By Ryan McMaken
Tariffs are nothing more than taxes, which means that protectionists believe high taxes create prosperity. This is an absurd claim.
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50 sats \ 6 replies \ @grayruby 19 Apr
Agree but I will play the contrarian statist here. While most tariffs are unnecessary sometimes they are needed to prevent bad actors from crushing vital industry within a country. As we saw with the Chinese dumping steel all over the world and almost destroying the American steel industry. An argument could be made that a stable domestic steel industry is necessary to preserve national security which is the primary (some would argue the only reasonable) function of federal government.
I broadly agree with libertarian principles but also recognize some people don't play by the rules so we may need to bend our principles. If the Kansas City chiefs OLine are allowed to hold on every play maybe our defensive backs need to start holding too.
That's my devils advocate position.
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110 sats \ 5 replies \ @Undisciplined OP 19 Apr
For the sake of argument, I'll grant your premise about there being such a thing as "vital domestic industries".
The particular tool of setting tariffs on the import for protectionist purposes is less efficient than other policy options. One simple option is just to require the government to procure its steel domestically. That would put a floor under the domestic industry.
The option I'd consider ideal is to just abolish taxes on the domestic industry.
A third option would be to just buy up a strategic reserve of all this cheap steel, until the Chinese decide they don't want to subsidize everyone's national defense anymore.
Tariffs are chosen because the state wants the revenue, not because it's the best way to protect an industry.
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40 sats \ 4 replies \ @grayruby 19 Apr
All good points. I think buy up all the steel at a discount as a national reserve would be a great way to get back at the Chinese for not playing fair but wouldn't necessarily help the domestic steel industry so it would solve the problem in the short term but not necessarily the long term.
I like the idea of also in turn incentivizing your own domestic industry maybe coupled with caps on what can be bought foreign and domestically.
No solution is optimal because any time the government gets involved things are going to get screwed up but we are working under the premise that other players are not honest actors and will stop at nothing to secure victory. Even if it means holding on every play.
I do think there are a few vital domestic industries. Food, energy, building materials, maybe semiconductors now. It is about resilience and preparing for the worst case scenario where you don't rely on the kindness of strangers. If we are going to have nation states part of securing a nation should be securing the ability for the populous to sustain its living standards even if the nation was cut off from the rest of the world.
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100 sats \ 2 replies \ @Bell_curve 19 Apr
How many steel producers in North America?
Is US steel a monopoly?
I know since 1970 American steel producers have used an outdated and more expensive method for making steel.
It’s not just China. It used to be steel from Indonesia, South Korea and Japan.
Recently Nippon Steel offered to buy US steel for 14 billion. The second highest offer was 7.5 billion. Should shareholders take the lower offer in the name of patriotism?
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50 sats \ 1 reply \ @grayruby 19 Apr
Fair points.
US Steel is not a monopoly but I think it is fair to call the Steel market an oligopoly and no shareholders should not take a lower offer out of patriotism.
I completely understand the dynamics of why the market doesn't want domestic steel but I am playing devil's advocate on the validity of tariffs in certain industries.
My argument is if shit hits the fan and you can no longer rely on economic partnerships with your adversaries or the kindness of your friends you probably want to have some semblance of domestic industry for critical resources, materials, energy, food etc.
I am not saying tariffs are the only tool or even the best tool for the job just playing devil's advocate.
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100 sats \ 0 replies \ @Bell_curve 20 Apr
I get it
The American steel industry has used the national security argument since 1960 to justify tariffs.
But the last 60 years have demonstrated how they have fallen behind their foreign competitors.
The other problem is their labor costs are comparatively high because of the steel workers union.
Does national security depend on union workers? Of course not
In the case of Nippon Steel buying US Steel, we get the best of both worlds. Foreign investment and expertise, the company is still on American soil
I agree we are too dependent on Taiwan and South Korea for chips and semiconductors. Also certain generic drugs are exclusively imported from Taiwan, India and China. That is madness.
We have created a very fragile system. Globalization is fragile.
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60 sats \ 0 replies \ @Undisciplined OP 19 Apr
I do think this is something that deserves more attention than it's gotten. The past few years have really demonstrated how fragile the supply chain can be and that it doesn't adjust as smoothly as many of us would have expected.
The buying up subsidized stuff and storing it strategy has been used several times historically. Charles Dow used this strategy to defeat a concerted effort from the European chemical companies to undercut his prices.
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