Who pays for the trade war? We do. -- May 16, 2019 column

By MARSHA MERCER

How or when President Donald Trump’s trade war will end is anyone’s guess. There’s no long-term plan or end game in sight.

But two things are clear: You’ll pay more and Trump will claim he won.

Despite what you’ve heard, China is not paying for the tariffs any more than Mexico is paying for the border wall.  

“We find that the U.S. tariffs were almost completely passed through into U.S. domestic prices, so that the entire incidence of the tariffs fell on domestic consumers and importers,” three economists wrote in a report on the impact last year of Trump’s tariffs. They are Mary Amiti at the Federal Reserve Bank of New York, Stephen Redding at Princeton and David Weinstein at Columbia.

Trump imposed tariffs on nearly $283 billion in imports last year – about 12 percent of total imports – and foreign countries retaliated with tariffs of their own on American goods amounting to $121 billion. 

By the end of the year, tariffs reduced U.S. income by $1.4 billion per month, the economists calculated.

Trump says consumers can buy American to avoid tariffs, but that’s easier said than done in our global economy. 

Besides, “We also find that U.S. producers responded to reduced import competition by raising their prices,” the report said.

A tariff is basically a tax at the border that’s paid by the importer, usually an American firm. Businesses may try to absorb the costs for a while, but eventually they pass them on to the consumer.

Even Trump’s top economics adviser, Larry Kudlow, conceded on “Fox News Sunday” that American consumers and businesses are paying the tariffs.

Trump says the world has been ripping off America too long. He insists tariffs bring back industries, like steel, and create jobs -- but the cost is astounding.

The steel tariffs Trump imposed last year created about 8,700 jobs in the U.S steel industry, according to calculations by the Peterson Institute for International Economics. But the price tag for American consumers and businesses for each job created or saved was more than $900,000.

“Wow!” the report said.

Trump has told allies and advisers the trade war is very popular with his base and will help him win re-election, The Washington Post reported.

“You want to know something? We always win,” Trump said on the White House lawn this week.

Well, let’s hope so. The last time the United States fell hard for tariffs was the 1930s, when tariffs probably worsened the Depression.

But Trump loves tariffs. After trade talks with China fell apart, he hiked tariffs from 10 percent to 25 percent on $200 billion worth of Chinese goods last Friday. China announced retaliatory tariffs of $60 billion on U.S. goods.

Trump wants to impose tariffs on another $300 billion of Chinese products, and he’s eyeing tariffs on autos from Europe and Japan.

Everyone agrees China should stop its aggressively unfair business practices -- like making American companies share technology and trade secrets. The question is whether tariffs are the right tool.

While the economy remains strong, the trade war is hurting the nation’s farmers who rely on overseas markets for soybeans. That’s opened a rift between the president and some Republicans in Congress.

Senate Finance Committee Chairman Chuck Grassley, an Iowa Republican and a lifelong farmer, complained he can’t through to Trump on the need to lift tariffs.

Trump gave farmers a $12 billion bailout last year and is planning another for $15 billion.

“Our great Patriot Farmers will be one of the biggest beneficiaries of what is happening now,” he tweeted.

But Sen. Patrick Toomey, Republican of Pennsylvania, isn’t buying.

“Think about what we’re doing. We’re inviting retaliation that denies our farmers, the most productive farmers on the planet, the opportunity to sell their products overseas and then we say, `Don’t worry, we’ll have taxpayers send you some checks and make it OK,’” Toomey said.  

Consumers can expect to see higher prices of Chinese goods by mid-June, experts say. Items affected include auto parts, bicycles, dog leashes, fish and seafood, furniture and luggage.  

So grab your wallet. You’re likely to suffer collateral damage in the trade war.

©2019 Marsha Mercer. All rights reserved.

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Why 'Buy American' isn't the answer -- Sept. 15, 2011 column

By MARSHA MERCER

I snagged a patriotic, giveaway T-shirt at a Washington Nationals baseball game the other day. Stars and stripes decorated the team’s curly W logo, but the tag inside said “Made in Mexico.”

Visiting Ocracoke, N.C., this summer, I stopped by a National Park Service shop and got a souvenir shirt -- made in India. The flagpole I bought at the neighborhood hardware store so I could fly Old Glory outside my house? It was from China.

Like most people, I’d rather buy American, and I’m willing to pay a little more for the privilege. Reports say if each American spent an additional $64 a year on American-made goods, we could create 200,000 new jobs. That sounds good, if the jobs are decent. I’m inclined to let China keep the crummy ones and for us to create jobs with a future.

Politicians tend to go for the easy fix. Sen. Bernie Sanders, I-Vermont, shopping at a Smithsonian Institution museum shop last year, was distressed to find miniature busts of the Founding Fathers and other trinkets made in China. He pressured the Smithsonian to sell more items made in the USA.

In June, the Museum of American History opened The Price of Freedom shop on the third floor. The shop’s name isn’t a snide comment about higher prices, although American-made coffee mugs cost about $20 each, compared with $10 to $12 for mugs made overseas, a museum spokeswoman told USA Today. “The Price of Freedom” is the name of a nearby exhibit.

In July, the Senate passed a measure requiring that all American flags purchased by the federal government be entirely American-made. Previously, flags with 50 percent foreign content were OK. The House likely will wave the flag bill through this fall.

Such moves are dandy symbolism, and they play well politically. When President Barack Obama hit the road this week to sell his $447 billion package to create jobs, he made restoring the nation’s manufacturing base sound simple.

“We’ve got to start manufacturing. We’ve got to sell more goods around the world that are stamped with three proud words – “Made in America,” the president told a cheering crowd in Columbus, Ohio.

Applause greeted a similar Obama line in Raleigh, N.C., the next day. “We’ve got to start manufacturing and selling more goods around the world stamped with three proud words: “Made in America. Made in North Carolina. Made in Raleigh,” he said.

But a Buy American provision in Obama’s bill has ruffled relations with Canada.
Obama’s American Jobs Act would require that only iron, steel and manufactured goods produced in America be used for public buildings and public works. More than $100 billion could be made available for projects renovating schools and building roads and bridges and other transit projects.

The Buy American rule seems sensible, considering that the bill’s purpose is to create American jobs.

Unacceptable, says Canada’s trade minister. Canada plans to fight, as it did a similar provision in the 2009 economic stimulus act. Canada won an exemption that time.

A nationalist group called the Council of Canadians is calling for a “Buy Canadian” movement to freeze out American firms, the Toronto Sun reported.

In Washington, the unfolding Solyndra scandal comes at the worst possible time for a president trying to pry funding from a reluctant Congress.

The FBI launched a criminal investigation and Congress held hearings about the bankruptcy of Solyndra, a Silicon Valley solar-panel manufacturer that received a $527 million federal loan guarantee as part of the 2009 stimulus package. When it shut down, the company laid off about 1,100 workers.

Congressional Republicans charge that the administration hurried the Solyndra loan guarantee so it could show that the stimulus worked in creating jobs. The administration denies it rushed and insists that the 2009 stimulus package is helping create a viable American solar industry.

Solyndra was the third American solar company to declare bankruptcy in the last few weeks. Corporate executives and federal officials blame China’s aggressive efforts to dominate the solar industry. China reportedly has plowed $30 billion into solar subsidies in the last year and is flooding the market with cheap solar cells.

Too bad the Smithsonian stopped buying those trinkets. China will never give up on that solar thing now.

(c) 2011 Marsha Mercer. All rights reserved.
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