The president appears to view tariffs as the solution to a wide range of foreign policy problems. It isn’t working.
So we’re going to tax Americans until Mexico stops allowing people from Central America to exercise their legal right to seek admission to the United States?
Seems pretty foolproof.
President Trump announced Thursday evening on Twitter, his preferred medium for policymaking, that he plans to impose a new tariff on all imports from Mexico, “until the illegal immigration problem is remedied.”
The tariff would begin at 5 percent on June 10 and gradually rise to 25 percent by October.
Mr. Trump persists in the falsehood that tariffs are paid by America’s trading partners. The truth is that Mexico would no more pay this tariff than it is paying for the construction of a border wall. The evidence is clear: Mr. Trump’s tariffs are taxes being paid by Americans.
This new tax would sit atop Mr. Trump’s tariffs on aluminum and steel imports, and Mr. Trump’s tariffs on Chinese imports, and the bill is adding up. The United States so far has collected about $19 billion in Trump tariffs. A full 25 percent tariff on Mexican goods could add as much as $87 billion a year to that total.
Mexico would most likely respond by imposing retaliatory tariffs, which is especially bad news for the probable targets: American farmers. About two weeks ago Mr. Trump ended a tariff on Mexican aluminum and steel, and Mexico ended a tariff on American farm goods. So much for that false dawn. Farmers may need to resume the search for new markets.
Taxation is always painful, and always the question is whether the benefits outweigh the pain. In this case, Mr. Trump is using a tariff as a cudgel to induce Mexico’s cooperation in keeping immigrants from America’s southern border. While the cost of the tariff would be paid by Americans, the Mexican economy most likely also would suffer a loss of sales to the United States.
Mr. Trump might succeed in pressuring Mexico to take stronger steps on immigration. Tariffs, however, are a very crude tool. Most of the immigrants seeking to cross the southern border are fleeing problems in Central America that are beyond the control of the Mexican government. Moreover, while Mr. Trump tends to refer to all of the immigrants as illegal, many are exercising a legal right to seek asylum.
Past administrations have sought cooperation from Mexico on immigration issues without disrupting economic relations between the two countries. Mr. Trump’s decision to mix the two issues threatens to disrupt both economies because the manufacturing sectors in Mexico and the United States are tightly intertwined. About two-thirds of trade between the countries is between factories owned by the same company, according to Deutsche Bank.
Other American trading partners with whom Mr. Trump is trying to negotiate new trade deals, including Japan and the European Union, presumably are having the same thought.
Last but not least, messing with Mexico weakens the Trump administration’s hand in its dealings with China. Mr. Trump’s tariffs on Chinese goods have persuaded some American companies to relocate production to Mexico from China. Those companies now face a more difficult choice. Mr. Trump and his advisers also may find it more difficult to rally international support for their efforts to persuade China to make changes in its economic policies.
Mr. Trump’s apparent determination to fight with all of America’s trading partners at once makes it harder to make progress on any particular front.
Once again, Mr. Trump is lashing out rather than acting strategically — and Americans will feel the pain.
Economists Quit as Trump Relocates them in effort to install Loyalists
Economists who evaluate the effect of tariffs on small farmers are having their jobs relocated in the hopes that they will quit and the Trump administration can replace them with party localists
Trump’s Fake Fix for a Bad Economic Policy
What is driving the president’s apparent eagerness to impose tariffs is a simple and wrongheaded idea that plays to a large part of his base: A trade war will spur job growth in America. He is trying to use tariffs to give a leg up to American industries against countries that manufacture the same products that we do — whether steel, aluminum or cars — but more efficiently. And who could be against that if it creates more jobs?
.. In reality, however, creating jobs alone does not make for a strong economy. What we really want is to increase production. And to achieve that, we need to allocate labor as efficiently as possible.
.. One way to do that is to ensure that if other countries can make certain goods more efficiently than we can, we trade with them for these items, rather than manufacture them ourselves. The result is cheaper goods, which is to our advantage.
But tariffs do nothing to improve this efficient allocation of labor. They also do not increase or decrease employment. They just shift jobs around, and almost always in a manner that hurts the economy.
.. That is a $12 billion bailout using taxpayer funds for a problem the president himself created.
Trade Fight Threatens Farm Belt Businesses
Many farmers, who depend on shipments overseas for one-fifth of the goods they produce, say they are anxious
Researchers at the University of Illinois and Ohio State University estimate that over four years, a 25% tariff on U.S. soybean imports by Beijing would result in an average 87% decline in income for a midsize Illinois grain farm. The loss would pressure farmland prices, they say, prompting a more than $500,000 decline in the farm’s net worth by 2021.
.. Still, many farmers say they support the Trump administration’s trade goals of modernizing Nafta, shrinking the U.S. trade deficit and combating what they see as unfair trade practices by China. They view the president’s approach as a negotiating tactic and hope it will bear fruit by fall, when farmers will harvest their crops. Some are prepared to sacrifice financially if the U.S. economy benefits in the long run.
.. administration officials have tried to reassure farmers, saying they are considering the use of Depression-era programs, which permit borrowing of as much as $30 billion from the Treasury, as well as other tools to shield farmers from trade-related losses.
.. if farm incomes are significantly squeezed, tensions could emerge between party loyalty and farmers’ wallets. “In a close enough election even a small group can matter,” Mr. Franklin said.
.. Some farmers fear trade battles will jeopardize foreign markets for U.S. agricultural products that took decades to establish.
.. Dairy farmers have been banking on sales abroad to help absorb increasing milk supplies that have pushed down prices. Tariffs imposed on U.S. cheese exports by Mexico, the largest buyer of U.S. dairy products, add insult to injury