 8y ago
  > They're both bad, but they're bad for different reasons: accepting that taxation is a necessary evil (I'm not sure I do, but set that aside), welfare involves paying out of tax revenues into individuals pockets. Tariffs are exactly the opposite - tariffs involve increasing tax revenue by collecting taxes on imports, and then using that tax revenue for whatever you use all the other tax revenue for. If Mr. Widget isn't competitive at $100 vs. imports sold at $90, and you add a tariff of $10 so its "competitive", suddenly Mr. Widget's sales will increase. The other country, knowing their widgets aren't competitive (except $$ wise) then tariffs something like solar panels to protect a nascent solar panels industry. Tariffs are a form of welfare for domestic corporations. Creating a new Mr. Widget on the assumption that tariffs will remain the same is an expensive gamble you take only if you are sure your widgets are better than Mr. Widget's widgets. Subsidized loans (i.e. "The Bank of Boeing") are another example of welfare for domestic corporations.
  - commandlinefan 8y ago
    Well, you can argue (as you seem to be, although I'm not entirely convinced) that tariffs and welfare lead to the same result, but to imply that opposing welfare means you must also oppose tariffs is a non-sequitur.
- brentjanderson 8y ago
reaperducer 8y ago
For the benefit of HN readers, no serious economist supports tariffs in any form. I'm not going to pretend to be an economist, serious or otherwise, so I won't dispute this notion. Tariffs appeal to the naive idea that trade imbalances between two nations are a bad thing. This, however, needs some augmentation. Tariffs are a tool. Like most tools, they can be used multiple ways. Tariffs aren't only for balancing trade. The most common use is to punish another country economically for engaging in an action, such as doing business with the wrong people, or imposing other tariffs. Tariffs are also used to create jobs. To me, this is the most important function of a tariff, and one which the current American has very visibly implemented repeatedly. A high import tariff on a particular type of product can help create jobs in that sector domestically. There are vast numbers of people in every nation who are not able to — and will never be able to — code a program, or invest in the stock market, or found a startup, or work a robot assembling a car. But they can snap plastic forks off of a mold in a factory, or drive a forklift in an aluminum plant, or mix the concrete that paves the roads you drive on every day. These are actual, real human beings who deserve to have jobs and dignity. In SV this these people are often dismissed as undesirables who just need to be "re-trained." But a significant percentage of the population cannot be re-trained, for various reasons ranging from mental capability to physical limitations to family obligations to things you an I will never experience. The real re-training that has to happen is in the chattering internet classes who think the majority of the nation is like them, and it's OK to leave everyone else behind because... progress. A tariff won't create the next American entrepreneur. But if it keeps 10,000 people from becoming homeless, I'm all for that.
- resters 8y ago
  Your point is well taken. In my view, tariffs should not be used to achieve social welfare goals. When we create economic distortions the cost is usually much higher than it appears. I'm not sure, however, how you can say that working in a steel mill that would not be in business if it weren't for tariffs on imported steel comes with any dignity. Sure there is the dignity of showing up for a job and doing good work, but ultimately that job is being funded by welfare, and is itself a handout being received by the worker. The economy is a rapidly changing thing, and there is no reason to believe that any industry that is thriving today will still be thriving in a decade. But rather than undertake the worthy and challenging task of positioning our economy (via job training, entrepreneurship, etc.) to be resilient to change, we prop up industries that are much more efficiently done elsewhere. Consider how this would have played out in the early days of the automobile. Soon most of the blacksmiths who had been gainfully employed putting shoes on horses would find themselves out of work because people started preferring motorized cars to horse-drawn transit. By your logic, we should have idealized that horse-drawn era and should have put policies in place to guarantee that all of those blacksmiths were able to continue the dignity of their trade even though their skills were demanded much less. While there is something nostalgic about the days of horses and pre-industrial society, most of the important humanitarian (moral, etc) advances that have been made since then have been due to the proceeds of the improved economic output of an industrialized economy. What happened to those blacksmiths? Some probably ended up out of work and had to struggle to survive, while others likely transitioned their skills doing metalwork in the industrial sector. All humans have value as humans and I believe that the vast majority have strong work ethic and a desire to support themselves and their family through work and discipline. Nonetheless, as the economy changes rapidly, we find that we (industrialized nations) have lagged significantly when it comes to our educational system. Our modern schools still do many things the same way they were done in a one room schoolhouse. There are many reasons why this happened -- I'd argue that the biggest one was the state takeover of education during the industrial era to free up more workers by providing free daycare (not education). So the root cause of worker displacement is connected with industrialization, but it is due to state monopoly power and the destruction of liberal educational ideals in favor of daycare and rudimentary skills training. In other words, we should not teach people a trade we should teach them how to learn for themselves. Our educational system today is still very trade oriented, and that creates calcification in the economy and is ultimately a grave threat to national security. But politicians will of course prefer to prop up dying factories in dead industries in exchange for primary votes rather than tackling the much harder problem of figuring out how first world education should work in 2018.
lrajlich 8y ago
While no economist is yet advocating tariffs, except perhaps Peter Navarro (who's not taken that seriously), the attitude among economists that free trade is unequivocally a good thing is starting to change. There is traction for the work of David Autor where he argues that the effects of trade are unevenly distributed and thus some people do not benefit from free trade. The policy ramifications of this gaining traction could wind up with economists favoring tariffs in some cases. The grocer example isn't really applicable. We both use the same currency so the grocer can use the local currency I pay for groceries to buy goods elsewhere or pay their employees. With foreign trade you have different currencies and a current account, the trade equation isn't as straightforward. An accurate analogy would be buying groceries via a barter system where I'd exchange good or services for groceries or a promise for future goods or services (eg, "luke-bucks") in exchange for groceries.
- anomatopoeia 8y ago
  Yes this is critical - free trade benefits the economy/country as a whole but the benefits do not accrue evenly across society. Laymen have basically been saying this for years while being ignored by the ruling elites but economists have been slowly starting to get on board. Even post Trump I suspect that the global attitude toward free trade will become much more nuanced than it had been over the past 20+ years.
