No, of course not. Anyone who can hold a sophisticated thought in their brain realizes that a trade war is bad for the economy and that the trade off for protecting steel jobs is higher prices all consumers have to pay for those products.
I'm not a fan of the "one true faith" mentality which says there can only be one correct stance or view on a topic and everyone else is doomed to burning in hell as infidels / heretics.
I think its fair to say the chinese steel industry is extremely similar to BitMain in the ASIC industry. If Donald Trump proposed raising taxes against BitMain, miners would complain and say it would increase the cost of mining. That would be correct over the short term. There would be higher prices for consumers
initially.
But over the long term, higher taxes against BitMain could have potential positive effects. Higher tariffs on BitMain could introduce greater market competition and decentralize the ASIC market, which could have long term benefits for consumers and miners.
The chinese steel industry is the same. The short term likelihood is tariff and trade wars. Potential long term benefits are the centralized chinese steel industry becoming more decentralized, introducing competition in the market which has overall long term benefits.
I would be glad if anyone who believes there's only one "correct" perspective here could point out flaws in my reasoning.
You're setting up a strawman in trying to paint it as anyone who disagrees with your idea must believe there is "one true faith" or whatever that means. All opinions aren't created equal, and an opinion on economics is only as good as the the policies it supports. In forming those opinions, what should matter most is evidence and sound economic theory, and both strongly come down on the side of tariffs being more destructive to the economy than beneficial. Steel tariffs will benefit the US steel industry at the cost of every industry that uses steel by raising the price of all steel available to them. Tariffs don't make US steel cheaper, it makes all non-US steel more expensive in order to make US steel more competitive by comparison. So first, you have widespread price increases for all industries that use steel and all consumers who buy steel products. Second, you have retaliatory measures by other governments that will target US industries for tariffs, thereby offsetting any benefit to the US steel industry by making US goods overseas even less competitive than they already are. This is not a secret, Canada (our largest trading partner, which is important), Europe and China have already said they will impose retaliatory tariffs. This is going to affect US GDP negatively far more than protecting steel jobs in the US will positively affect GDP. The market knows this will happen, that's why all major indexes around the world dropped upon Trump's announcement. Economists are stunned, because protectionist trade policies was a problem they thought we "solved" a long time ago. The fact that Trump is cavalierly pursuing policies that have outright failed in the past is a pretty big shock to the system. Finally, Bush tried emergency steel tariffs to prop up the US steel industry in 2002, and at the time, the Congressional committee investigating the expected impact of the tariffs reported that they expected 8 jobs to be lost for every steel job protected.
Source:
https://www.gpo.gov/fdsys/pkg/CHRG-107hhrg81372/html/CHRG-107hhrg81372.htm Studies later on the impact found those tariffs resulted in a net loss for the economy by temporarily boosting the US steel industry and ultimately reducing overall GDP and also resulting in a net loss of approximately 200,000 jobs.
Source:
http://onlinelibrary.wiley.com/doi/10.1111/j.1467-9701.2005.00722.x/abstract Source:
http://www.tradepartnership.com/pdf_files/2002jobstudy.pdfAlso, the WTO ruled against the Bush US steel tariffs and imposed a $2 billion sanction if the tariffs were not withdrawn, which the US refused, but ultimately relented when Europe implemented tariffs on a range of US industries in retaliation.
It's government interference in the economy, which is never efficient, never works as intended, and never comes without retaliatory consequences. We have a large body of evidence showing the effects of tariffs and trade wars, and despite all this, some simpleton thinks "trade wars are good and easy to win."
I think there could be a double standard here.
Tariffs are "evil" as they're "government interference". Based on that reasoning tax hikes on sugary beverages, alcohol, tobacco, marijuana or bitcoin are also "government interference" and therefore "evil" are they not?
Yeah, there's no inconsistency here. Government shouldn't be interfering in the economy to produce artificial winners and losers because it's more inefficient than letting the market decide what goods/services the market wants, and it creates crony capitalism where the politically connected elites use the government to advance their own ambitions, which is undemocratic.
Well, they're not and they're not. That's why the world at large has moved towards free trade, because it's more efficient to let the low cost producers produce goods they have the advantage in producing, and have other economies specialize in something else.
Having a steel industry centralized and heavily monopolized by china doesn't necessarily represent the most efficient production method though?
That's like saying BitMain dominating the ASIC industry is the most efficient method of ASIC production?
That costs some jobs, yes, but consumers benefit more and the economy experiences more growth as a result. Protectionism never worked, it spawned shortages, price inefficiencies, and nationalist tendencies that sparked wars. That's why the stock markets dropped all around the world at the announcement that the United States was set to repeat the mistakes of the past. The MAGA munchers are on the march!
Hmm. For some reason I get an impression arguing against introducing competition in the steel industry by raising tariffs is a form of protectionism for china's steel monopoly.
Trump's steel tariffs promote free markets and greater competition by allowing other steel producers to be more competitive in american markets. I don't know if that's a form of protectionism?
(Merited. I know a lot of people disagree with me. You're the only one willing to talk about it. Have to credit you for that.)
I don't see tariffs as promoting free market. By definition, free market means laissez-faire, which means
no interference. Do you think that tariffs are non-interference? It's an intervention. So by definition it can't be free market, and it doesn't make the market more competitive, it just raises all prices to artificially keep in business a high cost producer. The most accurate thing we can call it is protectionist. It may logically follow that making the US steel industry more competitive by making everyone else's steel more expensive
does increase competition, but not because it makes anyone more competitive, it just artificially increases the number of producers. If it was a naturally competitive market, competition would result in cheaper prices, but we actually have the inverse here, which is obviously a perversion. The question you should be asking therefore is if the detriments of such a policy are worth the price. After all, we could have a completely isolationist trade policy, thereby boosting the consumption of US-made goods to 100%, but it would also decimate the economy and greatly reduce the amount of affordable goods available to US consumers because the US cannot produce itself everything the US consumes. Not competing with China on everything isn't necessarily a problem; the US isn't competitive with China in
all sorts of industries due to the fact that the cost of labor is a fraction of what it is in the US. China itself is having problems losing jobs to yet even cheaper labor nations that are yet underdeveloped still. To use your bitmain analogy here, it may be that having Bitmain dominate the ASIC industry
may be the most efficient method of ASIC production. Whoever can produce the cheapest and most efficiently will naturally rise to the top, that's just how free markets work. It may be bad for all other producers of ASICs if they can't produce as efficiently, but banning Bitmain ASICs will artificially raise the price consumers pay for ASICs just to benefit a small number of producers who, if they can't produce efficiently, probably don't deserve to be in business.
In this case, a steel tariff is a tax ultimately paid by consumers through higher prices which benefits the US steel industry, and it comes with the added detriments of slowing economic activity and also of retaliatory tariffs that will further depress US trade and therefore US GDP. And because Trump is an unsophisticated statesman who will see this as a loss, is likely to respond with other (what he considers) "strong" measures that will further have unintended consequences.
I'll merit back because you're promoting good discussion.
