George Rebane
Unless President Trump has something up his sleeve on the outcome of the current tariff tussle and ensuing trade war, I think our fearless leader is making a big mistake in imposing tariffs – and doubly so for “national security” purposes. Perhaps this ol’ noggin’ can’t figure out this global art of the deal, perhaps his real gambit is to go all in for abolishing tariffs all around (as he has already suggested), but I can’t see how he can get there from here, and even whether getting there makes any sense at all.
Now I don’t often agree with noted Princeton economist and syndicated liberal columnist Alan Blinder, but he did a good job explaining the matter of multi-lateral tariffs and the doings with our country’s current account in his ‘A Brief Introduction to Trade Economics’. Bottom line, among nations unbalanced trade is normal and good for everyone because of something called ‘comparative advantage’ – that’s doing and selling what you do best, and buying from others what they do best.
Another bad thing about tariffs and resulting trade wars currently overlooked is that consumers will not only pay a lot more for imported stuff, but also for the same stuff we make in America. Consider the new tariff on motor vehicles imported from the EU and Japan. If suddenly our consumers had to pay, say, 25% more for a Toyota truck, they would naturally turn to one of our truck makers to get a better deal. To be specific, consider both GM and Toyota selling comparable pick-ups at your local auto mall for $40K. If suddenly you have to pay $50K for the Toyota, you’d reasonably turn to see a similar product from GM and the other two American truck makers. And if that happened, what do you think would be the response of GM, Ford, and Chrysler? They’re not going to leave close to $10K on the table knowing that their American customers have no better alternatives.
So without any necessity for collusion, all three will quickly come to the same conclusion and bump their prices to, say, $45K or more. And as a Lucky Strike Extra, the ‘big three’ no longer will be bothered much by those pesky Japanese always pushing everybody to make higher quality vehicles like they did in the 1970s. Anyway, you get the idea of why I think tariffs and trade wars suck, especially for us Americans who don’t save much and therefore make it necessary for us to borrow from foreigners to fund our deficits and run the current account balance that we do.
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