The Tariff Issue

Paul Craig Roberts – May 14, 2019

Wherever I look at US policy, foreign or domestic, I see only insanity, ignorance, and incompetence.

Take the issue of tariffs, which is Trump’s mistaken approach to bringing the jobs back home. The tariff “solution” overlooks that offshored US production counts as imports when US firms bring their goods into the US to be marketed.

The Chinese did not steal American jobs by selling below US cost.  The jobs were taken to China by US global corporations, along with the technology and business know-how, for the sole reason of maximizing US corporate profits.  Labor, made as productive as US labor by offshored US capital, technology, and business know-how, could be hired at much less cost in China and elsewhere in Asia due to the enormous excess supply of labor that overhangs Asian labor markets.  The enormous cost savings went directly into US corporate profits, capital gains for shareholders, and bonuses for executives.  Half and perhaps more of the “cheap goods” imported from China are the goods of American firms, such as Apple, Levi, Nike.  They are products of US firms that are made in China for sale in the US.  They are not “cheap Chinese goods.”  Do you think an iPhone is cheap or a MacBookPro is cheap?

The tariffs fall on American goods produced offshore by American firms for sale in America. For example, on May 13 the office of the US Trade Representative (USTR) released a list of “Chinese” products subject to a 25% ad valorem duty.  The list includes cell phones, footwear, textiles.  Do the cell phone imports from China exclude Apple’s iPhone? Do the footwear imports from China exclude Nike’s shoes? Do the textiles exclude Levis?  I have not seen any information that Trump’s tariffs are only for Chinese owned exports to US markets. 

The tariffs will reduce the profits of American overseas production exported to the US and raise prices to US consumers, who have already lost the incomes from the manufacturing jobs that American companies moved abroad.

In other words, tariffs are silly and not a solution.

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