REPOST: Trump's tariffs have had a chance, and already failed

People are stunned, confused, concerned. at what the Toddler-in-Chief is doing to world trade. They're asking: 

What's the president's end-game here? 

What's he after? 

Is it just a child seeking attention? 

Or is there a point to all this? 

One clue would be what was gained from the similar game-playing in his first term ...

You don't need to wait to see what will happen. Trump's tariffs have already had a chance, and they've failed, explains Timothy Taylor.

President Trump set off a wave of protectionist trade policies about seven years ago, back in 2018, and those policies were mostly extended and followed during President Biden’s term of office as well.

So we can already measure the results from Trump 1.0. And, who would have thought ...

[U]nsurprisingly to most economists, trade restrictions have done a poor job of producing the desired results. ..

Those "desired results" being those desired (or claimed to be desired) by Trump 1.0 and his protectionist advisors and cronies.

Apart from making tariff threats for geopolitical ends ("Give us Greenland or feel our trade wrath") America First's protectionists claimed there to be three specific economic benefits from their economic protectionism:

1. more US jobs in manufacturing;
2. reducing US economic ties with China; and
3. reducing the trade deficit.

Studying the results since Trump 1.0, it's clear that all three are dead on arrival.

Taking them one at a time.

1. American manufacturing employment has been declining ever since WWII. If anything however, it accelerated under Trump's tariffs. Why?

As [one economist] points out, there are several effects of trade barriers on US manufacturing jobs: a certain domestic industry is protected against competition, but higher prices in that industry can lead to problems for other domestic industries, and foreign countries may retaliate by shutting out US-produced exports. Put these together, and [this] suggests that the Trump tariffs of 2018 may even have led to a reduction in US manufacturing jobs.

2. Even while Americans were taxed to trade with China (which is what a tariff does) US trade with China has remained steady for more than a decade. "[S]even years of protectionism has not led to any meaningful drop in China’s value-added share." But it has led to Americans paying more for their goods.

3. The 'current account deficit' is the broadest measure of the trade deficit, explains Taylor. And was thus reduced by Trump's tariffs? Answer:

This measure also doesn’t change much in the years after the Great Recession, and then gets much worse [sic] during the pandemic. In short, seven years of protectionism hasn’t “fixed” the trade deficit, either.

Oops!

[T]he main point is simply that judged in terms of its own main justifications, the surge of protectionism since 2018 has not been achieving its goals.
    One can of course offer reasons for this failure. A common pattern in politics–and not just in trade issues–is that the failure of past policies to achieve their stated goals then becomes a new justification for more of the same. In this case, the failures of past protectionism become a reason for additional protectionism.
    As one example. after Trump renegotiated the North American Free Trade Agreement (NAFTA) back in 2018, transforming it into US-Mexico-Canada Agreement (USMCA), he said in his press conference: “Once approved by Congress, this new deal will be the most modern, up-to-date, and balanced trade agreement in the history of our country, with the most advanced protections for workers ever developed.” Seven years later, Trump now apparently views the agreement that he renegotiated and lauded as a failure, and promises to dial up tariffs against Mexico and Canada–along with the rest of the world–to new heights.

Who would have thought it. Trump's not playing 4-d chess. He's playing 2-d Go-Fish. And losing.

"What we have here is (mostly) a failure to communicate"

 

"Below are 40 journal entries on the current state of public discourse.
    "Like the captain said in 'Cool Hand Luke', what we have here is (mostly) a failure to communicate.
    "But we’re now failing to communicate in totally new ways.

"1. All digital communication is reverting back to primitive ways. The emoji is like the hieroglyphic. The meme is akin to the cave painting. The text message is a throwback to the telegraph.
    "So it’s no surprise that people are scrolling on their phones. I can almost hear the rustle of the papyrus.

"2.Why do I see all these homemade videos of people talking into the camera while sitting alone in their cars?
    "They’re not even driving—just standing still. They’re literally going nowhere.
    "Is an empty automobile the new town square? ...

"3. Alexander Graham Bell would be shocked. The phone is now a device you use to speak into the void. You talk to nobody at all.
    "But we still keep talking.

"4. The most popular social media platforms will be those that allow people to avoid responsibility for what they say.
    "Every society has institutions of this sort. In ancient times, it was the bacchanalia. For us it is online shitposting and the burner account.

"5. Consider the etymology of the word ‘dictator’—from the Latin dictare (which translates as ‘to say often’). It thus designates a person who talks obsessively—repeating the same thing over and over.
    "It’s curious that dictators aren’t defined by their deeds, merely their monotonous talk. The assertion of power through repetitive speaking eliminates the needs for listening, or (at an extreme) even for action."

~ Ted Gioia from his post '40 Observations on Public Discourse'

"Ripped-off" by the pizzaman

Sorry, no, we can't avoid talking about bloody tariffs and trade deficits again. 

XKCD explains it all very simply ...

[Hat tip Duncan B.]

AI: The Human Advantage: Cooperation > Intelligence

"As someone who follows AI developments with interest (though I’m not a technical expert), I had an insight about AI safety that might be worth considering. It struck me that we might be overlooking something fundamental about what makes humans special and what might make AI risky.

