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Old 06-30-2018, 08:29 PM
Senior Member
Join Date: Apr 2006
Posts: 4,882

I don't thing DT is really into cancelling all 'tariffs' in the true sense. US manufacturing and production isn't cost effective enough to do that in many areas. Doesn't matter whether it is due to cheap labour in Mexico or China etc the bottom line is that tariffs help protect US companies from more efficient countries or countries with a lower standard of living/wages. Zero tariffs would improve the buying power of an American person, but lead to lots of job losses eventually unless the government then supplies industry specific subsidies to support the struggling industries, but to do that you need to increase taxes and then buying power goes down again. Both tariffs and subsidies are an additional tax on the tax payers where the tax payer is in effect subsidising the relevant industries. One classic example is from a recent report that calculated 73% of the income US dairy farmers get from milk production comes from direct and indirect subsides. You could get cheap milk from more efficient countries but that would shrink the local production (and make it more efficient by the way). You could remove subsidies and put nice big tariffs on imported milk products and let the retail price rise to a level that provides a workable income to the local farmers, but the population would scream about the price of milk being too high. So what they do is take $billions from your taxes and give it to the farmers in subsidies which best hides what is going on while you get the money back in cheap milk which the more efficient countries can't compete with due to the subsidies. It's really the same as having a tariff, but politically more advantageous as the farming communities are directly dependent on the government supplying the subsidies.

Balanced tariffs like say 10% on German cars and 10% on US cars etc is really mostly just a tax on the consumers if the cars were equally desirable. Where you get a situation though where German cars have a higher desirability than many US cars, the tariffs help push locals to buy local cars based on price. In reality it would probably make sense for Trump to push for an equal tariff as high as possible so that the large number of German vehicles bought in the US goes down, and when the relatively low number of US vehicles bought in Germany goes down it affects production less than the upswing on local purchases. Advantage USA unless you are a consumer because without the competition the local made car prices will go up. But then go back to the subsidies discussion. Trump makes a great issue about the unequal tariffs on German vs US cars. What he conveniently forgets to mention is that US car industry subsidies are over twice the German ones on a per car basis. So in real terms the total 'tariff/subsidy' arrangement is much closer to equal than DT likes to mention. So if DT really wanted a level playing field he would say lets drop all tariffs and all subsidies. That isn't going to happen and of course the Germans look at the US and say that it isn't fair that the US manufacturers get all those subsidies. We need tariffs to protect us from their subsidized production costs.

The thing with tariffs is that it usually isn't a simple case of 'cherry picking' individual items from one country. Germany might have 10% on US cars and 0% on US fruit, but the US has 2.5% on German cars and 15% on German beer (don't know the real numbers). In the big picture each country is looking at what gives them the best protection for their most valuable and/or vulnerable industries, plus looking at what the other country is supplying in subsidies to each industry to try and give them an 'unfair' advantage, The US, China, and much of Europe are rife with industry subsidies, and trying to fight over tariffs without addressing the subsidies is not about being 'fair' as DT is trying to represent it. It is a political push to grab support and it is worrying what might really happen as a result. Now we are seeing Canada, Europe, China etc reacting to Trumps new 'bully boy' tariffs on their products by putting strategic tariffs on particular items that best hit at Trumps main support base states. That is the edge of a full on trade war and that is going to cause a heap of harm everywhere it it continues to escalate..
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