Two articles in the Wall Street Journal (7/17/18) highlight the fatal conceit of Trump’s tariffs:

Tariffs Put a Frown on Pistachio Growers

After President Trump slapped tariffs on steel and aluminum and later escalated by targeting $50 billion in Chinese products, Beijing retaliated. China’s tariffs on U.S. pistachios this year have increased to 45% from 5%. China targeted pistachios to inflict pain in a region where Republicans are politically vulnerable. About 99% of American pistachios are grown in California’s San Joaquin Valley, home of GOP Reps. David Valadao, Jeff Denham and Devin Nunes.

China is using the trade war to influence American elections.  Where is the outrage? Further…

The U.S. was the world’s top pistachio exporter last year (217,559 metric tons), but Iran was not far behind (144,300). No other country exports a significant amount, so Iran is poised to supplant California pistachio farmers in China. It’s worth recalling that Mr. Trump justified his steel and aluminum tariffs in the name of national security, yet they’ve triggered retaliation that is now abetting an enemy.

… and his policy has aided Iran.

Trade wars fail because they are uncontrollable. They are the epitome of the ‘fatal conceit’ of Hayek.

On the WSJ front page, Whirlpool Wanted Washer Tariffs. It Wasn’t Ready for a Trade Showdown.

After the Trump administration announced new tariffs on imported washing machines in January, Marc Bitzer, the chief executive of Whirlpool Corp., celebrated his win over South Korean competitors LG Electronics Inc. and Samsung Electronics Co.

“This is, without any doubt, a positive catalyst for Whirlpool,” he said on an investor conference call.

Nearly six months later, the company’s share price is down 15%.

What happened?

  1.  Higher steel prices pushed up prices on finished goods more than 25%.
  2. Guess what happens when prices of products sharply rise?  Sales fall.  “I will just repair the old machine.”
  3. Samsung and LG are moving production facilities to the US. The same thing happened when we put strong tariffs on cars in the 1970s.  Toyota, Kia, BMW and Mercedes plants popped up all over America.

The trade war is uncontrollable.  The Whirlpool example was far more predictable than the pistachio impact.  Who would have predicted China using it to control elections? Who would have foreseen it could have aided an enemy like Iran?

 

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