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Monday, March 26, 2018

Tariffs work. Today's proof

I love how people who told me in December that cutting taxes would destroy the economy, turned around and told me imposing taxes on imported goods would destroy the economy by starting a trade war.

I have news for them: we have been in a trade war since we landed at Plymouth Rock.

CNN ran a column by Jeffrey Sachs, an economics professor at Columbia University, "Trump's tariff move shows he flunked economics."

Actually, economics flunked reality.

Trump imposed a 10% tariff on imported aluminum, and 25% on steel imports. This quickly opened a few steel plants.

But as I wrote on March 8, "Tariffs are a bargaining chip."

They give him leverage. He extended a temporary exemption to Canada and Mexico, which gives him an edge in the NAFTA re-negotiations.

South Korea, meanwhile, agreed to limit exports of steel in exchange for a permanent exemption.

"The U.S. and South Korea reached an agreement on revising their six-year-old bilateral trade deal and the U.S. said it wouldn’t impose President Donald Trump’s tariffs on steel imports from its ally in Asia," Bloomberg News reported.

"The two countries reached agreement in principle on the trade deal known as Korus, South Korea’s trade ministry said in a statement on Monday. While Korea avoids the steel tariff, shipments of the metal to the U.S. will be limited to a quota of about 2.7 million tons a year, according to the statement."

The art of the deal is you have to have something the other guy wants. A steel limit is better than slapping a limit on car imports.

"Korea’s trade surplus with the U.S. was about $18 billion last year, down from $23 billion in 2016, according to the Korea International Trade Association. Cars accounted for more than 70 percent of the value of the surplus," the report said.

Kia and Hyundai make good cars, by the way.

"On cars, which is an area of particular interest for the Trump administration, the U.S. will maintain tariffs on Korea’s exports of pick-up trucks until 2041, from the previously agreed 2021. Korea will ease some of its safety and environmental regulations on imported US. cars, the statement shows," Bloomberg reported.

For a guy who flunked economics, President Trump sure seems good at cutting deals.

8 comments:

  1. The difference between Trump and just about any c-y-a politician is that Trump has the guts to impose those tariffs. It's not an idle threat when he says it, and the other countries know it.

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  2. Another difference is that PDJT isn't bought.

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  3. Libertarians quote Frederic Bastiat saying that if goods don't cross borders, soldiers will, and conclude that anything less than totally free trade is suicidal. The globalists know that this is an unrealistic exaggeration, but use the logic to denigrate realists like Trump, as evidenced by the howling lie of an article by Jeffrey Sucks.

    The fact is that tarriffs don't cause goods to cease to cross borders, they merely alter the circumstances. And they have never ceased to have been used, either, so talking about them as if they are some evil innovation by some kind of madman president amounts to libelous propaganda which the perpetrators should not be surprised to understand that some of us would see justifiably silenced.

    Seeing as how people could actually lose their jobs and their lives because evil individuals like Jeffrey Sucks choose to lie and fiddle with policy via the press, we should start regulating the press and registering anyone who wants to explain left wing policy recommendations, subject to the approval of us on the right.

    Yeah. That sounds stupid and crazy. But that's the world the other side is hoping for, and almost has! Only all going their way. The universities amount to the registration system for journalism, and they filter everything we hear. And it is all lies.

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  4. The federal government was set up to be funded by tariffs which worked extremely well for 150 years. Fed gov't stayed small with few career politicians.

    US went from a backwater to one of the most prosperous, standing toe to toe with the most powerful countries on earth

    Then came the amendment permitting direct taxation of the citizens - which the founding fathers adamantly opposed - and the control and corruption in government as a result is killing us.

    Wouldn't it be wonderful tax cuts, smaller government and tariffs result in a repeal of the income tax and a return to freedom and prosperity?

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  5. Sachs must have studied under Paul Krugman.
    As for me, I would rather follow the advice of Wilbur Ross and Steve Mnuchin - two highly successful business men who have done it, rather than theorists who think it.

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  6. Economic theory is bound by the presumption of ceteris paribus (all other things being equal). That is, assuming everything else remains the same, doing X will produce Y. The problem is, ceteris paribus is a fallacy: things never remain the same. Maybe things work a certain way under typical politicians, but the president isn't a typical politician: he's a guy who's spent his life making deals, and if a deal goes sideways, he learns from it and moves on. His knowledge of economics comes from living them, rather than learning them from a textbook. You might say he's rewriting the textbook.

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  7. Don- this post is featured by Doug Ross @ Journal; congrats!

    http://directorblue.blogspot.com/

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