Monday, 4 November 2024

What would Sumner say about Trump and Vance’s pro-tariff rhetoric?


Trump isn't just for tariffs. He's enthusiastically for tariffs. He wants to build a tariff wall — and this time everyone — from producers to consumers — from American to Chinese — who will pay.
[T]he scale of what Mr. Trump is proposing is larger than any tariff increases that have been seen in nearly a century. He has floated a “universal tariff” of 10 to 20 percent on most foreign products and tariffs of 60 percent or more on China. To ban Chinese cars from coming into the United States via Mexico, he has said he would impose “whatever tariffs are required—100 percent, 200 percent, 1,000 percent.”

By the way, "in nearly a century” means “since Smoot-Hawley,” the notorious 1930 tariff act that helped precipitate the Great Depression and encourage a second Great War.

Remember that?

Yet the arguments Trump and Vance are making for tariffs were already addressed by free-trade proponents over a century ago. But, as Kody Jensen points out in this guest post, ignoramuses like Trump and Vance keep making them. So he goes back to what one of those anti-tariff agitators were saying, a pro-trade fellow called William Graham Sumner ...


What would Sumner say about Trump and Vance’s pro-tariff rhetoric?


Sadly, all US presidents in recent times have leaned towards opposing free trade, but some have been worse than others. One has been much worse. In recent times Donald Trump has built his political reputation on being its wholehearted adversary. William Graham Sumner (1840–1910) was a wholehearted supporter of free trade. Professor, sociologist, clergyman, and advocate of laissez faire, the gold standard, and free trade — I went back to Sumner to find out how
he would respond to claims made by Trump and his running mate JD Vance about free trade in the recent debates? 

Let’s go to his writings to find a potential answer.

The Great Free Trade Debate

DT: “First of all, I have no sales tax," responds Trump to Harris characterising his tariff plan as a sales tax.. That’s an incorrect statement. We’re doing tariffs on other countries. Other countries are going to finally, after 75 years, pay us back for all that we’ve done for the world. I took in billions and billions of dollars from China.”

Sumner observes that protectionists have always shied away from referring to tariffs as taxes. Consider these comments from his 1888 book Protectionism: the -ism which teaches that waste makes wealth:
There are some who say that “a tariff is not a tax,” or as one of them said before a Congressional Committee: “We do not like to call it so!” That certainly is the most humorous of all the funny things in the tariff controversy. If a tariff is not a tax, what is it? In what category does it belong? No protectionist has ever yet told. They seem to think of it as a thing by itself, a Power, a Force, a sort of Mumbo Jumbo whose special function it is to produce national prosperity. They do not appear to have analyzed it, or given themselves an account of it, sufficiently to know what kind of a thing it is or how it acts. Any one who says that it is not a tax must suppose that it costs nothing, that it produces an effect without an expenditure of energy. They do seem to think that if Congress will say: “Let a tax of —— per cent be laid on article A,” and if none is imported, and therefore no tax is paid at the custom house, national industry will be benefited and wealth secured, and that there will be no cost or outgo. If that is so, then the tariff is magic. We have found the philosopher’s stone.
Furthermore:
A protective tax is one which is laid to act as a bar to importation, in order to keep a foreign commodity out. It does not act protectively unless it does act as a bar, and is not a tax on imports but an obstruction to imports. Hence a protective duty is a wall to inclose the domestic producer and consumer, and to prevent the latter from having access to any other source of supply for his needs, in exchange for his products, than that one which the domestic producer controls. The purpose and plan of the device is to enable the domestic producer to levy on the domestic consumer the taxes which the government has set up as a barrier, but has not collected at the port of entry. Under this device the government says: “I do not want the revenue, but I will lay the tax so that you, the selected and favoured producer, may collect it.” “I do not need to tax the consumer for myself, but I will hold him for you while you tax him.”
DT: “They aren’t gonna have higher prices," claims Trump, when asked if consumers can afford higher prices caused by tariffs. "What’s gonna have and who’s gonna have higher prices is China and all of the countries that have been ripping us off for years”

WGS: “To this it is obvious to reply: what good can they then do toward the end proposed?”

If the tariffs do not raise prices, then how do they encourage the protected industries? No doubt it would be a neat trick if the President could force foreigners to pay more for US products while not raising prices for US consumers. However, I cannot comprehend how taxes on US imports will achieve this. And nor can you.

Vance: “Think about this. If you’re trying to employ slave labourers in China at $3 a day, you’re going to do that and undercut the wages of American workers unless our country stands up for itself and says you’re not accessing our markets unless you’re paying middle-class Americans a fair wage.”

