Tuesday, April 25, 2017

IT BEGINS: Trump Launches His Asinine Protectionist Trade Policy With Some Mega Tariffs

The Trump administration, led by the economically illiterate Donald Trump, is about to announce its first tariffs, which are likely to be the first of many, but these tariffs are whoppers.

U.S. Commerce Secretary Wilbur Ross said on Monday his agency will impose new anti-subsidy tariffs averaging 20 percent on Canadian softwood lumber imports.

Speaking to Reuters by phone a day ahead of the expected announcement, Ross said that the duties would affect $5 billion worth of softwood lumber imports from Canada.

"It's about 31.5 percent of the total U.S. market, so it's a pretty big deal in terms of the Canadian relationship," he said.

A Commerce Department fact sheet on the pending announcement seen by Reuters shows that
West Fraser Mills will pay the highest duties at 24.12 percent, followed by Canfor Corp at 20.26 percent.

Resolute FP Canada Ltd will pay a 12.82 percent duty, while Tolko Marketing and Sales and Tolko Industries will pay a 19.50 percent duty and J.D. Irving Ltd, will pay 3.02 percent.

All other Canadian producers face a 19.88 percent duty, according to the document.

The tariffs will also be retroactive!

The preliminary determination directs U.S. Customs and Border Protection to require cash deposits for the duties on all new imports as well as softwood products imported over the past 90 days.

To remain in effect, however, the duties need to be finalized by Commerce and then confirmed by the U.S. International Trade Commission after an investigation that includes testimony from both sides.

Softwood comes from gymnosperm trees, usually evergreen conifers, like pine or spruce.

According to Diffen, about 80% of all timber comes from softwood. Softwoods have a wide range of applications and are found in building components (e.g., windows, doors), furniture, medium-density fiberboard (MDF), paper, Christmas trees, and much more.

As Don Boudreaux has explained, a country that is subsidizing an industry is on a daily basis bazookaing its own people. To respond to this by instituting tariffs on Americans, so that they can't gain the benefit of the lower subsidized price, is to bazooka the American people in response.

How this will all play out for the consumer is complex. It likely to result to some degree in higher prices for softwood coming from Canada. It also likely to result in less softwood being imported from Canada into the United States, which will put upward price pressure on American produced softwood.

The crony US limber association is giddy and wants more, "We are pleased with this initial outcome and are looking forward to the (next, anti-dumping) duties expected to be announced June 23,'' said Zoltan van Heyningen of the U.S. Lumber Coalition.



  1. What is the Austrian perspective about the domestic companies that are forced out of business by competing against international companies that are subsidized by their own governments? I understand that the US consumer benefits with lower prices, but if this is done on a wide enough scale, wouldn't the resulting unemployment be a problem?

    1. I am so touched by your sudden concern for companies "forced" our of business thanks to the generosity of foreign governments who bilk their own. So touched.

      Are you going to be just as concerned for the poor consumer when the government, out of the same gawd-damned 'concern', bilk the consumers by imposing "compensatory" tariffs on goods the consumer buys?

      And was the unemployment derived from the end of buggy-whip industries 'a problem'? If not, then why would it be 'a problem' in your scenario?

    2. I mean, any tax subsidy is bad, but to then also punish domestic consumers of the product with higher prices via tariff is just adding injury to injury.

    3. @Torres, there is a difference between a company competing against another which has been subsidized by a foreign govt and a company going out of business because its product is at end of life.

    4. @PH They're similar in the sense that trying to prop up the resulting loser industries with tariffs is a fool's errand.

    5. Re: PH,
      --- @Torres, there is a difference between a company competing against another which has been subsidized by a foreign govt and a company going out of business because its product is at end of life.---

      In your mind, you think there's a difference. In the real world, the consumers don't care about your problems.

      Besides the fact that you prefer to ignore consumer's sovereignty, you have a very warped idea about competition in the market. The Market doesn't care about your particular problems and it certainly doesn't care about "fair competition". Your definition of it is not only incomplete but laden with false morality. If a company goes out of business because a foreign government subsidizes local businesses doing the same thing, that may be bad for the business owner and his ego but that doesn't mean all the resources now wasted on churning expensive things cannot be used by other entrepreneurs to make something else, including the labor. You have a very narrow view of economic reality, and a very moralistic view at that, which is why I reiterate what I told you: I find your preoccupation with "fairness" to be very sweet. Not smart, but sweet.

  2. @Torres. It was a legitimate question. If you're too stupid to answer it then keep you cock holster shut.

    1. Dont mind these other perceived bright bulbs Paul. No one does the due diligence to weigh the impact of cost of production, windfalls in lower tax burdens or reduction in regulatory cost of doing business to assess any "real" status in subsidy comparing an importer to a native company selling within its borders.

      Its all so arbitrarily set as percentage that they can tell you it means whatever they say it means. Its not likely an oligarchy is going to show you the math. Pleaaaaseee (eyeroll)

    2. Paul, the answer is that the purpose of economic activity is to satisfy consumer preferences, not to create jobs. To appreciate this, consider a thought experiment.

      Imagine a world in which all goods came down from heaven -- or all foreign governments subsidized a complete range of goods down to zero price, for US consumers to import -- such that all US companies went bankrupt and all jobs were eliminated in the US. Yet the unemployed US consumers would be able to "acquire" all the goods they need for nothing. They would have all preferences satisfied and could pursue lots of leisure activities.

      Now imagine the inverse, where everyone in the US had a job folding bits of paper into smaller shapes (and no goods could be imported); everyone would be employed, but no consumer preferences would be satisfied (OK, except for the preferences of origami freaks).

      In which world would you rather live?

      We only work to exchange our labor services for goods to satisfy our preferences; if a foreign government reduces the cost of this exercise, so that we can work less, great news!

    3. Re: Paul Hansen,

      --- It was a legitimate question. - ---

      And I gave it the legitimate answer it so deserved. No more, no less.

      --- If you're too s...d to answer it then keep you c..k holster shut.---

      Not giving you an answer that validates your extremely narrow view of economic activity is not evidence of stupidity, Paul. You are the one who is defining market competition too narrowly, as if you're describing a beauty pageant. But the Market is, instead, the result of billions of decisions made by free individuals. It is us, the individuals, who decide which business survives, not governments. If a foreign government wants to bilk the citizens to prop up a few businesses, then too bad for those citizens, but that does not translate to punishing the citizens of THIS country for THEIR purchasing decisions.