  - Nokinside 8y ago
    No economist has ever claimed that global trade is Pareto-optimal inside nations. It's well known fact that some industries suffer and some thrive. It's just that the total sum is positive. The trade shocks should not be handled with tariffs or restricting trade. It's domestic policy issue.
    - Tyrek 8y ago
      This needs to be emphasized more - Economics is given a bad rep for creating inequalities, but the field is playing with half the handbook - domestic policy in the form of fiscal policy (i.e. decision on how much and where to spend $), as well as distribution policy (i.e. how much redistribution to engineer via taxation/subsidies, etc.) has never been in the hands of any real economists - domestic politics has always taken the forefront in these decisions, and rightfully should take the blame for the results.
joekrill 8y ago
Doesn't this all assume that all trading partners are being fair and honest, though? For example, let's say a country artificially keeps prices low for microchips in an effort to infiltrate the US market (for whatever underlying reason). Or some other country's clothing is super-cheap because they use forced labor. I'm no economist, and I'm not even well-versed in the subject. I don't even know if these are real-world scenarios. But it's things like this that have always bothered me when people advocate for straight-up libertarianism, or complete lack of government oversight. Because there are always people who don't play fair.
- resters 8y ago
  If a foreign government subsidizes manufacturing of things that are exported to the US, it is taxing its own citizens and effectively paying US firms/individuals to import those goods at a discount.
  - tynpeddler 8y ago
    If it were that simple than no one would care if Walmart dumps a ton of goods on the market at below cost to drive its competitors out of business.
    - resters 8y ago
      Companies always try to undercut competitors. That is just how it works when you have competitive markets. If China subsidizes steel production, the subsidy is benefitting US firms that import steel. If there is a need for the US to have steel production capacity domestically, then why not keep steel reserves in a warehouse somewhere. This would cost a fraction of the cost of tariffs. The same rationale is used with oil reserves. Keeping reserves costs a bit of money and requires a small number of people to administer the project. Contrast this with a tariff that props up a dead industry and results in thousands of workers being paid to work a job that shouldn't really exist and is essentially a welfare check in disguise. Far better to use the money to directly and transparently address any resource needs, national security, etc,. and then also use money to directly and transparently provide job training to help workers deal with slower-paced but obvious economic trends.
gxs 8y ago
>>>They simply are not a bad thing. Not being antagonistic hear - but your sentence reads like you meant it in absolute terms, as if they are never a good thing. That's quite a claim - can you elaborate on it? Your post gives a trivial example, would be great to hear your actual reasoning.
- resters 8y ago
  The "trade deficit" is simply a number that measures the value of exports minus the value of imports. It has no relationship with the health of the economy whatsoever. Firms within an economy have their choice of whether to import inputs from domestic providers or foreign providers, and they choose the option that offers the best value. Let's use the example of a company that is considering opening a 50K square foot call center for customer service. The company will decide whether it makes sense to open that call center in an expensive place like downtown San Francisco, but it may also consider opening it in a place that would be more affordable. If you focus only on the call center workers in downtown San Francisco, it will look like perhaps a tariff should be created by the city of SF to prevent firms from opening call centers in Iowa. After all, where will those call center workers find jobs? But think about the rest of the firm. Maybe with the money it saves by opening the call center in Iowa, it can open an R&D office in downtown SF instead. Maybe in a few years the R&D pays off and now the firm can hire 1000 more workers in SF for other jobs. But if we rewind and consider the situation with tariffs. The firm still decides to open the call center in Iowa but now must pay a tariff, which reduces the profitability of the decision. Now it can't afford to open the R&D office and ends up a few years later going out of business. Or, suppose that the tariff is high enough that the firm does open the call center in SF. Due to the costs there is still no money to open the R&D office and so the company still fails. The counter-intuitive thing about economics is reasoning about counter-factual scenarios... all the things that might have happened if things had gone differently. In the above example, SF loses the higher skilled R&D jobs due to the tariff and also loses the 1000 new jobs a few years later. But it's easy to ignore those since they are counter-factual. The politicians can point to the SF call center employees and say "See, the tariffs got these people jobs, look how we're helping the economy!" But the truth is quite the opposite, the tariff prevented the company from having the capital to invest in R&D, cost the Iowa call center jobs AND the SF R&D jobs AND the 1000 other jobs that would have happened due to growth. In a nutshell, the mindset that makes people think tariffs are a good idea is anchored on the idea that the economy is static and that someone is winning only at the expense of someone else losing. In the tariff supporter scenario, Iowa would have "won" if SF had not instituted those tariffs to keep the jobs at home. I use SF and Iowa as an example here just to make the concept more simple and to remove the confounding ideology of nations being adversarial to one another. Trade makes otherwise adversarial nations into partners and allies, so you could substitute SF and Iowa for the US and Canada respectively.
thucydidesofusa 8y ago
>For the benefit of HN readers, no serious economist supports tariffs in any form. This is categorically wrong, many economists support tariffs as a way for countries to find relief from flooding or other anti-competitive practices. In 2010, Paul Krugman (an economist who won a Nobel prize for this theories on international trade) called for a 25% tariffs on all Chinese imports [0]. >But due to the political history of tariffs it becomes possible for politicians to claim (falsely) that tariffs will benefit the economy, when in fact they are (at best) a handout to specific industries. But on longer time horizons and some situations, it's hard to assert that tariffs are net negatives. Many countries use tariffs to encourage domestic industry - South Korea could have never created a domestic auto industry if they allowed Japanese and American car companies to freely sell cars in Korea. The tariffs that Koreans paid from the 1960s to the 1980s supported Hyundai - it's hard to imagine that Korea is worse off in 2018 because it created tariffs to encourage domestic auto production. Functionally, China's IP and ownership rules are tariffs and they've been wildly successful for China. If China didn't strong arm IP and capital out of companies, they'd be worse off. >What really boggles my mind about the groundswell of support for tariffs is that much of it is coming from people who would traditionally have frowned upon receiving welfare. Yet they are happy to receive it when it's called tariffs and also