The figure roughly corresponds to the amount of EU imports of autos and parts. The document, which the FT did not post or link to, warned of “likely” countermeasures to “a significant volume of trade”, as much as $294 billion accounting for 19% of US goods exports in 2017. The measures could apply “across sectors of the US economy.”
Accompanying the article is a silly FT Editorial video saying the world should "push back" with retaliations.
Here is the most laughable statement: "It is especially key for the EU to not let issues like immigration divide it on its commitment to free trade".
Excuse me for asking, but what commitment to free trade is that?
- The EU's agricultural tariffs are among the worst in the world.
- The EU wants to break up US technology giants like Google and Microsoft.
- Despite pusing for clean energy, the EU has massive tariffs on solar panels from China.
- Pushing back shows a complete lack of understanding regarding the benefits of free trade.
- One look at the Brexit negotiations should be enough to convince anyone the EU wants nothing to do with free trade.
Tax on Consumers
A good way to view tariffs is "a tax on consumers".
An automotive trade group said on Tuesday it would tell the Trump administration that a U.S. threat to impose a tariff of up to 25 percent on imported passenger vehicles under national security grounds would cost American consumers $45 billion annually, or $5,800 per vehicle.
The Alliance of Automobile Manufacturers, a group representing General Motors, Toyota, Volkswagen, and other major automakers, will file written comments with the U.S. Commerce Department later this week, spokeswoman Gloria Bergquist said.
"Nationwide, this tariff would hit American consumers with a tax of nearly $45 billion, based on 2017 auto sales. This would largely cancel out the benefits of the tax cuts," Bergquist said, previewing the comments. Consumers would also face higher costs of imported auto parts when buying vehicles from both U.S. and foreign automakers, she said.
The Council on Foreign relations reports Trump Steel Tariffs Could Kill Up to 40,000 Auto Jobs, Equal to Nearly One-Third of Steel Workforce.
That report was on March 8, when tariffs were at $50 billion. We are now talking $300-5000 billion.
Impact of Tariffs
The Tax Foundation has an interesting article on the Impact of Trade and Tariffs on the United States.
Academic studies have quantified the costs of tariffs and shown that tariffs often fail to achieve their objectives. A comprehensive study of tariffs in place in 1990 found that the annual consumer costs per American job “saved” range from $100,000 to over $1 million, with an average of $170,000. More recently, a study analyzing the 2002 steel tariffs imposed by the George W. Bush administration found that the first year the tariffs were in effect, more American workers lost their jobs due to higher steel prices (200,000) than the total number employed by the steel industry itself at the time (187,500).
These results aren’t unique to the 2002 steel tariffs. A Congressional Budget Office report from 1986 reviewed the effects of protectionist policies covering textiles and apparel, steel, footwear, and automobiles. The policies did effectively increase costs, which resulted in slightly higher profits for the firms. However, the report finds, “In none of the cases studied was protection sufficient to revitalize the affected industry.”
Tariffs may "save" jobs in one industry but at a greater cost in jobs elsewhere. On average, tariffs cots jobs at huge expense.
Every newspaper and ad print company in the the country was impacted by tariffs on Canadian paper. The Tampa Bay Times alone is laying off 50 people as a direct consequence of the tariffs. The tariffs add $3 million to that newspaper's costs.
Multiply similar numbers across the entire country. I do not have a total. But I do have a total on the number of people employed by NORPAC, a company that makes 50% of the uncoated groundwood paper produced in the U.S.
NORPAC employs 400. Since NORPAC makes 50% of such paper, it's a fair guess the total number of people employed in the industry is 800. Not all of those jobs would go away, after all NORPAC was in business before the tariffs were imposed.
At a cost of untold millions of dollars ($3 million at the Tampa Bay Times alone), Trump "saved" 400 or so paper producing jobs, at a cost of tens of millions of dollars and a loss of hundreds, if not thousands of newspaper and ad printing jobs.
This we call "winning".
Once again, Trump proves how clueless he is. The Financial Times, with its "push back" call supporting $300 billion in retaliations is also foolish. Citing the EU's commitment to free trade is a joke.
There is only one policy that makes any sense: No Matter What Any Other Country Does, the Correct Action is to Reduce Tariffs.
Mike "Mish" Shedlock