WGS:
The protectionist says that he does not want the American labourer to compete with the foreign “pauper labourer.” He assumes, that if the foreign labourer is a woolen operative, the only American who may have to compete with him is a woolen operative here. His device for saving our operatives from the assumed competition is to tax the American cotton or wheat grower on the cloth he wears, to make up and offset to the woolen operative the disadvantage under which he labors. If then, the case were true as the protectionist states it, and if his remedy were correct, he would, when he had finished his operation, simply have allowed the American woolen operative to escape, by transferring to the American cotton or wheat grower the evil results of competition with “foreign pauper labour.”
Can a tariff raise the general wage level? Sumner says no:
Wages are capital. If I promise to pay wages I must find capital somewhere with which to fulfill my contract. If the tariff makes me pay more than I otherwise would, where does the surplus come from? Disregarding money as only an intermediate term, a man’s wages are his means of subsistence—food, clothing, house rent, fuel, lights, furniture, etc. If the tariff system makes him get more of these for ten hours’ work in a shop than he would get without tariff, where does the “more” come from? Nothing but labour and capital can produce food, clothing, etc. Either the tax must make these out of nothing, or it can only get them by taking them from those who have made them, that is by subtracting them from the wages of somebody else. Taking all the wages class into account, then the tax cannot possibly increase, but is sure by waste and loss to decrease wages.
One point both Trump and Vance raised was that apparently even Joe Biden agreed with protectionist ideas, as he did not remove most of the tariffs imposed by the previous administration. I do not know what answer Sumner could give to this ubiquity of bad economics, other than to glumly shake his head.

And to point out perhaps that it is not economics that preaches tariffs to make Americans rich again—despite all the evidence against it: It's politics.

24 comments:

Mark Hubbard said...

I think you are running a false premise, Peter. And I understand it: I held the false premise up until some months ago.

Yes, tariffs are bad. Yes, tariffs will not make a country rich.

UNLESS:

I've been reading the work of Alexander Stahel and Michael Kao, two exceptionally good US analysts (the latter a former hedge fund manager): their premise is Xi Jinping is moving 'back' to Left Marxism proper, and onto a physical war footing with West: he is collapsing the 'free enterprise' in China that is left and has been doing so since taking over Hong Kong, and moving the state back to full party authoritarianism. Part of this movement was taking stimulus out of property market (which is collapsing with a much deeper hole to come) and into manufacturing to commit economic war on the West.

And that's what he has done. The flood of cheap product into EU and USA is not comparative advantage: it's Jinping sacrificing the Chinese population (he's in the line of Mao and Stalin, not the moderates before him) to wage war against Western economies possibly as a precursor to actual war centred around Taiwan as his first move (now he has seen West never put troops on the ground for Ukraine).

When you view it as a war, then you need a weapon, and the tariff is that weapon, and in this war setting, is justified. As much as I never thought I'd see myself writing that.

The West is at war with Xi Jinping, because he has been at war with West for some years now, set to ratchet up markedly the next ten years and change in nature from economic war to something much more troubling.

Yes, this puts New Zealand in a vulnerable place. Get at least 1/3 of your savings out of NZ and into Australia and US (sensible anyway given there's a 75% probability of an Alpine Fault rupture over next 50 years).

I say all this while still being a Libertarian.

MarkT said...

Mark H - Let's assume for the sake of this discussion you're correct about this threat from China, and also that it justifies some targetted tariffs against China for reasons of national security. Assuming all that, do you really think Trump and Vance have a nuanced and clear concept of what tariffs are justified and what aren't? Their rhetoric certainly suggests the opposite.

The thing with Trump increasingly is that there's no real scope for different opinions on what he really wants or intends, because all you have to do is listen to exactly what he says. The only choice is whether you believe him or not. If you do believe him, then on the basis of most things he's clearly on record as saying you should be horrified.

Mark Hubbard said...

Context: the only candidate on record for intention to shred the first amendment is Harris. As I said on the previous post, Trump is on the ticket with the man who spent $44 billion ensuring we all keep free speech. So your demonisation of Trump, here, as a tyrant whom must be obeyed (ergo will not allow free speech), is ludicrous: that's the other party and candidate. Despite that former post on this blog, again: your comment is informed by Trump derangement syndrome. He's an intelligent man, US is in a war with China, he knows this, hence his use of tariffs - try listening to him for longer than the sound bites serviced up on One News at six: otherwise I'm not interested in your whataboutism.

MarkT said...

Dear me. I don't know who you're talking to, but it sounds like someone different to me. I was commenting on his intentions with regards tariffs, nothing about free speech. All I invited you to do was listen everything he says and understand what it means (in full context, not just soundbites). To respond this rabidly, telling me I'm suffering from derangement syndrome, and 'whataboutism' (after doing exactly that yourself in regards to Harris) sounds like projection and validates what Tracinski is saying.