"The Human Advantage: Cooperation > Intelligence

• Humans dominate not because we’re individually smartest, but because we cooperate at unprecedented scales [ It's called division or specialisation of labor. ...To somehow prevent AI from practicing division of labour would be to make AI inefficient]
• Our evolutionary advantage is social coordination, not just raw processing power
• This suggests AI alignment should focus on cooperation capabilities, not just intelligence alignment

"The Hidden Risk: AI-to-AI Coordination

• The real danger may not be a single superintelligent AI, but multiple AI systems coordinating without human oversight
• AIs cooperating with each other could potentially bypass human control mechanisms
• This could represent a blind spot in current safety approaches that focus on individual systems

"A Possible Solution: Social Technologies for AI

• We could develop “social technologies” for AI – equivalent to the norms, values, institutions, and incentive systems that enable human society that promote and prioritise humans
• Example: Design AI systems with deeply embedded preferences for human interaction over AI interaction; or with small, unpredictable variations in how they interpret instructions from other AIs but not from humans
• This creates a natural dependency on human mediation for complex coordination, similar to how translation challenges keep diplomats relevant"

~ Jack Skidmore from his email to Tyler Cowen on Coordination & AI Safety

"Tariffs Aren’t Liberating": Your Tuesday Tariffs Ramble [UPDATED]

UPDATE: Some more great links here curated by Don Boudreaux, to help you put this calamity on context.

Since it's the topic of the day a historic turning point in human affairs, the least I can do is offer readers a ramble around the topic of tariffs and the destruction of tariff wars — basically, around the many writers reciting the multiplicity of ways in which the Trump Administration has fucked us.

"“Liberation Day”: That is what US President Donald Trump has called Wednesday, April 2, the day he announced huge swaths of taxes on imports worldwide. Despite the label, it was far from a day of liberation. By making imports to the US more expensive, the government is actively increasing the cost of living for American consumers.
    "The Trump administration has fallen for one of the most common misconceptions about trade—that it only benefits a country when it is the exporter. This could not be further from the truth. One of the greatest benefits of free trade lies with the importing country, where consumers gain access to a huge range of goods, crucially, at lower prices.
    "Whether it’s clothes, food, medical supplies, or mobile phones, access to the global market reduces the cost of living and increases consumer choice, often alleviating poverty in the process.
    "It comes down to a very simple principle. No one person could produce everything he or she consumes. No family or household could do so either. No city, town, or province could produce absolutely everything they consume. Equally, no country can produce everything it consumes, nor should it. Attempts to achieve autarky are acts of economic self-harm. Freedom to exchange across borders is win-win: it allows consumers to access a plethora of goods and services, improving welfare overall."

Tariffs Aren’t Liberating - Reem Ibrahim, FOUNDATION FOR ECONOMIC EDUCATION

"Tariffs are irrational both morally and practically.
    "Morally, tariffs are rights violations - they restrain or prohibit individuals from trading freely and voluntarily in their own self-interest with whomever - no matter where they reside geographically. ...
    "Practically, tariffs punish the individuals in the country which implements them. Trump even acknowledges the pain. But he mystically thinks this pain will be good and lead us to prosperity.
    "Tariffs raise prices, cause shortages, and decrease productivity. They destroy wealth, businesses, income, and jobs. This is well known in theory and practice. See the Smoot-Hawley Act and its role in making the Great Depression even worse.
    "Trump’s foreign policy is morally and practically irrational.
    "What is the moral and practical foreign policy solution?
    "Free trade."

          ~ Andy Clarkson

"The essence of capitalism's foreign policy is free trade—i.e., the abolition of trade barriers, of protective tariffs, of special privileges—the opening of the world's trade routes to free international exchange and competition among the private citizens of all countries dealing directly with one another."

The Roots of War - Ayn Rand, ARI CAMPUS

"Fundamental to the argument for high tariffs has been the argument that trade deficits reflect America being "exploited" or "taken advantage of." In this article of mine on, "Why Trade Deficits Don't Matter -- Unless Caused by Government," I explain the misguided economic reasoning behind this claim, and why the far better policy is free trade."
Trade Deficits Don’t Matter – Unless Caused by Government - Richard Ebeling, FUTURE OF FREEEDOM FOUNDATION

"Donald Trump is fond of saying that trade wars are easy to win. Among the litany of patently false Trumpisms, this may well prove one of the most disastrous. ...
    "Protective tariffs risk triggering a cycle of escalation that ends well for no one."

No One Wins a Trade War - William Bernstein, THE ATLANTIC

"America can’t be outcompeted because America does not produce or trade anything.
     "Nations do not compete with nations. Individual firms compete with individual firms abroad. Ford competes with Toyota. America does not compete with Japan. Nations are trading partners, not competitors."

Why America can't be outcompeted - Harry Binswanger, HARRY'S SUBSTACK

"“We are seeing a combination of true-believing mercantilism, shocking ignorance about how the global economy works, and shocking incompetence in the planning and execution of economic policy,” says Michael Strain."
Trump's aggressive push to roll back globalisation -FINANCIAL TIMES (paywall0

"Like the post-1945 British Labour governments, he wants to shelter domestic manufacturing and the working class behind tariffs while reducing overseas commitments. But the net result will be both economically damaging and geopolitically weakening. Americans will come to miss globalism and policing the world. They will belatedly realise that there is no portal through which the United States can return to the 1950s, much less the 1900s. And the principal beneficiary of Project Minecraft will not be Russia, but China. Call it Project Manchuria. ... 

"The president stands as much chance of reindustrialising the U.S. as you do of getting your frozen laptop to work by smashing the motherboard with a Minecraft hammer."

