Monday, March 5, 2018

Maria Bartiromo interviews Wilbur Ross

He's like a professor.

The WSJ writes against Trump's trade tariffs, they will:

* punish American workers
* invite retaliation
* harm U.S. exports
* divide political coalition at home
* anger allies abroad
* undermine tax and regulatory reforms

This is standard analysis recognizable from undergraduate Macro Economics 201. By the textbook we're compelled to agree. Even as the textbook acknowledges market forces such as planned economies with no market-concern for profit that overproduce and dump, attaining loans from their planned economy banks that would not be available in capitalistic countries because of the overproduction and selling below market value. Milton Friedman would say, good, soak them for all the steal and aluminum they choose to subsidize. Let their taxpayers help you buy your steel to the point they wise up.

But that point will not come until your critical industry is already gone. Wilbur makes that clear with his armor example.

So the WSJ list omits

*raise the cost of everything for everybody here and there. 
* best to let the American middle class simply disappear by brunt of non-capitalistic countries overproducing and dumping with market driven concern for profit 
* with the remaining American workers shunted to service industries 
* even as those service jobs are dispersed by global decision makers. 

I like Ross’s correction on WSJ analysis from looking at the impact of the numbers of Americans employed in industries that use steel and aluminum to the impact on the cost of individual products that use steel and aluminum.

Bartiromo changes the subject before Ross can correct each item on the WSJ list. And that's a real loss. I'd have liked to hear him continue his counter examples. My least favorite item is "anger allies abroad." What, by forcing them to acknowledge their existing tariffs and other non-tariff treaty barriers that harm us?

In another video shot at Davos, in concluding, the panel of international spokespersons are asked their recommendation and a woman with an Italian accent suggests not doing things unilaterally. That is, don't be Trump. Yet another international voice saying, let us have a say in your economic decisions. Allow us some control of American economy, we'll control our own side, and your side too.

15 comments:

Rabel said...

The studies referenced show that the steel tariff will raise US steel manufacturing capacity utilization from the current 73% to 80% and improve the long term viability of the industry. The national security benefits are obvious.

Thump understands that the US holds the whip hand in economic relations with the rest of the world and plays it to our advantage.

Winning.

AllenS said...

Anger allies abroad? Allies abroad will acknowledge one thing, and that is America does not have a patsy as POTUS like before. Bigly winning.

edutcher said...

There's debate that Smoot-Hawley caused the Depression (First one, anyway) although the protective tariff caused the Civil War, but most R Presidents have imposed tariffs.

The eminent Mr Surber revisits some history.

Trooper York said...

The EU can do something positive to avoid the tariffs. They can lower their tariffs to that which the US charges. As I understand it the tariff on Cars is 10% on US exports and 3% on US imports. Now they can go down to 3% to match our generous terms. Or our rate goes up.

We should institute a law that no US tariff can be less than that of which a trading partner charges.

I am looking at you Canada and Mexico. Nafta your fucking ass.

Trooper York said...

I would also embargo everything from Germany until their economy collapses. Fuck them.

The Dude said...

I didn't watch the video, but based on the still, it appears that Smoot has aged better than Hawley.

ricpic said...

I'm an economic illiterate but it's indisputable that the American economy grew hugely behind tariff walls in the 19th Century.

bagoh20 said...

Outside of beard scratching academic analysis, this will increase nearly all my company's material costs by 25% which will once again make my Chinese competitors competitive again against us to cost just my small company alone probably a couple dozen jobs. Winning.

We use mostly stainless steel, which virtually nobody makes in the U.S. at all, and they are not going to build a billion dollar steel plant based on a tariff that could disappear before the ground is broken. The only way this is not a disaster is if it doesn't really happen and is just an opening play in the negotiations.

The reason we don't have steel manufacturing is due to labor unions and regulations. Neither of which are addressed by tariffs. Where does the tariff money go after every one of us pays it every day? To the government where it will be wasted. Capital and resources diverted from hard-working striving Americans to lazy, wasteful, corrupt government bureaucracy is a dumb move. It's simply a regressive tax increase on all Americans dressed up like all tax increases as a way for the government to help us. "We're from the government and we're here to help" is no better coming from Trump than anybody else.