happy to receive bailout money when their industry is harmed by the tariffs. The difference is that tariff beneficiaries have to work whereas welfare recipients don't (or won't) and that's matters to the working class who pays for the social safety net. Additionally, the taxes that support welfare are a lot less discretionary than participation in most markets affected by tariffs. If I really don't want to pay a steel tariff, I can buy items made out of other materials. If I really don't want to pay my taxes to support welfare, a person with a gun will eventually show up at my door. >Put another way, tariffs are simply a way of introducing the government into economic transactions. If a foreign government foolishly decides to tax its citizens via a tariff on US goods, this harms the foreign citizens. And it harms the US citizens who are deprived of business they otherwise would have received. >When the US then plays tit-for-tat and adds its own tariff, this punishes American consumers in an attempt to harm foreign exporters. Additionally it punishes foreign producers and gives us a way to negotiate our way to lower trade barriers. >But I repeat, no serious economist (someone who studies the economy scientifically) supports tariffs. Please stop asserting this, a cursory google search would reveal that a lot of economists support tariffs in limited circumstances and think they're an important tool for economic development. >They are a political phenomenon and the rhetoric used to support them has no basis in reality. Tell that to the Indian politicians who run and win on autarky-lite platforms. >The understanding that tariffs are foolish is a universal among economists and is not remotely a partisan issue. It's actually a very big schism between the orthodox economist view (that's primarily focused on total wealth) and heterodox views (one that's focused on the environment, the working class, etc.). You're right that most economists believe lower tariffs produce more global wealth, but many concede that some agents are made worse-off by international trade and this is the basis of a cost-benefit argument. >It's one thing to want to grant welfare to a specific industry for some political reason, but completely another to introduce a distorting factor like a tariff. They're not that distinct, tariffs can be a way to grant welfare to a specific industry. >I have a trade deficit with my grocer, for example. Why? Because I chose to exchange money for groceries. How is this bad? The same applies to nations. That's a gross oversimplification. If you want to change your life and think about how to accrue wealth, it'd make sense to look at your spending and figure out how to reduce your costs and increase your income. Economic agents can do both with development - you could open your own grocery store, you could grow your own food, etc. It's very hard to compete with established players and you might have to spend extra money to compete at first just to get up the learning curve. In practice, it means something like saving 10% of what you spend at the grocery to buy seeds and farming equipment and gradually transitioning from grocery-bought food to self-made food. We can argue about whether it makes sense to change tomorrow, you have to change something today. Tariffs are a way to change the prices faced by consumers and the competitive landscape faced by producers, in some situations they can help agents achieve things they wouldn't have been Able to otherwise. [0]: http://www.idealtaxes.com/post3079.shtml http://www.idealtaxes.com/post3079.shtml
simonsarris 8y ago
> The understanding that tariffs are foolish is a universal among economists and is not remotely a partisan issue. The obvious endgame is not for the US to keep these tax increases. The administration stated the goals fairly clearly, and almost(?) none of them are controversial: https://www.whitehouse.gov/briefings-statements/president-donald-j-trump-confronting-chinas-unfair-trade-policies/ https://www.whitehouse.gov/briefings-statements/president-do... Tariffs are leverage. Economists not liking them is a lot like an economist pointing out that manufacturing bullets has a fair bit of dis-utility. It's true at face value but you might want to use them for something like if there's, you know, a war going on. If a war is ongoing and an economist wants to talk about how bullets have a lot of dis-utility when we could be manufacturing more spoons, that's fine I guess. But it misses the whole point. Anti-tax Republicans including the current admin obviously don't want tariffs around either. But they do want to use them for a short while as a tool to get China to stop the practices outlines above. No one in the republican administration intends to impose the tariffs for the sake of collecting tax revenue or anything like that.
- resters 8y ago
  Interesting point. It is probably the most charitable way of looking at how tariffs could possibly have been instituted by a party that claims to value economic freedom. We're told that finally a master negotiator is at the helm and that he will renegotiate trade deals that leave the US at a disadvantage. One data point that offers evidence counter to that view is the president's vocal opposition to NAFTA, a deal that resulted in a large (mostly) free trade zone and lower tariffs on US goods than on those from the other participants. I think the most likely explanation is that the tariffs are viewed as a way for the executive branch to unilaterally redistribute wealth to key swing states that have been hit hard by globalization. If your speculation is true, then the administration must believe not just that escalating tariffs will move trade negotiations to the brink and will allow the US to negotiate freer trade... but it must also believe that the negotiated freer trade will be economically significant nationally AND to the swing state areas hit hard by globalization. It is my understanding that if the above is true about the administration's beliefs, that the numbers quite obviously do not add up. So while the US would certainly be better off with freer trade, the economic cost of tariffs is not enough to move the needle economically in a significant way (per an analysis done by Reason magazine). This directly contradicts the claims made by the administration. So unless there is a deep factual discrepancy between the analysis conducted by Reason magazine and the analysis the administration is doing, the tariffs seem intended mainly as a tactic to rally key groups of voters, and there appears to actually be no broader strategic significance or possible negotiated outcome that would achieve the goals the administration claims will be possible via the tariff escalation. That said, the tariffs are probably a smart way to try to win a few elections. They allow the public to view other nations as adversaries and to rally behind the US "winning" over other nations. They also prop up the fiction that trading partners are in fact adversaries rather than cooperators. Such adversarial rhetoric is obviously a useful political tool. So since this kind of us vs them, zero-sum rhetoric has been such a key element of the administration's message, I find it unlikely that it would ever seem desirable to remove the tariffs and to reframe the US relationship with other nations as constructive rather than as adversarial. Why give up such a useful enmity if it's working politically? My concern is that the tariffs will cause unexpected and sudden economic harm, which could quite suddenly cause a lot of the players to lose their perspective and actually begin to act adversarially. FWIW tariffs also reduce trade cooperation between nations and reduce the disincentive for armed conflict.
rasz 8y ago
Economists are rarely outsourced to China.