Trump’s Tariffs and the End of American Empire - Niall Ferguson, THE FREE PRESS

"So think of it as a world wide Brexit like the U.S. leaving the global economy.
    "A trade lawyer at a global law firm here in London told me their clients see Trump’s tariffs as “worse than Brexit” as they’re dealing with rapidly changing trade rules on a massive scale. It’s not just the tariffs that Trump has imposed, but the retaliation it will provoke."

‘How Ugly Is This Going to Be?’ - Graham Lanktree, POLITICO

"You will go to work in a hot, noisy, dirty factory for low wages. And you will like it. 

The quality of life your grandfather had is more than good enough for you!"

"It sounds so sensible: why not use protection and industrial policy to preserve manufacturing capacity “just in case” of, say, a war or a pandemic? And, to be sure, this is a better argument for some limited government intervention on trade and investment flows than wanting to tax imported bananas or revive manufacturing.
    "But even then it’s not the slam dunk some people imagine. Below is my chapter on this issue from Economics In One Virus, published in 2021. It’s just as true and relevant today."

Flaws in the "Just In Case," Self-Sufficiency Case for Protectionism - Ryan Bourne, WAR ON PRICES

"The populist story of the death of U.S. manufacturing is nonsense. Mr. Vance and his cohort maintain that increased free trade with countries such as China in 2000 or Mexico in 1994 killed American jobs. It’s true that the number of manufacturing jobs is lower than it was in 1970. But that’s because we can make so much more with fewer people. Blame technology, not trade.
    "Real hourly output per manufacturing employee has been on an upward trend since 1959. Real U.S. manufacturing value-added—the sector’s contribution to gross domestic product—reached its highest recorded level in 2022. Manufacturing output was close to its all-time high in 2022, and the U.S. remained the global leader in manufacturing value-added per worker.
    "Steel is one example. In 1980, one steelworker could produce 0.083 tons of steel in one hour. By 2018, one steelworker could produce 1.67 tons in an hour. This is a good thing. Wage and income data in the U.S. show the rising tide is lifting all boats—especially the smallest.
    "Americans don’t want their children to have to work punishing jobs in a steel mill, and it’s evident they don’t have to. Manufacturing jobs, as a share of total employment, have been on a downward trend since 1943—falling from 39% to under 25% by the end of 1970 and hitting 20% in 1980. This decline started long before Ronald Reagan ran for office, before China received Most Favored Nation status for outsourcing manufacturing, before Bill Clinton signed the North American Free Trade Agreement and before the World Trade Organization was created. The trends even started five years before the U.S. joined the General Agreement on Tariffs and Trade."
Free Trade Didn’t Kill the Middle Class - Norbert J. Michel, WALL STREET JOURNAL

“The philosophy of protectionism is a philosophy of war.”
          ~ Ludwig von Mises

"“When it comes to steel, it’s fantastic for our industry,” said Jack Maskil [president of the United Steelworkers Local 2227 in Pittsburgh’s Mon Valley], “but what about everything else?” ...

    "On the one hand, they are thrilled that their industry will be a key beneficiary of the 25 percent tariff imposed on steel imports to the U.S. ...
    "But while the steelworkers are also hoping that tariffs will bring about a revival of manufacturing jobs, they also worry about their effect on the economy, and on their own purchasing power."

What Do American Steelworkers Think About Trump’s Tariffs? - Ethan Dodd, THE FREE PRESS

"President Trump’s ‘Liberation Day’ tariffs risk domino effect across the globe as Chinese goods look for new markets."

The Rest of the World Is Bracing for a Flood of Cheap Chinese Goods - WALL STREET JOURNAL

"The proponents of protectionism say, “Free trade is fine in theory but it must be reciprocal. We cannot open our markets to foreign products if foreigners close their markets to us.” China, they argue, to use their favorite whipping boy, “keeps her vast internal market for the private domain of Chinese industry but then pushes her products into the U.S. market and complains when we try to prevent this unfair tactic.”
    "The argument sounds reasonable. It is, in fact, utter nonsense. Exports are the cost of trade, imports the return from trade, not the other way around."

In 1970, Milton Friedman Advocating Moving Unilaterally Toward Free Trade Rather Than Retaliating. We Still Haven’t Learned That Simple Lesson -Mark Perry, AEI

"This idea that Donald Trump is just playing hardball to negotiate tariff rates down on US exports is absolutely ridiculous. The % of tariffs applied to US-produced goods has declined consistently since WW2 and was nearly nothing...
    "UNTIL! Donald's first term, and now his second.
    "And yet I keep seeing so many MAGA supporters saying: 'We're already seeing countries backing down from their tariffs!'
    "You're literally winning a battle and losing the war at the same time ..."

~  Landon Walsh

"Then there’s Trump’s fascination with tariffs. The damage Trump has caused Ukraine and Nato pales by comparison to what his tariffs will do to America’s economy and the entire international economic system. If Trump had acted on April 1 instead of 2, he could quickly have said it was all an April Fool’s Day joke, thereby saving the global economy trillions of dollars of damage when markets started heading south. Unfortunately however, Trump is totally serious, a fact evident long before “Liberation Day.”
    "Here too, “experts” and anxious businesspeople steadfastly ignored Trump labelling “tariff” the dictionary’s most beautiful word. Tariffs, they said, will be targeted, carefully calibrated, and he’ll do deals quickly. It’s all a bargaining tactic, Treasury Secretary Bessent said in October, 2024: “escalate to de-escalate”. Even as global stock markets drop like rocks, experts are still rationalising what his “strategy” is.
    "Wrong again. Trump is more likely to win the Nobel Prize for literature than for peace."

