|Trump Doesn't Understand How Tariffs Work, Brags About Making Up Trade Stats|
Eric Boehm|Mar. 15, 2018 11:15 am
AdMedia/NewscomIn a speech to Republican donors on Wednesday, President Donald Trump bragged about making up fake statistics during a meeting with the Canadian prime minister and argued that tariffs on imported steel would stimulate domestic car manufacturing despite mounting evidence that the exact opposite will happen.
Trump's comments, reported Thursday by the Washington Post, which says it received a recording of the address, suggest a disregard for facts and a level of economic illiteracy that is remarkable even by the president's own standards. The Post described the 30-minute speech as a "blistering attack against major U.S. allies and global economies."
In one part of the speech, Trump reportedly claimed that Japan used a bizarre gimmick to prevent American cars from being imported there. From the Post:
"It's the bowling ball test. They take a bowling ball from 20 feet up in the air and drop it on the hood of the car," Trump said of Japan. "If the hood dents, the car doesn't qualify. It's horrible," he said. It was unclear what he was talking about.
Trump said he didn't even want Japan to pay the tariffs but to build more automobiles in the United States, adding that Japan would do so if tariffs were imposed.
As crazy as the so-called "bowling ball test" is, what follows is actually more insane. Trump seems to be suggesting that tariffs on steel could make Japanese car companies manufacture more cars in the United States, but the 25 percent tariffs he signed last week will make it more expensive to build cars in the United States. That's true for both domestic and foreign automakers.
The tariffs only apply to raw and unprocessed steel—in other words, they do not apply to imported items made from steel, like cars. Instead of encouraging more automobile manufacturing in the United States, Trump's tariffs create incentives for cars (and anything else made with steel) to be built elsewhere and imported, tariff-free, here.
Toyota, a Japanese company that operates six manufacturing plants across the southern United States, has warned that Trump's steel tariffs will jeopardize American workers' jobs at those facilities.
The president's remarks, as reported by the Post, suggest that he is either completely ignorant of how tariffs work, or that he does not care about the potential economic damage they could do.
Other comments made by Trump during Wednesday's speech suggest the former.
Trump said that in a meeting with Canadian Prime Minister Justin Trudeau, he rebutted the claim that Canada has a trade surplus with the United States. Even after being told by one of aides that it was true, Trump maintained that "we lose $17 billion a year" when energy and timber are included in the calculation.
Trump made a similar claim on Twitter this morning.
We do have a Trade Deficit with Canada, as we do with almost all countries (some of them massive). P.M. Justin Trudeau of Canada, a very good guy, doesn't like saying that Canada has a Surplus vs. the U.S.(negotiating), but they do...they almost all do...and that's how I know!
— Donald J. Trump (@realDonaldTrump) March 15, 2018
He's wrong. The United States has a trade surplus with Canada, according to the Office of the United States Trade Representative.
This sort of willful ignorance about the importance of trade, the distorting effects of tariffs, and basic economic facts might be humorous if Trump didn't have the power to do such significant damage with the stroke of a pen. He was able to impose the steel tariff (and a similar one on aluminum) without congressional approval by claiming the maneuver was necessary for national security reasons. He has repeatedly threatened to pull the United States out of NAFTA and to tear up a trade deal with South Korea. According to the Post, Trump threatened to pull American troops out of various allied nations if he didn't get what he wanted on trade.
Bringing our troops home sounds like a good idea, of course, but using them as leverage in a trade war after nearly two decades of actual war is obscene.
Likewise, what Trump wants on trade makes no sense. He wants tariffs, but also wants more cars manufactured in the United States. He wants to renegotiate trade deals between America and its top trading partners, but then brags about making up statistics during a meeting with a trusted foreign leader. How is any of that supposed to lead to better deals?
Some of Trump's defenders have argued that the tariffs are only a tactic in the administration's plans to renegotiate trade deals—as if setting fire to the economy is a strategic first step towards saving it. Trump's comments on Wednesday night belie any claim of a master plan that results in the U.S. coming out on top. From "bowling ball tests" to tariffs, the president doesn't know what he's talking about, and his ignorance grows more dangerous each day.
Photo Credit: AdMedia/Newscom
Eric Boehm is a reporter at Reason.
Follow Eric Boehm on Twitter
Find Eric Boehm on Facebook
Sent from my IPad