So it begins.

Brazil, Argentina . . . pretty much everyone: Exempt us from the tariffs too!

By —— Bio and Archives--March 12, 2018

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Brazil, Argentina . . . pretty much everyone: Exempt us from the tariffs too!
I guess I’m to the point where I’m seeing this story on two tracks. Tariffs are bad policy and you’ll never convince me otherwise. They always add to the cost for consumers to buy things, and to companies to source things, and Commerce Secretary Wilbur Ross is being absurdly dismissive when he talks about it in terms of only adding a few cents here or a few dollars there, as if that doesn’t matter in the big picture.

It matters. President Trump has a blind spot when it comes to trade policy and it muddles his otherwise sound economic record to date.


That said, the man is clearly a master negotiator. It’s becoming obvious that the gambit all along has been to take an impossibly hard stand at first (no exempions!), only to then make it clear that exemptions can be had if you give the U.S. what it wants in return. The question was whether other countries would come begging for exemptions or simply retaliate with tariffs of their own.

It looks like it’s going to be a mixed bag. The Chinese will almost certainly retalitate in some form, which will cause consternation among American CEOs who prize access to the world’s biggest market. But as for other countries, the grovelfest didn’t take long to get rolling:

Brazil, which after Canada is the biggest steel supplier to the U.S. market, said it wanted to join the exemption list and Argentina made a similar case.

Japan, the United States’ top economic and military ally in Asia, was next in line. Chief Cabinet Secretary Yoshihide Suga told a news conference that Japan’s steel and aluminum shipments posed no threat to U.S. national security.

With Japan a major trade partner and international investor, Suga said that, on the contrary, they contributed greatly to employment and industry in the United States. Japan’s steel industry body also expressed concern..

The European Union, the world’s biggest trade bloc, chimed in. “Europe is certainly not a threat to American internal security so we expect to be excluded,” European trade Commissioner Cecilia Malmstrom said in Brussels.

Malmstrom told reporters the EU was ready to complain to the World Trade Organization, and retaliate within 90 days. She will meet U.S. Trade Representative Robert Lighthizer and Japanese Trade Minister Hiroshige Seko in Brussels on Saturday when she will ask whether the EU is to be included in the tariffs.

She won support from German Chancellor Angela Merkel. Shares in European steelmakers fell, although Germany’s two biggest producers Thyssenkrupp (TKAG.DE) and Salzgitter (SZGG.DE) have insisted the impact on them will be limited.

So Trump is almost certainly going to win some trade concessions from the countries who want in on the exemptions, and he’s going to consider that a policy win that justifies this entire tariff decision.

The problem remains, however, with the president’s understanding of what an economic benefit is. He insists on seeing trade as a zero-sum game in which exports are good and imports are bad. He sees a “trade deficit” (in which the value of what we’re importing exceeds the value of what we’re exporting) as virtually the same thing as a budget deficit. It’s not.


Now, there are obviously benefits to exporting your products. When you make something here and sell it abroad, you bring more capital back into our economy. That’s more feasible than ever now that Trump has signed the tax reform bill that eliminates the tax on repatriated profits. We want to export as much as we can.

But that doesn’t mean imports are bad. Trade is not a competiton. You don’t win or lose it. When we import products from overseas, we’re expanding consumer choice and consumer buying power. That forces U.S. manufacturers to compete, and most of the time conservatives believe in the value of competition.

I have a feeling the outcome of this whole thing is going to be that virtually all the major exporters to the United States will get exemptions, and that Trump will get concessions in return that don’t mean as much as he thinks they mean, and in the end we’ll have spent all this time on something that didn’t make much difference one way or the other.

Actually I hope that’s what happens, because the alternative seems to be that Trump actually applies the tariffs as broadly as he’s threatening to. And that would be a disaster.


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Dan Calabrese -- Bio and Archives | Comments

Dan Calabrese’s column is distributed by HermanCain.com, which can be found at HermanCain

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