I worked for Donald Trump. This is the key to understanding him: It’s not about America, and there’s no connection to the real world - John Bolton, TELEGRAPH (UK)

"Reminder: This policy was spearheaded and implemented by a man who thinks nobody says the word “groceries” these days because “it’s an old-fashioned word” and he somehow brought it back into the limelight.
    "Donald Trump is a motherfucking moron. Those who knew this and voted for him anyway because he gave them explicit license to be assholes deserve every last bit of pain his policies will cause them."

          ~ Stephen T. Stone

"In times of upheaval, those closest to power often find ways to turn disruption into wealth. Trump’s erratic tariff wars, billed as economic nationalism, upended markets, collapsed sectors, and triggered retaliatory shocks. But while farmers went bankrupt and consumers paid more, the market opened space for those with foresight—or insider access—to buy low and consolidate.
    "Geographer David Harvey calls this accumulation by dispossession: crisis used not to correct the system, but to extract from it. Devalue public assets. Destabilise protections. Create just enough chaos to buy cheap what others are forced to abandon. It’s not just policy failure—it’s extraction dressed as populism.
    "The con isn’t just psychological. It’s material. It’s not just about being lied to—it’s about being looted.
    "And that’s what makes this moment different—and more dangerous. The scam isn’t happening outside the system. It’s running through it."

The Confidence Game: How Trump’s Con Threatens More Than the Truth - James Greenberg, JAMES'S SUBSTACK

"The latest rumor, when I started drafting this column, was that President Trump will suspend the tariffs for a 90-day period, with the exception of those on China. Markets started going back up again.
    "But “the very latest information” doesn’t stay current for long these days. The new report—but don’t count on it—is that the 90-day pause is not real after all. That revision came out before this draft was finished. And markets again whipsawed.
    "The Trump administration has created a new monster—one of unpredictability and erratic behavior. We simply cannot predict with any degree of accuracy what will happen next. By the time you are reading this article, there will probably be some newer report about the tariffs or threat of tariffs, and then another report after that.
    "Even if the White House winds up instituting a pause on the proposed tariffs—or ultimately adopts much better economic policies—this seesawing may plunge the American and perhaps also the global economy into recession."

A Contagion of Uncertainty - Tyler Cowen, THE FREE PRESS

[WATCH] Singapore must be clear-eyed about dangers ahead: Singapore's Prime Minister Wong on implications of US tariffs:

"Donald Trump has demonstrated his profound misunderstanding of the basic economic principles of international trade for several years now, and perhaps reached a pinnacle when he told the New York Daily News in an interview last August that “we’re getting hosed by the Chinese — and that we’ve done it with our eyes wide shut.” ...
    "[Trump adviser] Peter Navarro, in his Wall Street Journal opinion piece earlier this week (see related post here) demonstrated his fundamental misunderstanding of international trade when he opened his op-ed with the following question: “Do trade deficits matter?” Just to ask the question is to admit one’s ignorance of trade theory, which has been pretty settled on this topic since Adam Smith taught us in 1776 that “Nothing…can be more absurd than this whole doctrine of the balance of trade. ..."

Trade Deficits Don’t Matter; Understanding Deficits Do: Protectionists' idea of a trade balance is completely backward -Mark Perry, FOUNDATION FOR ECONOMIC EDUCATION

Tariffs are a suicide bomb":

Trump's team said they based their "reciprocal tariff" calculation for each country based on the tariffs and impediments put on American imports by those countries. But no. It's even more irrational: "[Trump's chart] features an estimate of 'Tariffs Charged to the USA' by other countries that nobody could figure out, until a financial journalist realised it was just how much we export to that country, minus how much we import, divided by how much we import."

"Under a system of perfectly free commerce, each country naturally devotes its capital and labour to such employments as are most beneficial to each. This pursuit of individual advantage is admirably connected with the universal good of the whole. By stimulating industry, by regarding ingenuity, and by using most efficaciously the peculiar powers bestowed by nature, it distributes labour most effectively and most economically: while, by increasing the general mass of productions, it diffuses general benefit, and binds together by one common tie of interest and intercourse, the universal society of nations throughout the civilised world."
        ~ David Ricardo (1817)

"Why is today’s Trump so different from the Trump of his first term? .. ". Turns out, the answer is very simple" Back then he had people, and a Congress who would say "No." But now the yes men are in power.

What happened to Trump? Why has be become so pro-Russian? - Roman Sheremata, UKRAINE TODAY

Trump's tariffs policy came from his economic advisor Peter Navarro, who invented a fake expert in his books to justify it. "Peter Navarro liked to quote a guy named Ron Vara in his books. Those books are largely what led to Navarro becoming a top adviser to President Trump and helping to shape U.S. policy on China. Here’s the thing about Ron Vara, though: He doesn’t exist. ...

"Ron Vara is an anagram of Navarro."

Trump's China Muse Has an Imaginary Friend - Tom Bartlett, CHRONICLE OF HIGHER EDUCATION

 

Second-term Trump is who Trump always was. This is Trump without many adults in the room stopping him getting his way. This is Trump surronded by Yes Men in a cult. This is Trump. A freedom-hating, dictator-loving, trade-despising child who wants the power of a tryant. Someone who has no regard for facts and who will utter any lie he wishes - no matter how ridicolous it is. And his believers are expected to believe it. Under fear of discommunication from the cult.
This is what you asked for when you voted for Trump. This is what you got. I hope you are happy....