It was the government that pushed out the steel industry, and as usual, they are back now to fix their mistake by making another one which always seem to involve us paying more.

If the government wants to artificially increase a domestic industry, do it the way our competitors took it from us: remove barriers, give tax breaks, lower costs, and get unions out of the way. All those things are done with high tech, which is why we lead there.

bagoh20 said...

The negatives affect millions of American workers in virtually every industry, and the benefits are for 150K high paid steel workers, becuase the steel executives had a meeting with the administration.

bagoh20 said...

"American economy grew hugely behind tariff walls in the 19th Century."

In place of income taxes, not on top of them.

Dad Bones said...

Thanks Bagoh, for sharing how that tariff would affect you and possibly the rest of us.

Chip Ahoy said...

That's the thing. It will affect all of us. Bagoh wites as if he alone experiences added cost so is put at disadvantage to his competitors. But his competitors, whoever they are, deal with the same added expense.

When that cost is passed along then the rest of us feel it too.

Ross's examples were steel in automobiles and aluminum in beer cans. So the differences in cost are minimal. Not small manufacturers whose entire production relies on steel.

Trump's economic program is macro. Its affect on Bagoh as described is micro. Not to diminish the pain, these economies being affected by Trump's protectionist decisions are separated by a magnitude of order while connected by economic streams.

The macro situation is like a table of water cups balanced on a single pivot. Remove water from one cup and pour it into another then observe and measure how the table shifts and splashes. But that takes a disinterested mind. It's quite different when you're one of the cups and someone else is controlling the splashing. It feels like picking winners and losers, because it is.

Response. Pay the higher price for subsidized Chinese steel or for American steel, and pass the increased cost along. When questioned about the higher price, the automatic answer is, "Trump."

I'm Full of Soup said...

My brain asks HTF a heavy heavy product like steel can be shipped from overseas and still costs less here than steel made here? I doubt the domestic labor costs [however high they are due to unions] are a significant & decisive determinant re the total costs of a domestic steel mill.

bagoh20 said...

" But his competitors, whoever they are, deal with the same added expense."

Not true, nearly all my competitors are foreign, mostly Chinese. They don't have to pay this, only Americans do. This gives foreign competitors an artificially imposed advantage on material cost on top of the labor cost advantage. This is how we lost all those jobs in the first place, by handicapping ourselves with taxes and regulations. This is a tax on American workers first by handicapping their employers' competitiveness, and then again by making consumers pay an extra tax only on American made products. Imports of things made with foreign steel are unaffected and thus made more competitive against us. The 25% tariff will not cause me to buy American steel, becuase first, it's far more than 25% higher, and second, the type I use is not made here anyway and won't be. This is lazy, unthinking policy designed to help a few connected companies increase their market share by a slight amount. It's only value to all the rest of us is as a bargaining position. The steel industry is highly automated today. Very few jobs, if any, will be added from this.

If the objective is creating jobs here, there are a lot of ways to do that without shooting ourselves in the foot. I hope and assume this will either not take place or be a short term temporary policy. If it's temporary, the lost jobs may come back afterward, maybe, but if it lasts a while, they will be lost forever.

bagoh20 said...

Here is what will happen:

Import steel will go up 25% only to American employers.
Little additional material will be sold by American steel companies, because:
1) Tariff is not enough to eliminate the cost differential.
2) The American steel producer will just raise their prices 25% and sell the same amount with much higher margins. Who wouldn't? You don't need to hire more people or spend money expanding anything.
3) Then even foreign steel can raise their prices too and be just as competitive as before.
4) Nothing changes except the cost to Americans regardless of where the steel comes from. 5) Raising costs to American companies is going to wipe out the benefits of the corporate tax cut for everybody except the steel companies, and companies that don't use much steel or steel products. Who is that?

It will only benefit American and foreign steel companies, the executives there, and stock holders of those companies.

If this is anything but a negotiating tactic, Trump got played by a small group of wealthy people.