Paul Krugman gets this right in his New York Times column:
What economic thinking went into the Trump tariffs announced last week? None at all. In fact, the economists (“economists”?) who currently have his ear seem to regard their job as being to confirm the wisdom of whatever he decides to do. Peter Navarro:
My function, really, as an economist is to try to provide the underlying analytics that confirm his intuition. And his intuition is always right in these matters.
Translation: Navarro sees his role as that of a propagandist, not a source of independent advice.
But the rest of us don’t have to accept that Dear Leader is always right. And in fact, these tariffs are weirdly poorly considered even if all you want to do is create manufacturing jobs, leaving aside all the other ramifications.
Why? Because steel and aluminum aren’t final goods – nobody directly consumes steel. Instead, they’re intermediate goods, basically used as inputs to other U.S. manufacturing sectors. And while tariffs that raise primary metal prices may increase production of those metals, they make the rest of U.S. manufacturing less competitive.
Of course, Krugman plays this role in Democratic administrations, including supporting economic policies that don't make any sense.-Robert Wenzel
"Because steel and aluminum aren’t final goods – nobody directly consumes steel. Instead, they’re intermediate goods, they make the rest of U.S. manufacturing less competitive."
ReplyDeleteThis is the bottom line that few want to emphasize! ITs lip service, it wont impact the large US corps that make products elsewhere using foreign metal and sell to the US for even more than it costs now while the monopolies scream about being beggared by US tariffs for the good of the country.
What the raw goods tariffs really tell us is that the Trump administration is anti competition and anti small business and willing to punish everyone involved because of his stupidity!