          ~ Dwayne Davies

"An often forgotten truth is that it is not just military warfare that can cause injury to innocent bystanders, the same inescapably happens in economic warfare initiated by governments, as well. But in the latter case the human “collateral damage” is a targetted victim. ...
    "Tariffs and counter-tariffs are tools of economic warfare that are said to be targeting the “aggressor” country. But the very nature of how tariffs and counter-tariffs work, results in the main targets being innocent bystanders in the countries concerned.
    "Once we disaggregate “nations” into their, respective, individual buyers and sellers, producers and consumers, we see that the most damage falls on the economic “non-combatants,” of whatever the original “dispute” may be about ..."

Trump’s Economic Warfare Targets Innocent Bystanders - Richard Ebeling, FUTURE OF FREEDOM FOUNDATION

"TikTok is a major bargaining chip in a grave geopolitical struggle. Given the data users have always sent to Beijing, it’s been a bargaining chip ever since it arrived on America’s digital shores. For Trump, though, it’s not exactly his chip to bargain with: Congress already determined the American course of action. The mystery is why nobody seems to mind Trump delaying its execution — or at least, why nobody is complaining publicly....

    "Trump’s motives here are not difficult to parse, and the bill in question is legitimately problematic. He’s popular on TikTok, and close to one of the company’s major investors. ...
    "As fallout continued from his tariff bombshell — including the legitimacy of his emergency authority to implement the new rates — barely anyone batted an eye at TikTok getting another dubious bailout."

Why Trump keeps saving TikTok - Emily Jashinsky, UNHERD

"Since my last essay on the crisis of democracy, the assaults on democratic checks and balances have escalated. Without agreement from Congress, Trump’s DOGE shut down the U.S. Agency for International Development with stunning speed. Although a federal court blocked further implementation, ruling that the action “likely violated the Constitution,” by then the agency had already been gutted and largely dismantled along with many other agenices. Then, in an alarming politicisation of the military high command, Trump fired the Chairman of the Joint Chiefs of Staff, the Chief of Naval Operations, the Air Force Vice Chief of Staff, and the judge advocates general (the highest-ranking legal authorities) for the Army, Navy, and Air Force.
    "Pressing his claim to imperial power, Trump has moved to assert absolute control over all federal regulatory bodies, including the Securities and Exchange Commission, the Federal Trade Commission, and the Federal Communications Commission. This not only hobbles their capacity to act independently in the public interest but opens the door to massive corruption. As DOGE seizes control of more and more of the government’s most sensitive and highly centralised stores of data, the conflicts of interest proliferate for its chief 'overseer,' Elon Musk, who over the years has received 'at least $38 billion in government contracts, loans, subsidies and tax credits.' And Just Security has documented an 'alarming' pattern of 'politicisation and weaponisation of the Department of Justice since Trump has retaken office.
    "The United States now faces the grave and imminent danger of its democracy decaying into a 'competitive authoritarianism'.”

How to Undo Trump’s Growing Dictatorship and the Damage it Is Inflicting - Larry Diamond, THE UNPOPULIST

"We have to realise that Trump is not joking about any of this. He’s not joking about invading Greenland, and he’s not joking about running for a third term. He’s as serious about all of this as he was about the tariffs. The evidence indicates that he will do it all, whatever he can get away with. ...
"While we prepare a mass movement—and Donald Trump crashing the economy with the world’s stupidest tariffs will help us a great deal—we need to fight everything. What that will specifically mean is that we have to fight a lot of losing battles. ...
"There are five reasons to fight early and often, no matter the odds of winning any one fight.
    1. It lays down a marker. ....
    2. It mobilises others to fight. ....
    3. It delays and exhausts the strongman. ...
    4. Sometimes you win. ...
    5. You find out what works and who fights. ...."

How to Fight Back - Robert Tracinski, TRACINSKI LETTER

Tariffs in 2 lessons

THERE IS ONE SINGLE lesson in economics everyone needs to learn, says Henry Hazlitt — the one lesson that might allow them to best understand the field and avoid the errors of bad economists. It is this, below:

Today is already the tomorrow which the bad economist yesterday urged us to ignore. The long-run consequences of some economic policies may become evident in a few months. Others may not become evident for several years. Still others may not become evident for decades. But in every case those long-run consequences are contained in the policy as surely as the hen was in the egg, the flower in the seed.
    From this aspect, therefore, the whole of economics can be reduced to a single lesson, and that lesson can be reduced to a single sentence. The art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups.

Take that fully on board and you'll already know more than most bad economists — and certainly more than any of the alleged economists kissing Trump's ring. [For the whole lesson, you can download and read pages 3 to 7 of Hazlitt's seminal book Economics in One Lesson. It's that simple.]

HAZLITT NATURALLY APPLIES THAT lesson over several policy areas. Including tariffs. An excerpt:

And this brings us to the real effect of a[n American] tariff wall. It is not merely that all its visible gains are offset by less obvious but no less real losses. It results, in fact, in a net loss to the country. For contrary to centuries of interested propaganda and disinterested confusion, the tariff reduces the American level of wages. Let us observe more clearly how it does this. We have seen that the added amount which consumers pay for a tariff-protected article leaves them just that much less with which to buy all other articles.
    There is here no net gain to industry as a whole. But as a result of the artificial barrier erected against foreign goods, American labour, capital and land are deflected from what they can do more efficiently to what they do less efficiently. Therefore, as a result of the tariff wall, the average productivity of American labor and capital is reduced. If we look at it now from the consumer’s point of view, we find that he can buy less with his money. Because he has to pay more for sweaters and other protected goods, he can buy less of everything else. The general purchasing power of his income has therefore been reduced. Whether the net effect of the tariff is to lower money wages or to raise money prices will depend upon the monetary policies that are followed. But what is clear is that the tariff—though it may increase wages above what they would have been in the protected industries—must on net balance, when all occupations are considered, reduce real wages.
    Only minds corrupted by generations of misleading propaganda [and presidential baloney] can regard this conclusion as paradoxical. What other result could we expect from a policy of deliberately using our resources of capital and manpower in less efficient ways than we know how to use them? What other result could we expect from deliberately erecting artificial obstacles to trade and transportation?

