Last week President Trump surprised even his own aides by announcing that he will impose tariffs on steel and aluminum. In fairness he ran on a platform of protectionism, a belief that our economy suffers from cheap imports from other nations. Protectionism protects American jobs by demanding payments (or tariffs) for goods and services made outside the United States and imported here. President Trump believes that cheap steel and aluminum from other nations creates an unfair disadvantage to American workers and charging a tariff “levels the field” for American workers.
That’s fine as far as it goes, but it doesn’t go far enough. When we impose tariffs on other nations, that’s not the end of the story. Other nations don’t like it when we impose tariffs and they generally respond by imposing tariffs on goods and services that we export to them. Oftentimes this leads to an escalation that we call a trade war. Perhaps it’s better called a de-escalation because it often causes a chain reaction of more tariffs (we react, and then they react, etc.).
We’ve already seen that nations in Europe are threatening to place tariffs on our exports of Harley Davidson motorcycles and bourbon. Since these motorcycles are made in Wisconsin (the home of House Speaker Paul Ryan) and bourbon is distilled in Kentucky (the home of Senate Majority Leader Mitch McConnell) it’s not hard to understand why they chose these targets.
If history teaches us anything, tariffs are answered by more tariffs. But by calling this trade war it made it irresistible for President Trump to claim that we can win a trade war. But we can’t. Nobody wins a trade war.
Trade benefits both partners. I understand that Americans who depend on steel and aluminum are hurt by cheap imports from other nations. But the answer is not blocking imports. It may benefit American steelworkers in the short run, but when other nations raise tariffs on bourbon it hurts distillers in Kentucky.
We live in a dynamic world where job skills change quickly. Your dream job when you’re 20 may not exist when you’re 40. But when you’re 40 there will be jobs you never dreamed of, and you can have the opportunity to learn how to do them.
A hundred and fifty years ago you could make a good living making buggy whips for carriages. A hundred years ago “horseless carriages” (or “cars”) threatened your living. Today nobody makes them. Will all due empathy for those who made their living making buggy whips, they needed to find some other way to make a living.
So here’s my point: our standard of living grows when we increase our world and it shrinks when we decrease our world. Our President demands a future when that will make us smaller and poorer.
We need look no further than the Koreas. North Korea isolates itself and finds it hard to feed their people. South Korea participates in global trade and does well. The per capita GDP (that is, the wealth of the nation divided by its population) is $1,800 in North Korea and $33,200 in South Korea.
Our best future lies in the road that decreases, and even eliminates tariffs. President Trump, we ask that you care about our nation more than you care about yourself.