Nokinside 8y ago

The real weakness of democratic societies is that the general understanding of the world don't transfer into politics. Mercantilism as a zero sum game where you export more than you import and then you get rich reasonable first theory if you start to think trade from the scratch, but it's wrong. It was already debunked by Adam Smith in "The Wealth of Nations" 1776. Then came Ricard's comparative advantage (1817), the emergence of Classical Theory Of International Trade, then New Trade theory then New New trade theory. Every area of politics that touches issues like medicine, chemistry, genetics, climate science, macro economics, trade economics, urban economics, etc. is always facing arguments that were outdated hundreds or thousands of years ago.

commandlinefan 8y ago

> traditionally have frowned upon receiving welfare You weaken your (otherwise solid) argument when you do that. Tariffs and welfare are two different things, and you know that, and everybody reading this knows that, but you try to sneak in a conflation anyway. They're both bad, but they're bad for different reasons: accepting that taxation is a necessary evil (I'm not sure I do, but set that aside), welfare involves paying out of tax revenues into individuals pockets. Tariffs are exactly the opposite - tariffs involve increasing tax revenue by collecting taxes on imports, and then using that tax revenue for whatever you use all the other tax revenue for. Trying to imply that they're the same just looks like you're trying to score cheap points with people who have poor critical thinking skills.