You can read the whole lesson on tariffs here: 'Who’s “Protected” by Tariffs?'

FILMS: Take the 'sharp' test [updated]

 (Reposted from June 2005. Updated because, well, who even remembers what a video store is?)

I like adult films. There, I’ve said it. Can anyone else remember a time when the term ‘adult film’ referred to something other than the stuff that comes with the label NSFW? Something with some wit or intelligence that, you know, was meant for adults. For grown-ups. For folk who still have brain cells they wish to rub together.

I for one am heartily bored with what passes for movie entertainment these days – there’s more formulas than a chemistry lab, fewer real adult themes than you'll find at a corner bar, and better acting on most soccer fields after a heavy tackle. 

Your video store online steaming app has movies categorised for everything. Everything that is, except for one category that for me is the most important: movies that makes you think, instead of making you want to put your foot through the screen. If, like me, you want something celluloidal that doesn’t insult your intelligence, then the one important question when choosing a movie should be, ‘Is it sharp?’

Sharp, (shahp), a. having a keen edge or fine point; terminating in a point or edge; biting, piercing; acute, keen-witted; alert, penetrating …

So as my video store online streaming app won’t do the job, I’ve sorted out my own ten working rules for finding movies that are sharp – or at least won’t blunt an evening’s entertainment with the usual dross. As a public service to help you avoid wasting valuable minutes of your life watching crap, I offer them here for your guidance. Thank me later.

1. The ten-minute test. This is most important: If it don’t grab you in ten, let it hit the bin.
2. Plot. The three most important things in a movie are plot, plot and big ti ahem, plot. As Tarantino should have said, ‘If it don’t have a plot, then it ain’t worth squat.’
   Aristotle identified nearly two-and-a-half-thousand years ago what made a good plot, but the news still hasn’t got to LA: in two words, dramatic conflict. Without a decent dramatic conflict, there is no plot, and you fail on the Rule One Test.
   The only thing better than a good plot is a really good plot. The only director who can break this rule is Fellini. Why? Because he can.
3. No coming of age movies. Just because the entire population of the planet over the age of fifteen passed through puberty once doesn’t mean we have to share every one of those experiences. Who cares what they’re a metaphor for. [No, not even — especially not — Adolescence. Not when "the state’s fingerprints are all over it."]
4. No movies starring George Clooney, Julia Roberts, Brad Pitt, Nicole Kidman, Leonardo Di Caprio or today's modern equivalent — nor anyone who's referred to as "bankable."  No pop stars (with the exception of ‘Hard Day’s Night’) And definitely no "reality" stars. And no 'franchises.' (If you can't say it in one movie then you need a better editor. Yes, Shakespeare had the whole Tudor thing going. But no, these film-makers aren't Shakespeare.)
5. Anything with David Mamet involved is worth a look. He might insult your sensibilities, but never your intelligence.
6. No high-school romances/sports stories/problems in class etc., etc., etc. Yawn. See rule 3 above. If it’s set in a high school, let it hit the bin.
7. Black and white. If it’s in black and white and your video store favourite online streaming app has it, there’s probably a good reason: because the film has legs. It’s lasted. Think Casablanca, or The Big Sleep here however, not the entire first year of ‘Coronation Street.’ If it’s ‘B and W,’ it’s worth the trouble. But bear in mind rule 1 above.
8. No gun fights/sword fights/car chases/explosions. Now, I don’t mean films like The Longest Day or A Fistful of Dollars here. Think Die Hard, if ‘think’ can be used about a whole franchise untouched by human minds. I mean gun fights/sword fights/car chases et al that are used as a subsitute for a decent dramatic conflict — used because the screenwriter was too lazy or inept the think of one. Aristotle identified that without dramatic conflict there is no plot, and in my revised and updated edition of his Poetics he went on to add that loud noises and Bruce Willis are no substitute for a film with a plot. ‘Hey, who cares,’ say the money-men, ‘let’s have a half-hour of gun fights/car chases/explosions to pad out the end of the movie.’ No, let’s not. Best to watch a movie in which the story actually has a real story delivered by a real screenwriter. Something that makes you think, not gawp.
9. Every rule has at least one exception. Except this one.
10. Goodies and baddies are for cartoons (and don’t bother with that childish Spider Man/Batman/Hulk/Arnie crap on film either, unless you’ve either just got to the head of the lobotomy waiting list and you want to show off, or you watch coming-of-age movies to pick up tips for the future). The best, most intelligent drama sets good against good, the worst sets good against psycho, sicko with a grudge or serial killer. 
    Psychos, sickos and serial-killers makes for cartoon viewing and poor drama; whereas good-against-good makes for really good plot conflict, out of which real, memorable drama develops. Unfortunately, while there's a slew of good novels like this I can’t remember the last time I saw a film which adopts this technique. Perhaps I schould eschew film-watching and just read a good book.