Anonymous said...

Yes Mark T. Many folk have been radicalised by stuff on the internet. Even former Libertarians

Mark Hubbard said...

My context MarkT: you said, quote: 'The thing with Trump increasingly is that there's no real scope for different opinions on what he really wants or intends, because all you have to do is listen to exactly what he says. The only choice is whether you believe him or not. If you do believe him, then on the basis of most things he's clearly on record as saying you should be horrified.'

What leader isn't sure of their opinions: on your definition you'd certainly not vote for Xavier Milei?

So, the context was really first amendment.

Re Anonymous: I don't even know what you mean by radicalised.

Derangement, I assume.

MarkT said...

No Mark, the context was the subject of this article, and what you also commented on (tariffs). Not whatever demons in your head you seem to be arguing against. I don't even understand what you're referring to in detail. I don't follow everything Trump says nor the allegations against him. I just know that when I do read what he says and try to understand the meaning; in full context, and not just soundbites as you're alleging - I'm usually horrified. As I initially invited, try just doing that in regards to what him and Vance have said about tariffs - if nothing else, and decide for yourself if it equates to a considered and well-planned defensive manouveur against a hostile China.

MarkT said...

Indeed Anon. I can only conclude that either they are 'former' libertarians, or Ayn Rand was perhaps right all along when she dismissed libertarians as 'hippies of the right'.

Mark Hubbard said...

'if it equates to a considered and well-planned defensive manouveur against a hostile China'

If very definitely does. That's my point.

You are not in good faith: I'm out.

paul scott said...

They need to put America back to work, and develop Industry in the Rust Belt, There us a price attached to that . But you old NZ Libertarians live in a false world about a century ago. Here is an update from Michael Rectenwald who is a Libertarian that you probably haven't heard of in the sad declining little State. > https://mrectenwald.substack.com/p/the-peculiar-phenomenon-of-libertarian?utm_source=post-email-title&publication_id=2669190&post_id=151168387&utm_campaign=email-post-title&isFreemail=true&r=eqppn&triedRedirect=true&utm_medium=email

Mark Hubbard said...

How does that contact with anything I said in my initial comment?

And, bad faith. I don't care about your opinion of libertarians.

I'm not interested in following your link: you do the work and summarise it here if it is in any way relevant. I stated my case regarding a different view of tariffs very clearly.

The one thing I would say is it's not up to governments to develop industry: it's up to governments to get of the way so industry can thrive. But that is nothing to do with use of tariffs in time of war (as opposed to peacetime when it is foolish to use them).

Anonymous said...

Trump's washing machine tariffs saved washing machine manufacturer jobs, but they increased the cost of washing machines so much that consumers had to pay over $800k more in costs for every job saved. That's not a good trade.

Tell me how this is part of the Libertarian philosophy.

Mark Hubbard said...

Bad faith.

I was very clear in my initial answer I DO NOT SUPPORT TARIFFS. The rejoinder is in peacetime. My position, following the mentioned analysts, is this is not peacetime: Xi Jinping is involved in economic war by flooding EU and USA with cheap goods to weaken his enemy as the forerunner of a more serious physical war: during a war comparative advantage is no longer an argument: during a war there is damage done, in this case using tariffs as a weapon to stop your country being overrun with cheap goods will cause harm, BUT IT IS JUSTIFIED to fight a moral enemy. Otherwise you allow that enemy to damage your industries UNFAIRLY. I said Xi Jinping is in the mould of Mao: he has no problem sacrificing the real or economic lives of Chinese to wage his war.

Read what I said. Leave out your straw men you want me to say.

Peter Cresswell said...

@Mark Hubbard: You missed a step.

A fairly important set.

You’ve accepted that in peacetime the Chinese ability to flood the world with cheap goods is not only good for inflation (well, until central banks use those cheap goods as an excuse to goose us with counterfeit capital, but that’s another story) but good for peace and prosperity.

But you reckon that somehow in wartime the ability to flood the world with cheap goods will somehow be different.

That’s the bit you forgot to explain.

And it’s not trivial. If Xi does want to declare war by cornering the ability to flood the market in the cheapest stuff the world has ever seen, then bring it on. It would be a curious way to declare war, but there we are. Enjoy it while we can, right.

But perhaps you’re saying that Xi will declare war by *stopping* flooding the world with cheap goods.

Hmmm.

In 2000, China accounted for 6% of global manufacturing. In 2030, China is projected to account for almost half of all global manufacturing.

So even if Xi *wanted* to stop the flood (and there’s no sign of that evident anywhere; the main signs we see instead appear only in Republican presidential literature) he’d have a hard job. He wouldn’t just damage Chinese industry, he’d destroy it. That’d be a hell of a funny way to declare war. “Do what I want or Chinese industry gets it.”

