Trump should take hard look at tariffs
President Donald Trump was part of the reason General Motors recently decided to eliminate 14,800 jobs and close down car factories in Michigan, Ohio and Maryland, but there the tough guy was, on the phone, apparently reprimanding the CEO. Here’s hoping that he listened for a minute and will quit trying to outwit capitalism to the misfortune of the American people.
It’s hardly the whole story, but Trumpian tariffs were a factor in the GM decision that will leave some families, communities and unions in despair. By raising taxes on imports, Trump raised prices GM had to pay for steel and a wide variety of other products needed to manufacture cars. The timing was especially bad. The public had lately grown less interested in buying some of those cars, the small ones, and when costs go up and income goes down, something has to give.
GM was not about to go under, but the question was how it would adjust to these new realities and still have the money to thrive and focus on the future. With cheaper gas, non-guzzling small cars were not the thing they used to be, and, with technological development racing along, driverless and electric cars were shouting loud and clear for attention. So it was that GM began waving goodbye in one direction and saying hello in the other, almost surely a wise move in the circumstances. Stock prices gave their approval.
Other firms may well have fewer options as they deal with Trump’s misbegotten international trade policies. He keeps complaining about us buying more from other countries than they buy from us, leaving us with such a big, big trade deficit. Look, a trade deficit is nothing to worry about. Some economists explain it by saying, look, when you go into a grocery store, you leave with food and the store gets money. Is that trade deficit bad for you? Of course not. The food was worth the money to you.
Selling exports is great, of course, and we want to do as much of that as we can. But imports are just as important, in some ways more important, and when prices start rising, we suffer— consumers, businesses, just about everyone. There’s justification for some of what we are doing to China—it steals intellectual property from us, breaks about every trade rule in the book and is a threat as it builds up its military, issues territorial warnings and does too little about North Korea’s nukes.
Happily, our allies are now joining us in trying to hem in China’s trade aggressions, something Trump should have striven for long ago instead of playing too many trade games with our friends, too. The ideal would be that all tariffs and other trade tricks, such as subsidies and absurd demands, disappear. Paradise is usually over the hill, and then over another and another, but this strategic teamwork is a move in the right direction.
Trump has done incredible economic good. Scuttling obstructionist regulations (not all fit that bill) and lowering taxes have been a way of getting out of the economy’s way, letting it do what it’s there to do. The tariffs do the opposite, getting in the economy’s way. Yes, it is true that free trade can sometimes cost jobs, but it always creates far more than are lost.
A free innovative economy is a changing economy that helps far more than it inevitably hurts. Sooner or later, those tariffs could undo just about all the good Trump has otherwise done, and, if he keeps ignoring the truth, we’ll have a 2020 election waking him up.
Right now, Trump and some other politicians are quite possibly dreaming up interventions to reverse GM’s plans, and it likely won’t be a tariff remission. My advice: Leave GM alone. It’s doing what the market is asking it to do, and that’s usually the best way to help produce national wealth, initiate more jobs and make us the world’s most prosperous nation.