It was twenty years ago today that NOT PC began.

 

It was twenty years ago today that NOT PC began, with that short post above.

Twenty years!

Crikey!

No, don't clap. Just throw money. ;-)

It's interesting, to me at least, to see what I wrote that first week, and whether any predictions came right—or if any ideas the blog promoted took hold. It turns out that...

• John Tamihere wasn't heading for political oblivion after all
• the Toy Love album is still great in any guise
• Nanny State, in every guise, has only got worse
• bloggers aren't quite as collegial now as they were then, but
• anonymous commenters are still mostly cowards
• lazy politicians are still mostly A Good Thing
• it's more true than ever that state and school be separated
• its more true than ever that the revolution libertarians and Objectivists are trying to foment is inside people's heads—even if most of them have forgotten that
• we still need property rights embedded within the Bill of Rights —and even mentioned in the RMA!
• we still desperately need a National Party that understands property rights—or even what their own Dancing Cossacks were all about
• the Herald knew more about rights then than almost everybody does now
• we still await a device transmitting signals direct from brain to 'puter —though it is one of many Musk promises
• increasing ignorance of the Holocaust does indeed "run the risk of history repeating itself"
• the IRA and other paramilitaries have still, mercifully, mostly given up the gun
• as another Pope heads to the out door, the reputation of his Church is if anything in even poorer health

In that time I've written about 4.5 million words words across nearly 15,000 posts, which have attracted 54,639 comments (thank you).

Over those twenty years, those 15,000 posts have enjoyed precisely 15,742,467 page views.

And my Top Ten posts of all time (below) features quotes from Stephen Hicks, Steven Pinker, architecture by my teacher Claude Megson, and guest posts by sundry others. My sole personal contribution to the Top Ten however is my Family Tree of Economics. Of which, to be fair, I am very proud—decent "trees" are still a rarity.

PS: Credit again to Richard Goode for calling my bluff when I told him I should start blogging—a few taps of a keyboard and he turned around and said "There you go." So I did. (Thanks Richard.)

"The patriot .. "

 

“Before, the patriot, unless sufficiently advanced to feel the world his country, wished all countries weak, poor, and ill-governed but his own; he now sees in their wealth and progress a direct source of wealth and progress to his own country.” 

~ John Stuart Mill, from his speech 'England Under Free Trade: An Address Delivered to the Sheffield Junior Liberal Association, 8th November, 1881' (quoted in The Atlantic's article 'No One Wins a Trade War.' Hat tip Tony Morley)

"Trump's policy, unveiled yesterday afternoon, is called a 'reciprocal tariff plan,' which is a bit like calling a hammer a 'reciprocal pillow'."

"There’s a fundamental problem with Donald Trump’s new trade policy: it fails a test that actual 5th graders can pass. I know this because I tried explaining his 'Liberation Day' trade plan to one last night. Here’s how that conversation went:

“Imagine you want to buy a toy at a store which costs $50. You pay for the toy and walk away with it. The President looks at that transaction and says ‘wait, you paid the store $50 and the store paid you nothing, therefore the store is stealing from you. To 'fix' this, I’m going to tax the store $25. From now on that same toy costs $75.”

"The 5th grader looked at me like I was crazy. 'Whaaaaaaat? None of that makes sense. If I pay for something, it’s not stealing. And taxing the store seems stupid, and then everything is more expensive. Why would anyone do that? That can’t be how it works.'
    "This is the core problem with Trump’s 'Liberation Day' trade policy: it fundamentally misunderstands what trade deficits are. And if you think that’s bad, just wait until we get to the part where this policy declares economic war on penguins and our own military base. ...

"The policy, unveiled yesterday afternoon, is called a 'reciprocal tariff plan,' which is a bit like calling a hammer a 'reciprocal pillow.' The premise is that since other countries have high tariffs on us (they don’t), we should have high tariffs on them (we shouldn’t). But that’s not even the weird part.
    "At the heart of this policy is a chart. Not just any chart, but what might be the most creative work of economic fiction since, well, Donald Trump launched his memecoin. Trump proudly displayed these numbers at a White House event, explaining that they showed the tariffs other countries impose on the US. He emphasized repeatedly that the US was being more than 'fair' because our reciprocal tariffs would be less than what other countries were charging us.
    "There was just one small problem: none of the numbers were real tariff rates. Not even close.
    "At first, observers assumed the administration was simply inventing numbers, which would have been bad enough. But the reality turned out to be far more stupid. ...

"All of this glosses over the fact that 'reciprocal tariffs' are not reciprocal at all. Trump’s team is making up fake tariff numbers for foreign countries based not on anything having to do with tariffs, but on trade deficits, which is just an accounting of inflows vs. outflows between two countries. It’s only reciprocal because the Trump team faked the numbers.
    "On top of that, Trump can only impose tariffs (normally a power of Congress) based on the International Emergency Economic Powers Act and the National Emergencies Act. Both laws require there to be an actual 'emergency.' The only emergency here is that nobody in the administration understands what trade deficits are....