EvilEndures 8y ago
> They're both bad, but they're bad for different reasons: accepting that taxation is a necessary evil (I'm not sure I do, but set that aside), welfare involves paying out of tax revenues into individuals pockets. Tariffs are exactly the opposite - tariffs involve increasing tax revenue by collecting taxes on imports, and then using that tax revenue for whatever you use all the other tax revenue for. If Mr. Widget isn't competitive at $100 vs. imports sold at $90, and you add a tariff of $10 so its "competitive", suddenly Mr. Widget's sales will increase. The other country, knowing their widgets aren't competitive (except $$ wise) then tariffs something like solar panels to protect a nascent solar panels industry. Tariffs are a form of welfare for domestic corporations. Creating a new Mr. Widget on the assumption that tariffs will remain the same is an expensive gamble you take only if you are sure your widgets are better than Mr. Widget's widgets. Subsidized loans (i.e. "The Bank of Boeing") are another example of welfare for domestic corporations.
- commandlinefan 8y ago
  Well, you can argue (as you seem to be, although I'm not entirely convinced) that tariffs and welfare lead to the same result, but to imply that opposing welfare means you must also oppose tariffs is a non-sequitur.
brentjanderson 8y ago

reaperducer 8y ago

For the benefit of HN readers, no serious economist supports tariffs in any form. I'm not going to pretend to be an economist, serious or otherwise, so I won't dispute this notion. Tariffs appeal to the naive idea that trade imbalances between two nations are a bad thing. This, however, needs some augmentation. Tariffs are a tool. Like most tools, they can be used multiple ways. Tariffs aren't only for balancing trade. The most common use is to punish another country economically for engaging in an action, such as doing business with the wrong people, or imposing other tariffs. Tariffs are also used to create jobs. To me, this is the most important function of a tariff, and one which the current American has very visibly implemented repeatedly. A high import tariff on a particular type of product can help create jobs in that sector domestically. There are vast numbers of people in every nation who are not able to — and will never be able to — code a program, or invest in the stock market, or found a startup, or work a robot assembling a car. But they can snap plastic forks off of a mold in a factory, or drive a forklift in an aluminum plant, or mix the concrete that paves the roads you drive on every day. These are actual, real human beings who deserve to have jobs and dignity. In SV this these people are often dismissed as undesirables who just need to be "re-trained." But a significant percentage of the population cannot be re-trained, for various reasons ranging from mental capability to physical limitations to family obligations to things you an I will never experience. The real re-training that has to happen is in the chattering internet classes who think the majority of the nation is like them, and it's OK to leave everyone else behind because... progress. A tariff won't create the next American entrepreneur. But if it keeps 10,000 people from becoming homeless, I'm all for that.

resters 8y ago
Your point is well taken. In my view, tariffs should not be used to achieve social welfare goals. When we create economic distortions the cost is usually much higher than it appears. I'm not sure, however, how you can say that working in a steel mill that would not be in business if it weren't for tariffs on imported steel comes with any dignity. Sure there is the dignity of showing up for a job and doing good work, but ultimately that job is being funded by welfare, and is itself a handout being received by the worker. The economy is a rapidly changing thing, and there is no reason to believe that any industry that is thriving today will still be thriving in a decade. But rather than undertake the worthy and challenging task of positioning our economy (via job training, entrepreneurship, etc.) to be resilient to change, we prop up industries that are much more efficiently done elsewhere. Consider how this would have played out in the early days of the automobile. Soon most of the blacksmiths who had been gainfully employed putting shoes on horses would find themselves out of work because people started preferring motorized cars to horse-drawn transit. By your logic, we should have idealized that horse-drawn era and should have put policies in place to guarantee that all of those blacksmiths were able to continue the dignity of their trade even though their skills were demanded much less. While there is something nostalgic about the days of horses and pre-industrial society, most of the important humanitarian (moral, etc) advances that have been made since then have been due to the proceeds of the improved economic output of an industrialized economy. What happened to those blacksmiths? Some probably ended up out of work and had to struggle to survive, while others likely transitioned their skills doing metalwork in the industrial sector. All humans have value as humans and I believe that the vast majority have strong work ethic and a desire to support themselves and their family through work and discipline. Nonetheless, as the economy changes rapidly, we find that we (industrialized nations) have lagged significantly when it comes to our educational system. Our modern schools still do many things the same way they were done in a one room schoolhouse. There are many reasons why this happened -- I'd argue that the biggest one was the state takeover of education during the industrial era to free up more workers by providing free daycare (not education). So the root cause of worker displacement is connected with industrialization, but it is due to state monopoly power and the destruction of liberal educational ideals in favor of daycare and rudimentary skills training. In other words, we should not teach people a trade we should teach them how to learn for themselves. Our educational system today is still very trade oriented, and that creates calcification in the economy and is ultimately a grave threat to national security. But politicians will of course prefer to prop up dying factories in dead industries in exchange for primary votes rather than tackling the much harder problem of figuring out how first world education should work in 2018.

