Editor’s Note: Welcome to Point-Counterpoint, where Liberty Nation writers face off in an intellectual debate about issues affecting everyday Americans. This week, Tim Donner faces off against Andrew Moran on the topic of Trump’s Tariffs!
Tim Donner: We must have free trade! That is the plaintiff wail of many or most conservatives and libertarians aghast at the tariffs on steel and aluminum announced in recent days by President Trump. Among them is my colleague Andrew Moran, who took to LN to excoriate the President on this move. Allow me to respond to his lamentations.
To many or most free-market types, you are automatically a protectionist and not a “free trader” if you favor any tariffs on any industries at any time (or oppose NAFTA). It’s almost like the Pavlov’s Dogs-style response of leftists who cry racism any time you criticize someone who happens to be black.
Mr. Moran rightly states that “The U.S. imports four times as much steel as it exports from more than 100 countries.” This leads to a basic question: do you want an American steel industry at all? Or are you fine with the US relying almost strictly on imported steel? Because those are essentially the long-term stakes in play, and the reason – along with, of course, national security – that Trump made the decision to slap tariffs on imported steel. Fact is, there’s a global steel glut, so we can decide to just allow excess supplies to flood the US market, or take action that allows our shrinking steel industry to survive and ultimately thrive to the greatest extent possible.
A country that has ceded manufacturing to foreign nations is one that can not ultimately survive. A country that builds nothing is gambling its future. Services alone are not the basis for a sustainable economy. The President is rightly concerned about this big picture.
Though he concedes that we import four times as much steel as we export, Mr. Moran later claims, “The U.S. steel industry doesn’t need any protection. In fact, it is doing quite well,” citing the corporate earnings and share price of a couple of US steel producers. But the financial health of two individual companies ignores the big picture: the undeniable decline of the once-proud US steel industry over the last 50 years.
If you, like I, have visited any of the many American steel towns which have turned into ghost towns, you will also understand the human toll of mass unemployment: depression, crime, alcoholism, drug addiction, suicide. The US steel industry will never return to the salad days of yore, but is it not incumbent on us to take reasonable steps to allow them to rebuild, work and produce to whatever extent possible?
It is well documented that the Chinese have been “dumping” cheap excess steel into the US industrial economy for many years, undercutting US steel production and diminishing an industry which was once a legendary source of American productivity and pride. But free traders are unconcerned, believing that our growing dependence on foreign steel is perfectly fine, while at the same time decrying our (admittedly diminishing) dependence of foreign oil.
Fact is, China has been dumping so much cheap steel on the US because the Europeans – plus Andrew’s beloved Canada – acted to stop such dumping and unfair trade practices by implementing exactly the type of tariffs Trump now advances. So essentially, Trump’s tariffs will simply level the playing field by enforcing the same barriers against dumping that our friends across the pond and to our north have seen fit to enforce, thus forcing the Chinese to look elsewhere to unload the excess steel they produce. It is akin to the recently passed tax reform which made the business sector more competitive by reducing the famously high US corporate tax rate to a level competitive with the rest of the world.
Andrew Moran: Legendary libertarian writer Lew Rockwell had the best definition of free trade, and this is paraphrasing: an American businessman walks across the Mexican border, purchases 10,000 t-shirts at 50 cents per item, saunters across the U.S. border, and sells them to American consumers at $1 per t-shirt. This is what free trade looks like, not government-managed trade which is what tariffs and trade deals are all about.
Despite President Bush abandoning the steel tariff in 2002, there are more than 100 government levies and restrictions on steel. Though the U.S. has imported a substantial amount of steel, the domestic industry has not only been surviving, it has been thriving. As I noted in the article, the American steel sector has been booming: Nucor generated about $15 billion in sales in 2016, US steel posted $136 million in net earnings in the October-to-December period in 2017, and steel output has risen at least 5%.