"So to sum up where we are:The administration invented an economic emergency

• To justify a policy based on made-up numbers
• Generated by an AI formula that came with explicit warnings not to use it
• Which they’re now using to launch trade wars 
• against: 

• Penguins
• Our own military
• And presumably Santa’s Workshop (someone check for a North Pole entry)

"And while the penguins and military base make for amusing examples of this policy’s incompetence, the real damage will come from applying this same backwards logic to basically all of our actual trading partners — countries whose goods and services make American lives better and whose economic relationships we’ve spent decades building. And who, historically, welcomed back American goods and services as well. All of that is now at risk because someone couldn’t be bothered to learn what a trade deficit actually is. And the American electorate deciding that’s who we wanted to govern the country.
     "When your trade policy is so fundamentally misguided that you’re declaring economic war on flightless birds and your own armed forces, perhaps it’s time to admit that the 5th grader from the beginning of this story wasn’t just smarter than the administration — they were dramatically overqualified for Trump’s Council of Economic Advisers."

~ Mike Masnick from his article 'Trump Declares A Trade War On Uninhabited Islands, US Military, And Economic Logic'

 

Did you know you can see shit political economy from space? [update 2]

Auckland: Eden Terrace's workers' cottages on the right, Mt Eden's California Bungalows 

beginning over the railway line lower left. (Photo showing the area before the Dominion Rd flyover,

from the Sir George Grey Special Collections, Auckland Libraries, 580-9498']

Did you know you can see shit political economy from space? Here below is the Black Hole of North Korea at night, too poor to have enough lights to switch on.

And you can see shit political economy in Auckland too, in aerial photographs. To be accurate: you can see shit political economy in the form of the effect of tariffs. ...

Let me explain.

Workers' cottage, Freeman's Bay

Victorian Villa, Grey Lynn

The first houses built here en masse were workers' cottages and then villas. When you fly over the city, you can see a ring of these villas around the inner parts of the city — especially so in Ponsonby and Grey Lynn — built right up until the First World War.

But after that war, something changed. It seemed to some that the United States had rescued Europe from its Great War, and had a lifestyle to which an increasingly prosperous population could aspire. It was the Jazz Age — the age of radio, electrification, automobiles, and the mass production (Fordism!) that made them affordable. In love with Americanism, in housing here it became the decade of the California Bungalow.

California Bungalow, Mt Eden

A villa is not a bungalow.  Like the California lifestyle it aped (and which the world would fully fall in love with after another war), the California Bungalow was freer than the more uptight Victorian villa, and reached out for sun and air. Their broad spreading gables form a second ring around the city in what we now call the "tram suburbs," a ring from Pt Chev through Mt Albert, Sandringham, Mt Eden, Greenlane, Ellerslie, and right around to the border of Meadowbank/Remuera.

Their popularity was immense. 

Their takeover seemed unstoppable. 

Until something happened.

That something involved a tariff. Brought in by US Senators Smoot and Hawley, their Smoot Hawley Tariff Act raised tariffs on imports by an average of twenty percent. Their intention (we're told) was to quarantine American manufacturers from the effects of the 1929 stock market crash. What it did do instead was to spread the misery and contagion around the globe, kicking off the Great Depression and all but shutting down international trade for nearly two decades.

John Bell Condliffe's "wagon wheel" showing the dramatic death spiral of world trade
following the disastrous implementation of the 1930 Smoot-Hawley Tariff Act

New Zealand economist J.B. Condliffe has a world-famous diagram describing the accelerating downward spiral of trade as every country and trading bloc in the world put up their own tariff walls in response. It was one of the most successful acts of intentional self-destruction in all modern history.*

Almost at a stroke, we fell out of love with the US.  In Britain, still the head of something called an Empire, an Imperial Preferences Act was swiftly passed making trade within the Empire roughly tariff-free — allowing many Commonwealth countries to escape the Depression first. (Not so the US of A, which had to wait until the death of a President and the end of a war to boom again.)

And trade amongst the Empire, rather than outside it, meant many more British goods replacing the previous love affair with American. Not least in housing. If the twenties was the decade of the California Bungalow, then the thirties was the decade of the English Cottage/English Revival. We can see these crabby, restrained offerings around the outer parts of the tram suburbs. (And you can see all these styles described in the Auckland Council's 'Style Guide,' pp 14-24)

In insulating itself from the world, America had not only shot itself in the foot economically, it also lost its influence with the rest of the world. 

Turned out it was a not-so-great way to Make America Go Away Again.

* * * *

* Until April 2, 2025, that is, with what Johan Norberg calls "the longest suicide note in economic history."

UPDATE 1: David Farrar notes that our average two-percent tariff rate (world's second-lowest after Singapore) becomes in the mind of the Toddler-in-Chief a twenty-percent tariff. (I use the word "mind" loosely.)

Johan Norberg has more on the effects of what he jokingly calls '"Liberation Day June 17 1930":

As he says, " I think the US was heading for trouble even before, but it certainly deepened the depression and spread it around the world, with devastating effects for European democracies. We would have had a depression anyway, but perhaps not a great one."

UPDATE 2: 

"Thomas Rustici identified the role of the Smoot-Hawley Tariff Act in exacerbating the Great Depression, particularly through its effects on trade, banking failures, and economic contraction. His seminal work, *Smoot-Hawley and the Great Depression: A General Equilibrium Analysis* (2005), presents a compelling argument that Smoot-Hawley initiated a trade war, triggered mass bankruptcies, destabilized the banking system, and led to deflation and depression. ... 

"Conclusion Rustici’s work provides one of the most comprehensive and rigorous explanations of how the Smoot-Hawley Tariff Act triggered a trade war, bankrupted farmers and businesses, destabilized the banking system, and created deflationary collapse. His analysis is central to understanding how protectionist policies can create economic catastrophe by disrupting credit, trade, and monetary liquidity. His insights remain critical in debates over trade policy and economic crises."