lrajlich 8y ago

While no economist is yet advocating tariffs, except perhaps Peter Navarro (who's not taken that seriously), the attitude among economists that free trade is unequivocally a good thing is starting to change. There is traction for the work of David Autor where he argues that the effects of trade are unevenly distributed and thus some people do not benefit from free trade. The policy ramifications of this gaining traction could wind up with economists favoring tariffs in some cases. The grocer example isn't really applicable. We both use the same currency so the grocer can use the local currency I pay for groceries to buy goods elsewhere or pay their employees. With foreign trade you have different currencies and a current account, the trade equation isn't as straightforward. An accurate analogy would be buying groceries via a barter system where I'd exchange good or services for groceries or a promise for future goods or services (eg, "luke-bucks") in exchange for groceries.

anomatopoeia 8y ago
Yes this is critical - free trade benefits the economy/country as a whole but the benefits do not accrue evenly across society. Laymen have basically been saying this for years while being ignored by the ruling elites but economists have been slowly starting to get on board. Even post Trump I suspect that the global attitude toward free trade will become much more nuanced than it had been over the past 20+ years.
- Nokinside 8y ago
  No economist has ever claimed that global trade is Pareto-optimal inside nations. It's well known fact that some industries suffer and some thrive. It's just that the total sum is positive. The trade shocks should not be handled with tariffs or restricting trade. It's domestic policy issue.
  - Tyrek 8y ago
    This needs to be emphasized more - Economics is given a bad rep for creating inequalities, but the field is playing with half the handbook - domestic policy in the form of fiscal policy (i.e. decision on how much and where to spend $), as well as distribution policy (i.e. how much redistribution to engineer via taxation/subsidies, etc.) has never been in the hands of any real economists - domestic politics has always taken the forefront in these decisions, and rightfully should take the blame for the results.

joekrill 8y ago

Doesn't this all assume that all trading partners are being fair and honest, though? For example, let's say a country artificially keeps prices low for microchips in an effort to infiltrate the US market (for whatever underlying reason). Or some other country's clothing is super-cheap because they use forced labor. I'm no economist, and I'm not even well-versed in the subject. I don't even know if these are real-world scenarios. But it's things like this that have always bothered me when people advocate for straight-up libertarianism, or complete lack of government oversight. Because there are always people who don't play fair.

resters 8y ago
If a foreign government subsidizes manufacturing of things that are exported to the US, it is taxing its own citizens and effectively paying US firms/individuals to import those goods at a discount.
- tynpeddler 8y ago
  If it were that simple than no one would care if Walmart dumps a ton of goods on the market at below cost to drive its competitors out of business.
  - resters 8y ago
    Companies always try to undercut competitors. That is just how it works when you have competitive markets. If China subsidizes steel production, the subsidy is benefitting US firms that import steel. If there is a need for the US to have steel production capacity domestically, then why not keep steel reserves in a warehouse somewhere. This would cost a fraction of the cost of tariffs. The same rationale is used with oil reserves. Keeping reserves costs a bit of money and requires a small number of people to administer the project. Contrast this with a tariff that props up a dead industry and results in thousands of workers being paid to work a job that shouldn't really exist and is essentially a welfare check in disguise. Far better to use the money to directly and transparently address any resource needs, national security, etc,. and then also use money to directly and transparently provide job training to help workers deal with slower-paced but obvious economic trends.

gxs 8y ago

>>>They simply are not a bad thing. Not being antagonistic hear - but your sentence reads like you meant it in absolute terms, as if they are never a good thing. That's quite a claim - can you elaborate on it? Your post gives a trivial example, would be great to hear your actual reasoning.

