That sounds reasonable, but it's not the way these things work.
As we're already seeing, other countries are not "coming to their sense" - they're retaliating, and it won't be long before the retaliations and escalations start taking their toll. Oher countries have no motivation to "come to their senses" - we're a consumer society, and they are manufacturing societies. That's why we have a trade imbalance. They make the stuff we want because we can't make it here in sufficient quantity or at a reasonable cost to the consumer. You don't correct that by slapping on tariffs willy-nilly as Trump is doing.
A tariff is really just a tax on the consumer - we end up paying more for the products we want, because we can't get them elsewhere. Look ay Harley-Davidson - most Harley owners are Trump supporters, and they're about to be screwed. Although Harleys are "made" here, many of the parts - and almost all of the aftermarket customization parts - are made in China. A 25% tax on steel and aluminum from China is going to increase the cost of a Harley to American consumers. Why not just make those parts elsewhere? That might work, except Trump has slapped tariffs on just about every other country that exports steel and aluminum to the US. So if you want a Harley, you'll have to pay more for it.
And Harley is getting it from both sides, since they're also facing tariffs in Europe and Asia which will make their products more expensive in those markets as well. Their decision to shift European production to Asia and reduce manufacturing capacity here (at a cost of jobs lost) was really a no-brainer from a business perspective. The alternative was going to be to increase the cost of a Harley shipped from here to Europe by about $2200; by making them offshore, they avoid that tariff. And just to add to it, Polaris Corp (which manufactures the "other" American motorcycle, the Indian), just announced that it too will be sending some manufacturing offshore to avoid the tariffs.
Trump may know the real estate business (debatable, based on some of his failed deals), but he doesn't know manufacturing. He also doesn't know trade, or understand what a trade deficit is, or understand how tariffs work. He's ignorant about history, which would show him the effect that protectionist tariffs have had in the past (think Great Depression). He won't listen to his advisors because he thinks he's the smartest guy in the room. What we're looking at is a recipe for disaster. We won't see the effects immediately, but unless he reverses course before then, by September we'll start seeing a drop in the jobs numbers and a rise in unemployment. That won't be the fault of the "liberals" who supposedly want a recession; it will be the result of a failed and poorly thought out trade policy. |
