Wednesday, March 7, 2018

Trader To His Class

Donald Trump finally did it - he angered fellow Republicans.  His tariffs on steel and aluminum - the latter of which his economic adviser Peter Navarro calls "alumumum" - are going into effect despite concerns by congressional Republican leaders about retaliation from Canada and from European countries.  Neither one of these tariffs affect the Chinese, whom Trump says are laughing at us.  They are.  They're laughing at how Trump's not-altogether-thought-out protectionist policies are angering our friends and not even dealing a glancing blow to our enemies.  Like the Chinese.
Trump says he will drop the tariffs if he can renegotiate the North American Free Trade Agreement, or NAFTA, with Canada and Mexico for and get a deal more favorable to the U.S.  Good luck with that.  Right now, Republican members of Congress are trying to figure out how to avert a trade war that Trump is itching for, despite the fact that increased prices on foreign steel and aluminum would make it more expensive for domestic consumer-product manufacturers who use foreign metals in their products. Commerce secretary Wilbur Ross, who supports the tariffs, says the price increase on such products would be negligible.  He used as an example aluminum soda cans.  
Just a cent or two more for a can of soda.  Nothing to be alarmed about . . until you realize how much more a more substantial product will cost with these new tariffs . . . like a car. 
It's misguided policies like these that caused Gary Cohn, Trump's chairman of the Council of Economic Advisers, below, to resign his position, saying that he couldn't support an economy policy that does not support a free-trade policy that benefits all nations. 
This is significant.  Trump relied on Cohn to fashion and implement his pro-corporate, pro-greed economic and tax policies, but Cohn believed these policies could only help everyone if they were pursued in tandem with free trade.
For his part, Trump defended protectionism by citing the dearth of American cars in the European Union.  "How many Chevrolets do you see in Berlin?" he asked rhetorically.  Uh, yeah . . . the reason you don't see any Chevrolets in Berlin is because GM made its money in Germany making and selling Opels, and because it couldn't establish the Chevrolet brand successfully there.  In fact, it couldn't sustain the Opel brand there; that's why GM sold Opel to PSA, or Peugeot, a year ago yesterday.  GM decided that it couldn't make any money in Europe and shifted its attention elsewhere in the world, like . . . China.     
The tariff on imported steel is likely to affect the cars that German automakers Volkswagen, Daimler, and BMW makes in the United States.  Many American-made German cars are exported elsewhere and will likely cost more to make and ship.  The effect on the economy - and on international relations - could be devastating.  And these tariffs could be difficult to undo.  A 1963 tariff of 25 percent on foreign commercial vans imposed by President Johnson shortly after he took office in response to European tariffs on American poultry - the dreaded "chicken tax" - remains in effect, subverted by Nissan by making its commercial vans made in Mexico.  Ford Transit Connect vans have been imported from Turkey, then Spain, in passenger form and converted to commercial use in a plant in Baltimore before the loophole allowing Ford to escape the tax was closed.  Amazingly, Ford has continued to offer Transit Connect vans in commercial form using the same conversion techniques as before, despite the tariff (and passenger versions are available without that pesky 25% tax).  
It may be very difficult to be a VW in America in the near future. >:-(
This tariff may offer a cautionary tale for Democratic progressives, especially the Bernie bros, who want to push protectionist policies.  It may also offer a boost for the presidential hopes of Martin O'Malley, a devotee of Gary Hart, whose "new ideas" in the eighties included developing new industries to supplement if not totally replace aging industries like steel and big-ticket manufacturing.  O'Malley has attempted to redefine progressive values by championing an aspirational society that encourages people to go as far as they can economically rather than staying in place - "Rebuild the American Dream" - and he also advocates a push to develop new industries.  An aspirational form of economic mobility is a vision that Republicans have successfully exploited for forty years.  That was a Democratic message that the Republicans stole from the Democrats back in the late seventies.  It's time the Democrats stole it back. 

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