resters 8y ago
The "trade deficit" is simply a number that measures the value of exports minus the value of imports. It has no relationship with the health of the economy whatsoever. Firms within an economy have their choice of whether to import inputs from domestic providers or foreign providers, and they choose the option that offers the best value. Let's use the example of a company that is considering opening a 50K square foot call center for customer service. The company will decide whether it makes sense to open that call center in an expensive place like downtown San Francisco, but it may also consider opening it in a place that would be more affordable. If you focus only on the call center workers in downtown San Francisco, it will look like perhaps a tariff should be created by the city of SF to prevent firms from opening call centers in Iowa. After all, where will those call center workers find jobs? But think about the rest of the firm. Maybe with the money it saves by opening the call center in Iowa, it can open an R&D office in downtown SF instead. Maybe in a few years the R&D pays off and now the firm can hire 1000 more workers in SF for other jobs. But if we rewind and consider the situation with tariffs. The firm still decides to open the call center in Iowa but now must pay a tariff, which reduces the profitability of the decision. Now it can't afford to open the R&D office and ends up a few years later going out of business. Or, suppose that the tariff is high enough that the firm does open the call center in SF. Due to the costs there is still no money to open the R&D office and so the company still fails. The counter-intuitive thing about economics is reasoning about counter-factual scenarios... all the things that might have happened if things had gone differently. In the above example, SF loses the higher skilled R&D jobs due to the tariff and also loses the 1000 new jobs a few years later. But it's easy to ignore those since they are counter-factual. The politicians can point to the SF call center employees and say "See, the tariffs got these people jobs, look how we're helping the economy!" But the truth is quite the opposite, the tariff prevented the company from having the capital to invest in R&D, cost the Iowa call center jobs AND the SF R&D jobs AND the 1000 other jobs that would have happened due to growth. In a nutshell, the mindset that makes people think tariffs are a good idea is anchored on the idea that the economy is static and that someone is winning only at the expense of someone else losing. In the tariff supporter scenario, Iowa would have "won" if SF had not instituted those tariffs to keep the jobs at home. I use SF and Iowa as an example here just to make the concept more simple and to remove the confounding ideology of nations being adversarial to one another. Trade makes otherwise adversarial nations into partners and allies, so you could substitute SF and Iowa for the US and Canada respectively.

thucydidesofusa 8y ago

>For the benefit of HN readers, no serious economist supports tariffs in any form. This is categorically wrong, many economists support tariffs as a way for countries to find relief from flooding or other anti-competitive practices. In 2010, Paul Krugman (an economist who won a Nobel prize for this theories on international trade) called for a 25% tariffs on all Chinese imports [0]. >But due to the political history of tariffs it becomes possible for politicians to claim (falsely) that tariffs will benefit the economy, when in fact they are (at best) a handout to specific industries. But on longer time horizons and some situations, it's hard to assert that tariffs are net negatives. Many countries use tariffs to encourage domestic industry - South Korea could have never created a domestic auto industry if they allowed Japanese and American car companies to freely sell cars in Korea. The tariffs that Koreans paid from the 1960s to the 1980s supported Hyundai - it's hard to imagine that Korea is worse off in 2018 because it created tariffs to encourage domestic auto production. Functionally, China's IP and ownership rules are tariffs and they've been wildly successful for China. If China didn't strong arm IP and capital out of companies, they'd be worse off. >What really boggles my mind about the groundswell of support for tariffs is that much of it is coming from people who would traditionally have frowned upon receiving welfare. Yet they are happy to receive it when it's called tariffs and also happy to receive bailout money when their industry is harmed by the tariffs. The difference is that tariff beneficiaries have to work whereas welfare recipients don't (or won't) and that's matters to the working class who pays for the social safety net. Additionally, the taxes that support welfare are a lot less discretionary than participation in most markets affected by tariffs. If I really don't want to pay a steel tariff, I can buy items made out of other materials. If I really don't want to pay my taxes to support welfare, a person with a gun will eventually show up at my door. >Put another way, tariffs are simply a way of introducing the government into economic transactions. If a foreign government foolishly decides to tax its citizens via a tariff on US goods, this harms the foreign citizens. And it harms the US citizens who are deprived of business they otherwise would have received. >When the US then plays tit-for-tat and adds its own tariff, this punishes American consumers in an attempt to harm foreign exporters. Additionally it punishes foreign producers and gives us a way to negotiate our way to lower trade barriers. >But I repeat, no serious economist (someone who studies the economy scientifically) supports tariffs. Please stop asserting this, a cursory google search would reveal that a lot of economists support tariffs in limited circumstances and think they're an important tool for economic development. >They are a political phenomenon and the rhetoric used to support them has no basis in reality. Tell that to the Indian politicians who run and win on autarky-lite platforms. >The understanding that tariffs are foolish is a universal among economists and is not remotely a partisan issue. It's actually a very big schism between the orthodox economist view (that's primarily focused on total wealth) and heterodox views (one that's focused on the environment, the working class, etc.). You're right that most economists believe lower tariffs produce more global wealth, but many concede that some agents are made worse-off by international trade and this is the basis of a cost-benefit argument. >It's one thing to want to grant welfare to a specific industry for some political reason, but completely another to introduce a distorting factor like a tariff. They're not that distinct, tariffs can be a way to grant welfare to a specific industry. >I have a trade deficit with my grocer, for example. Why? Because I chose to exchange money for groceries. How is this bad? The same applies to nations. That's a gross oversimplification. If you want to change your life and think about how to accrue wealth, it'd make sense to look at your spending and figure out how to reduce your costs and increase your income. Economic agents can do both with development - you could open your own grocery store, you could grow your own food, etc. It's very hard to compete with established players and you might have to spend extra money to compete at first just to get up the learning curve. In practice, it means something like saving 10% of what you spend at the grocery to buy seeds and farming equipment and gradually transitioning from grocery-bought food to self-made food. We can argue about whether it makes sense to change tomorrow, you have to change something today. Tariffs are a way to change the prices faced by consumers and the competitive landscape faced by producers, in some situations they can help agents achieve things they wouldn't have been Able to otherwise. [0]: http://www.idealtaxes.com/post3079.shtml http://www.idealtaxes.com/post3079.shtml

