Send in the Clowns

“He that knows not that he knows not…..”

        The announcement of steel and aluminum tariffs by POTUS is a poor decision, taken unilaterally against the advice of many who know better, as the man prostitutes himself to 140,000 Americans at the expense of the rest.

       What he didn’t consider, and may well not even comprehend, is that these tariffs will actually undermine American job growth. The reality of our economy is that American companies that manufacture things out of steel and/or aluminum represent a much broader sector of the economy than the raw metal industries Trump is trying to shore up. Because of these tariffs, manufacturers of steel goods will have to pay higher prices for their raw materials.

       Calling this “tariffs” is misleading to a degree, in that while it is a tax on imports, it really is very little different that another government giveaway, farm subsidies. The difference is that with farm subsidies, the prices of domestically produced agricultural products are guaranteed by the government. Of course, this means that we consumers pay more than a market price for many agricultural items, ranging from corn to sugar to milk.  American farm subsidies are egregiously expensive, harvesting around $25 billion a year from taxpayers' pockets. Most of that money, yours and mine, goes to big, rich farmers producing staple commodities such as corn and soy beans in states such as Iowa. Defenders of subsidies assert that the $25 billion annual cost of farm subsidies (a bit less than 1 percent of total federal spending) is too small to bother reforming. Yet one-third of the federal budget — about $1 trillion total — consists of programs that each cost $25 billion or less.

        Tariffs, in that they will make import commodities more expensive, will raise the prices of both steel ad aluminum in a multitude of American industries, including, but not limited to, Beverage, Automotive, Oil and gas, Aerospace, Soups, Dow/Dupont, Aluminum Boat manufacturing, and every single business which must construct anything of steel and/or aluminum. 

       The steel and aluminum producers in America employ about 140,000 workers. The industries which will be hurt by the effects of increased prices for these commodities employ millions. Boeing alone has 140,000, Dow/Dupont 98,000, Auto parts (parts, not entire cars) employs 800,000 and the list goes on. Campbell’s soups employ 18,000 alone and packages their products in steel containers. This pales by comparison to the 2 million plus employed by the brewing industry, which uses aluminum cans. Of course, carbonated sodas use the same packaging medium.

        American-made finished products could also become less competitive if US trading partners impose their own tariffs in retaliation. Several countries, including China, Mexico, and EU members, have already signaled they would raise tariffs for US products in response. As a result, US manufacturers are likely to produce less—and hire less—in the US. A similar policy rolled out by the George W. Bush administration in 2002 resulted in the loss of tens of thousands of jobs in the Rust Belt.

       So why, in the face of all this evidence of how bad an idea this is, would Trump do it. Easy answer? Because he can, and it makes him feel like the schoolyard bully again. Other reasons (not an inclusive list) might be: to divert attention from his other, equally "Stormy" issues, to look like a leader, even when the issues are above him, to appeal to those, like him, who believe that America should, and still can, dictate economic policy to the world.  

       Sadder yet, is that for those true believers and zealots who, for reasons I cannot even imagine, still defend this man, facts and economic concepts centuries old won’t faze them. As I write this, the news has broken that Rex Tillerson has been fired as SecState and found out when the news broke, without the courtesy of a Trump face to face. Send in the clowns…..don’t bother, they’re here.