Sunday, January 08, 2017

Implemented broadly, tariffs could prove catastrophic to the US economy


Daniel J. Ikenson has an article on Cato and in “The Hil”, “Trump’s import taxes could devastate US economy”, here.  The trade deficit, he says, is a myth.  Correct.

A flat tariff would seriously erode the balance sheets of many US companies that import many machine parts.  It would amount to a 10% consumer VAT.  It would decrease jobs as a whole in the economy while possibly saving the jobs in a few politically favored companies or industries in Trump’s electoral vote base.

One item of concern would be smart phones, laptop computers, cameras, and many other tech gadgets.

On the other hand, it’s legitimate to expect Americans to avoid products produced with “slave” conditions and dorm workers in other countries.


There is one positive point in Trump’s desire to increase manufacturing at home:  national security.

 There are some items, especially power grid components (like transformers) where reliance on overseas suppliers is dangerous and could invite attacks.  I have tweeted such to “RealDonaldTrump”.  Power grid security also would be improved by constructing more small stations, kept underground, some of them run by fission, or by the most modern natural gas technologies, and will be much cleaner.  This idea has been proposed by Taylor Wilson, and Peter Thiel (a Trump supporter), and Pickens.  This would add manufacturing jobs, some of them of a nature that auto workers or other workers experienced in manufacturing could fill them,  in somewhat rural or smaller-city areas of the country (Shenandoah Valley, Piedmont, upper South, some of the Great Lakes) that supported Trump.  (There are some small transformer manufacturers in Virginia mountain areas now, for example.)  This would not be a zero sum game and eventually consumers could benefit.  It’s interesting that China has a terrible pollution problem because of over-reliance on coal plants.

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