Let’s be Honest about Trump and his Trade Policies…

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Let’s be Honest about Trump and his Trade Policies…

 By Kyle McDonough  December 8, 2016 


It’s no secret that Donald Trump was elected president due in large part to his promise to negotiate better trade deals on behalf of the American working class.

The spirit of this kind of campaign promise is appealing to anyone who isn’t a left-wing communist dressed up as a Democrat. After all, those of us who voted for Trump are patriotic Americans who want to see our beloved country thrive. We’re tired of being told that America’s phony problems (systemic racism) are our fault and America’s real problems (abysmal economic growth) are here to stay. Going from a President who actually told all of America “you didn’t build that” to one who, in a thousand ways, said ‘yes we damn well did and we’ll do it again’ is inexplicably gratifying.

Having said that, now that Trump is elected it’s important that we stay intellectually honest and hold him accountable. Hillary Clinton is no longer a threat. Donald Trump is our President-elect. We should be as vigilant as we are optimistic.

On more than one occasion, Trump has floated the idea of imposing large tariffs on steel products entering the United States. The logic is simple enough to follow. American steel companies are able to produce and sell a ton of steel for a specific market price and maintain profitability.  China also produces a ton of steel and ships it to the United States but sells at a lower market price, undercutting American steel companies. How does China manage to set the market price even after adding the cost to ship their product overseas? Subsidies. The Chinese government subsidizes their steel production, driving the cost to produce a ton of steel down, thereby allowing them to sell at a lower price in America.

American steel companies argue that this is an unfair playing field and America should impose a tariff that would level the prices. If China subsidizes their steel production to the tune of 35%, then the American government should impose a 35% tariff on every ton of steel entering the United States. That would level the playing field for American companies to compete with China. Sounds fair, right?

No, it’s not fair.

Reiterating the fact that we’re Trump voters and we want American businesses to thrive, let’s give this idea an honest assessment and avoid the ‘anyone who disagrees with this hates American workers’ crap. Here are a few realities of this trade policy:

The downstream effects of these tariff policies suck.

If we tax a ton of steel 35% via a tariff, that means all of the American companies buying that steel will pay 35% more for their material costs. That is not helping America’s construction sector, their employees, or their customers, something Trump is promising to do. It’s true that artificially raising steel prices is, at least in the short term, good for American steel companies because they’ll be able to sell steel at a much higher price. That’s why they have lobbyists in Washington DC demanding the government protect them from China’s steel subsidies. The immediate effect is noticeable and tangible for them. What is less noticeable but extremely significant are the downstream effects of raising steel costs, something that hits every part of the economy and, eventually, steel companies. After all, higher steel prices are only good if someone is buying it. When the construction sector has to tighten it’s belt, that won’t be good for America steel producers. The bottom line is that free trade will always be the best policy for any economy because the central planners of government can’t impose profitability.

We wouldn’t apply this logic anywhere we’re more familiar with (like gas or healthcare)

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http://constitution.com/lets-honest-trump-trade-policies/

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He cannot unilaterally renegotiate trade deals anyway

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He cannot unilaterally renegotiate trade deals anyway

So?

All he has to do is claim it, and the ignorant masses will drool and worship.