simonsarris 8y ago

> The understanding that tariffs are foolish is a universal among economists and is not remotely a partisan issue. The obvious endgame is not for the US to keep these tax increases. The administration stated the goals fairly clearly, and almost(?) none of them are controversial: https://www.whitehouse.gov/briefings-statements/president-donald-j-trump-confronting-chinas-unfair-trade-policies/ https://www.whitehouse.gov/briefings-statements/president-do... Tariffs are leverage. Economists not liking them is a lot like an economist pointing out that manufacturing bullets has a fair bit of dis-utility. It's true at face value but you might want to use them for something like if there's, you know, a war going on. If a war is ongoing and an economist wants to talk about how bullets have a lot of dis-utility when we could be manufacturing more spoons, that's fine I guess. But it misses the whole point. Anti-tax Republicans including the current admin obviously don't want tariffs around either. But they do want to use them for a short while as a tool to get China to stop the practices outlines above. No one in the republican administration intends to impose the tariffs for the sake of collecting tax revenue or anything like that.

resters 8y ago
Interesting point. It is probably the most charitable way of looking at how tariffs could possibly have been instituted by a party that claims to value economic freedom. We're told that finally a master negotiator is at the helm and that he will renegotiate trade deals that leave the US at a disadvantage. One data point that offers evidence counter to that view is the president's vocal opposition to NAFTA, a deal that resulted in a large (mostly) free trade zone and lower tariffs on US goods than on those from the other participants. I think the most likely explanation is that the tariffs are viewed as a way for the executive branch to unilaterally redistribute wealth to key swing states that have been hit hard by globalization. If your speculation is true, then the administration must believe not just that escalating tariffs will move trade negotiations to the brink and will allow the US to negotiate freer trade... but it must also believe that the negotiated freer trade will be economically significant nationally AND to the swing state areas hit hard by globalization. It is my understanding that if the above is true about the administration's beliefs, that the numbers quite obviously do not add up. So while the US would certainly be better off with freer trade, the economic cost of tariffs is not enough to move the needle economically in a significant way (per an analysis done by Reason magazine). This directly contradicts the claims made by the administration. So unless there is a deep factual discrepancy between the analysis conducted by Reason magazine and the analysis the administration is doing, the tariffs seem intended mainly as a tactic to rally key groups of voters, and there appears to actually be no broader strategic significance or possible negotiated outcome that would achieve the goals the administration claims will be possible via the tariff escalation. That said, the tariffs are probably a smart way to try to win a few elections. They allow the public to view other nations as adversaries and to rally behind the US "winning" over other nations. They also prop up the fiction that trading partners are in fact adversaries rather than cooperators. Such adversarial rhetoric is obviously a useful political tool. So since this kind of us vs them, zero-sum rhetoric has been such a key element of the administration's message, I find it unlikely that it would ever seem desirable to remove the tariffs and to reframe the US relationship with other nations as constructive rather than as adversarial. Why give up such a useful enmity if it's working politically? My concern is that the tariffs will cause unexpected and sudden economic harm, which could quite suddenly cause a lot of the players to lose their perspective and actually begin to act adversarially. FWIW tariffs also reduce trade cooperation between nations and reduce the disincentive for armed conflict.

rasz 8y ago

Economists are rarely outsourced to China.