Even When He's Right, He's Wrong

       Walter Williams, the Black apologist heir - apparent to Dr Thomas Sowell,   actually got one right in an op-ed of February 23, stating that  protective tariffs are harmful to the vast majority of American consumers. You remember, those extra charges on imports Mr. Trump insists will bring jobs back to America?  

        To understand why tariffs are inflationary, consider the 2009 Obama tariff on cheap Chinese tires. The International Trade Commission had already determined that Chinese tire imports were disrupting the $1.7 billion market and recommended that the president impose the new tariffs. Members of the commission, an independent government agency, voted 4-2 on June 29 to recommend that President Obama impose tariffs on Chinese tires for three years.

        Analysis  showed that  adding an artificial "add on" cost to these cheap imports may have temporarily "saved" about 1200 tire industry US jobs. Economically, no tariff exists in a vacuum, however;  the tariff also forced consumers to spend $1.1 billion more on tires than they otherwise would have — or roughly $900,000 per U.S. tire industry job created.  And this is where Williams runs into the wall, because he then slams Obama as if there were no real reason for the tariff. In the case of tires, however, there is a more compelling reason - they were lousy tires! More on that later.

        Even so, what is valid, and speaks to Trump's  ignorance  (See Forbes and National Review, two very conservative sources for more!) is that retaliatory tariffs imposed by the Chinese further hurt our economy. In early 2010, China’s Ministry of Commerce imposed tariffs ranging from 50.3 to 105.4 percent on American poultry imports, which reduced exports by $1 billion as U.S. poultry firms experienced a 90 percent collapse in their exports of chicken parts to China.  

        In truth, it's obvious why the Chinese can make tires cheaper than the US; the Bureau of Labor Statistics says the average American employer has to pay about $35 per hour in salary and benefits to hire a worker on a production line. My analysis of the reasons for the huge cost of "benefits," which is  code for healthcare  insurance,  is another story.  A Chinese factory pays only about $1.36 per hour for the same work, and even this is not a free market wage, but is regulated by the government.

        In response, many companies (like Ivanka Trump and her father) have moved jobs to China to take advantage of the lower wages. Consequently, Chinese products tend to be cheaper to buy all over the world. In the case of tires, however, there is a more compelling reason, stated earlier - they were inferior  tires!

        Here's what Consumer reports had to say: "... if value is a priority, consider that the "best Chinese tire, Pegasus, cost about half as much as a  Michelin LTX M/S2. But  the Michelin will last  three times longer. Factor in the cost of buying two additional sets of tires, plus mounting and balancing, and you could save hundreds of dollars, not to mention get a better all-weather performing tire, if you choose the Michelin. Certainly if you are on tight budget,  buying a cheap tire is better than riding on worn-out tires. But as our tests show, buying bargain-priced tires such as these Chinese models is a bad  choice for the long haul." Even recapped decent quality tires would surpass the Chinese . Consumer reports rated 20 similar purpose tires, three of them Chinese. Those three placed 18,19 and 20th in the testing. in short - a bad product. Reading the entire consumer reports analysis reveals, furthermore,  that these Chinese tires performed at their worst under those road conditions which are the most demanding from a safety standpoint.

        If the Obama tariff had been on all foreign import tires, Williams would have had a case in point, but it wasn't. In fact all other routinely sold import tires are tariff free, and that includes those from India, Italy, Japan, Korea, Germany, etc.

        The bitter truth, however, and best indicator of  either Trump's ignorance or avarice (probably both) is that without fail, ever since Adam Smith, who I'm sure Trump cannot identify, tariffs have lined the pockets of the few at the expense of the many. While protectionism can be beneficial to sectors of the manufacturing economy, the economic reality is, that for those who can least afford it, the tube top tugboats in stretch yoga pants navigating the aisles of Walmart, four year old toddler with pacifier in tow, the cost of routine purchases will rise, fueled by the greed of companies who simply add the tariff cost to their own and blame someone else. Trump and his ilk will see no diminution of profit  in a tariff environment but we as consumers certainly will. 

       Essentially every economic publication in America, right or left, has weighed in with a similar opinion. I have rarely seen unanimity such as there is on this topic. Now it Trump were only literate or concerned!