Not a metaphor.
No restraints
Seems like one of the unchecked powers of the Presidency these days is the power to slap a tariff on pretty much whatever you want. Whenever you want. In any amount you want.
Or did I miss something these past eight years or so?
Domestically, this cavalier attitude toward tariffs is the natural offspring of two parents. First is the Congress, which delegated significant authority on tariffs to the Executive. Second is the Executive, which now routinely oversteps its authority (e.g., via declaration of a national emergency as pretext for a tariff).
The result is that after decades on the sidelines, tariffs are in, for both Republicans and Democrats. There’s now a 100% tariff on Chinese EVs, courtesy of the Biden administration. On the other hand, in the prior administration, I think we had, at one point, a material tariff on Canadian steel, for reasons that escape me. And, of course, a tariff on Chinese steel etc. Like 25-percent-ish? I’m pretty sure the Biden administration kept at least the Chinese steel (and aluminum?) tariffs in place.
A third factor in this increased reliance on tariffs is what I see as a breakdown of enforceable international law regarding tariffs, as the General Agreement on Tariffs and Trade (GATT) framework has been replaced by something that seems to lack any effective enforcement. To me, there still appear to be international treaties that appear to bar these tariffs. But they are effectively unenforceable, or ineffectively enforced, or rarely enforced.
An odd knock-on of the protection of the U.S. Steel industry is that the U.S. Steel industry tried to cash in. Not by upping production, say, but by selling out to foreigner ownership. In this case Nippon Steel. The Biden Administration was not pleased and put the kibosh on that deal. For the time being.
Pick whatever suits your world view, as long it works out to mean that nobody overseas can do much to block a Harris import tariff.
Bipartisan vice (or virtue).
Most classically-trained western economists put import tariffs and a minimum wage in the same boat. They are examples of interference with the price mechanism. As such, in a static world, they reduce human welfare, a.k.a., consumer’s surplus.
In a word, they make us poorer, in the aggregate, even as they favor some over others. So says classical economic theory. The average economist might phrase it better and argue it more clearly. But that’s the gist of the Econ 101 analysis of import tariffs.
Republicans, on the other hand? Minimum wage, sure, that’s undesirable interference in the marketplace. But after the tariffs imposed by the previous administration, I don’t think Republicans are allowed to be against tariffs now.
My point being this: Even admitting that logical consistency is not exactly the linchpin of Republican talking points, it’s hard for me to see Republicans heaping scorn on any reasonable-looking Harris tariff, if they stood by and applauded the various ill-structured Trump tariffs.
Sure, they will wring their hands and talk about raising costs for the working person. But that’s just a reflex talking point. I don’t think Republicans can or will actually do anything meaningful to block a Harris tariff.
Harris appears to lean in a protectionist direction
My point is that, at the moment, foreign trade is one area in which nothing stops unilateral action by the President. No matter how fortunate or unfortunate the consequences.
So it’s a relevant question to ask how Harris leans regarding foreign trade.
The answer appears to be pretty straightforward, based on cruising a handful of random websites that purport to know the answer.
The first theme I see is that Harris is expected to provide continuity with the Biden administration’s stance on tariffs and trade. Which I would view as part of an overall U.S. industrial policy that uses all the tools of “managed trade” in order to boost demand for domestically-produced products.
One leg of Biden’s industrial policy is the buy-American clauses in new Federal spending. For example, I’m pretty sure the big bipartisan infrastructure bill requires the use of U.S.-made steel. For sure, tax incentives for EVs only apply to (mostly)-U.S-built vehicles. And so on.
The second, as we have seen, is straight-up protectionist tariffs. In this case, the Biden 100 percent tariff on EVs may be viewed either as an anti-dumping tariff (which I think is how the Chinese steel tariff is characterized), or as an infant-industry tariff (because if we are to avoid the worst of global warming, we are going to be using a lot of big batteries in the near future, e.g., see the last section of Post #1952 on the plans for the future of electrical generation in Virginia.)
Plus, the opposition can’t object. Republicans reflexively hate all EVs.
Except Teslas.
Maybe you can start to see why economists rarely cheer for import tariffs. We’ve long had a 25 percent tariff on imported light trucks, thus protecting U.S. pickup-truck manufacturers. Effectively, since the mid-1960s, we’ve had an import tariff that encourages domestic production of gas-guzzlers. Now we have the Biden tariff encouraging domestic production of EVs. Go far enough down that path, maybe toss in retaliatory tariffs on U.S. goods, and it’s completely plausible that everybody ends up worse off. Except for the makers of trucks and EVs.
Third, less overtly, the Biden administration appears to have resurrected the old tools of “managed trade”. That is, non-price interference in the flow of goods and services across borders. Things such as import quotas, or their nicer-sounding relation, voluntary restraint.
My understanding is that the removal of the Trump-era excess tariffs on European imports (e.g., of steel) was conditional on “voluntary restraint” by the Euro-zone nations. That is, they collectively agree not to increase their share of the U.S. market. In effect, for items covered by these voluntary restraints, European companies are forbidden from driving selected (some might say favored) U.S. industries out of business.
In any case, it’s not as if Federal aid and protection for industries deemed critical to the U.S. is anything new.
Who remembers the near-collapse of the banking system in 2008, as a consequence of the bursting of the real estate bubble, and the subsequent bankruptcy and Federal government bailout of two of the Big Three U.S. auto makers? Process begun by Bush, and completed by Obama. That’s how I recall it.
If you’re old enough, you might even recall the Chrysler bailout of the 1970s.
So it ain’t like Federal life support for certain industries is a new thing. You can debate at your leisure whether you think it’s a good thing, as practiced.
Beyond continuing the Biden-era start of U.S. industrial policy, everything I read says that Harris leans in favor of protectionism toward U.S. workers. Good jobs, living wages, and all that. So I’d guess we might expect to see more of that. For whatever good middle-class industrial jobs we have that are still worth protecting.
The fact that all of this comes at a cost to American consumers will get mentioned, then swept under the rug. And, to be honest, I won’t shed a tear if astoundingly-cheap-made-in-China stuff is no longer the norm here. Even if it means paying more. But that’s hardly what my economics training tells me to say.
Conclusion
If I had to point to one real issue contributing to American malaise it’s the loss of manufacturing in America.
I have no idea what the solution to that is, if any.
But I bet that, given the chaos we are likely to face going forward, having some reasonably coherent industrial policy is going to be a good thing.
And for sure, even if we have no coherent policy, even if an effective policy is impossible, politicians will still pledge to do what they can to reverse that loss. If they’re smart.
It’s not too soon to ask what we can expect from Harris, and from her opponent, regarding a coherent U.S. industrial policy. Starting with tariffs.
