Saturday, November 23, 2024
Tariffs, and protectionism more broadly, are always promoted as advancing the interests of US companies and US jobs. These are stated as axiomatic, as obviously true, that whatever benefits might obtain from more open markets always accrue to foreign actors and always, always hurt Americans.
This is nonsense.
Tariffs raise prices for consumers, reduce demand, both in the aggregate and for the protected products, and hurt domestic producers and their employees. You cannot support domestic production by raising costs for domestic consumers.
But there is another negative aspect of tariffs: the target country always, always, retaliates. Always.
When President Trump imposed 30% tariffs on imports of Chinese solar panels in 2018, China imposed devastating tariffs on American agricultural products.
Since that time, since 2018, US agricultural exports to China have plummeted by over $25 billion. Soybean exports dropped by $12.2 billion which resulted in a 15% reduction in planted acreage. Until 2018, China was the largest foreign market for US agricultural production and represented a lifeline for US farmers.
Chinese importers and consumers have, by now, found alternative sources, and those customers may be difficult or impossible to win back, in the unlikely event that reason should return to US trade policy.
The losses to US farmers due to this wildly counterproductive trade war have exceeded the size of the US solar panel industry and that does not include the billions in subsidies the federal government has been forced to pay out to US farmers.
This is crazy. And it is always the outcome of protectionist policies.
In the early part of the 20th century, the US was home to one of the largest commercial shipbuilding industries on the planet. Not the largest, by any means, but a strong, growing industry with thousands upon thousands of employees.
Deciding that the shipbuilders needed protection from foreign competition, Congress passed the Jones Act. Now, 100 years later, there is no domestic shipbuilding industry, to speak of, in the United States. Again, any first-year economics student could have predicted it. Many did.
Free trade, opening the US market to foreign goods, is a profoundly selfish policy. It is always in the best interest of US consumers, workers, companies and investors. Oh, and US tax collectors, as well.
Stocks opened higher, rallied throughout the morning but sold off into the close to finish mixed. All of it on above average volume.
Interest rates were higher on some stronger than expected economic news.
The economic and earnings numbers have all been good. Although apparently NVIDIA’s blowout earnings weren’t quite good enough. The stock was off over 5% for the day on Thursday. There’s was some scuttlebutt about whether or not the chip giant can keep up the pace, and that’s a legitimate concern but we see the selling as more of a buy the rumor, sell the news play.
Initial and continuing jobless claims came in below expectations. Good news, there. GDP for the second quarter came in at a better than expected 3% annual rate. Good news there. And the first look at the PCE price index came in lower than expected. Likewise, good news. We’ll get the rest of the Personal Consumption Expenditures Index later this morning.
Pending homes sales came in well below expectations, not good news there, but with rate cuts on the way, we expected the construction sector to gain some steam in the near term.
We’ll keep an eye on all of it, all you’ve got to do is keep it right here on the Buzz.