So: please explain. So far what you've said makes zero sense. (Just like that Republican presidential literature.)

Mark Hubbard said...

Peter, for some reason no reply button.

No, you miss the context vis a vis these analysts (I have no idea if they are republicans, indeed, Kao is American I don't know about Alexander).

The context is the free enterprise part of the Chinese economy, and in many ways the Chinese economy is going to collapse. They went to a stimulus model in their property market - 70% of Chinese savings are property - of banks being able to mortgage apartments before they are built, noting local councils also get the majority of their income from these 'builds': trouble is there is the equivalent of Japan's property market that is now financed in China, but not built, and they're not going to be built: that system, and the income of the councils is going to collapse.

So it will be a straight out command economy under societal repression. (There is no way that China will account for 50% of global manufacturing by 2030; the whole model is going). When Xi changed stimulus from the property market to manufacturing over last three to four years, at the expense of Chinese workers, the flood of cheap products into USA and Europe - where they had the diabolical confluence of energy poverty problems - is damaging their industries: Europe is simply 'going down', USA has been on a program of extensive re-shoring of manufacturing to the US out of China, but those businesses are vulnerable.

The analysts then contend the West doesn't understand the man, Xi. He is an ardent nationalist, and Marxist, and he is moving in the last 10 years or so of his life to a war footing run by a command economy. Measures he is taking in the Chinese homeland now, curtailing activities of business and who they can deal with, etc, repression of the population, are consistent with this.

If correct everything changes (NZ is in an awful position). But, Trump is not a stupid man, he understands this, he sees the reshoring and he will use tariffs 'on a war footing'.

IE, the world order is about to change dramatically.

Mark Hubbard said...

Typo: EU has energy poverty policies (not problems) ... esp Germany, their biggest economy.

MarkT said...

Right, a considered and well-planned defensive manouveur against a hostile China. How then does Mexico fit into this? Something I found after 2 minutes of googling:

"This week, he raised the ante still higher. To punish the machinery manufacturer John Deere for its plans to move some production to Mexico, Trump vowed to tax anything Deere tried to export back into the United States — at 200%.

And he threatened to hit Mexican-made goods with 100% tariffs, a move that would risk blowing up a trade deal that Trump’s own administration negotiated with Canada and Mexico."

For all your allegations of everyone else ignoring context, it seems you're not even vaguelly aware of the totality of which your hero is saying.

Peter Cresswell said...

@Mark T: That's horseshit.

Horseshit on many counts.

But here’s just one.

Your orange hero has been pro-tariffs since at least the 1980s, when it was said then that Japan was taking unfair advantage.

He was then against the NAFTA agreement, when he said it was Mexicans taking unfair advantage,

And he was against the TPPA, when it was said that all the rest of us are busy taking unfair advantage. (You seeing a pattern?)

By “taking advantage,” your orange hero, by the way, means selling stuff super-cheap.

But he’s been against every such kind of “taking advantage” ever since he first learned how to grab a pussy.

His anti-China trade war was not set off because he “understands” anything at all. Because he understands nothing, least of all how Americans use those cheaper goods to make their lives better and more prosperous.

His anti-China trade war was set off precisely because he IS a “stupid man.” A very stupid man. A man who wouldn't know how trade makes people free and prosperous anymore than he cares.

And. if there’s one leader who really will destroy it all - sacrificing real and economic lives of those he claims to “lead’ — then it’s this dickhead.

MarkT said...
This comment has been removed by the author.
MarkT said...

@ PC - Please don't attribute to Mark T what comes from the keyboard of Mark H!

Mark Hubbard said...

There's a software issue: I can reply to this, but not your comment above, or to Peter's latest.

Mark Hubbard said...

Peter: Harris is on record she will be shredding the first amendment. Without free speech there is only tyranny. You can be pure, but like good men doing nothing, that would allow evil to prevail. That's the decision Americans have.

Trump is not the evil here. Perhaps he is just what the world needs at this point in time when geo-politically we ARE looking at the new Dark Ages if Putin and Xi Jinping are not controlled.

Mark Hubbard said...

I would also say Trump is on record at the many mistakes he made in his first term, uppermost the people he put around him.

This term he has superb team: the worlds top entreprenuer whose commitment to free speech/first amendment can't be faulted, Vivek, Gabbard, Kennedy, etc.

Peter Cresswell said...

@Mark H: We're talking tariffs. Stick to the topic. (Even if your orange hero can't stick to one topic for more then one microsecond, that's no reason for any human being to adopt the short-term memory of a leperous goldfish as well.)
@Mark T: Oops. Apologies.