There is a misconception that the U.S. does not manufacture anything important or export to foreign nations. This is untrue. These states rank at the top of foreign exports, and what they manufacture is important: Michigan builds automobiles, Kentucky produces trucks, Louisiana exports crude, South Carolina manufactures aerospace technology, and Texas’s trade, particularly with Mexico, is energy-related.
We shouldn’t necessarily want to embrace Bernie Sanders economics: building snowglobes (he was perturbed by the fact that the Washington gift shop on Capitol Hill sold snowglobes and t-shirts made in China). Working in sweatshops is a thing of the past.
When Mr. Donner speaks of ghost towns and lack of jobs, protectionist measures induce that effect. When Bush instituted the steel tariff, between 43,000 and 200,000 industry jobs were lost. When Obama applied the tire tariff, the tire industry shed 5,000 jobs – and other industries lost jobs, too, like the poultry sector, which lost more than 1,000 jobs.
And, when nations apply their own sets of tariffs and barriers, it is done out of retaliation. Why did the domestic chicken industry lose 1,000 jobs and $1.1 billion? Because China retaliated to the tariff.
One more thing: when corporations and industries talk of “leveling the playing field,” it really means pleading for special privileges, like subsidies and tariffs.
Tim Donner: It is always possible to find statistics to reinforce a policy position. Try this one: the US steel industry has shrunk by more than 40% since the 1970’s, from 12 million tons of production to less than seven million. And those are hard numbers, unlike those cited by Mr. Moran, because we have no way of knowing if all the lost industrial jobs to which he refers would still have been lost without the tariffs. It is possible that even more jobs would have been lost had the tariffs not been imposed.
It is true that centralized industrial policy is never beneficial over the long haul. But does that mean we should simply sit back and accept flagrant dumping by an autocratic country like China which has not just cheated on trade but also been engaged in rampant intellectual property theft? Are we to allow ourselves to be a punching bag while Europe and Canada enact measures to protect their native industries? The Chinese have been outsmarting us at every turn, and Trump aims to send the message that those days are over.
Following the logic of free trade absolutists (and notice how they never use the term “fair trade”), we should not utter a peep about communist China using slave labor to build products exported to the US because it will lead to cheap prices for Americans. (Mr. Moran declares, “Working in sweatshops is a thing of the past,” while providing no evidence of such). This preoccupation with potentially dubious green-eye-shade number-crunching completely ignores the long-term human and economic cost of diminishing our own ability to build. Are we to become a nation of buyers rather than makers? And are we to sacrifice any semblance of fair trade at the altar of unfettered “free trade”?
Andrew Moran: There is another statistic that should be pointed out: domestic production of raw steel has remained the same for the last 30-plus years. In 2006, U.S. steel output was 98.2 million metric tons, then it dropped to 80.5 million just after the recession. Since then, production has been between 80 and 86 million metric tons. In other words, domestic production fluctuates the U.S. has been in the top and top three throughout the last decade, and with the state’s concern about Chinese steel dumping, these are good numbers.
How exactly has China cheated on trade? It hasn’t forced American consumers and businesses to buy their steel. Beijing hasn’t sold fraudulent steel. The Chinese yuan has actually appreciated in value in recent years – Trump liked to remark that the People’s Bank of China (PBOC) debased the currency. Besides, even if China is manipulating its currency to sell cheaper goods, then that is a lifeline for cash-strapped businesses and consumers.
Two things about “fair trade”: first, fair trade is just another term for cronyism; the government grants corporations, corporations, unions special privileges. Second, this is like saying we want free, fair, and smart speech. Are we to sacrifice free speech so that fair speech doesn’t hurt someone’s feelings? Free speech sometimes isn’t fair, just like free trade.
When I say “sweat shops are a thing of the past,” I was referring to the U.S. This was prevalent in the 1920s, 1930s, 1940s, and so on. They are not as ubiquitous today.
Also, the U.S. does build. With a talented workforce and the American entrepreneurial spirit, the U.S. constructs computer chips, builds aerospace technology, fracks energy from the ground, and offers state-of-the-art financial services to the rest of the world.
Tariffs are simply taxes on consumers to offer benefits to a favored group.