Yesterday, (Wednesday July 11th) Trump was screaming at protesters of his 50% copper tariff, and like other tariffs he dissolves and institutes them at the whim of his mind at the time. Trump kept saying, “They pay, you don’t.” Totally untrue. Tariffs are items he never campaigned on, and which may imitate the Smoot-Hawley tariffs of 1930.
Protesters’ outrage was about his 50% tariff on imports of copper, which we need to import about 47% of, to meet our needs. This caused the price of copper to go up a bit more than fifty cents per pound. The dictionary definition of a tariff is: “A system of taxes placed by a government on exports, or especially imports.” Let’s then examine what the 50% tariff on imported copper will do. Will importers of copper have to pay to get their copper in at a higher price, to counteract the expense of paying for the tariffs? If copper was forty nine cents a pound as it had been for decades, and it was raised to $5.25 or more to pay for the tariff cost, how will it affect America?
Electricians and electrical contractors and manufacturers use copper for their wire, electrical components, and all which has to do with electricity. The cost of electricity and its appurtenances will rise. Not just on new construction but remodeling and manufacturing, and every item in America which uses copper.
Plumbers use copper for pipe, and tons and tons of it for new and old repairs and construction. Copper is used in hundreds of ways in America, and every way will see an increase in prices, due to the tariff. This copper tariff alone will cost America millions, regardless of who pays.
Trump has bragged repeatedly about how tariffs have added hundreds of billions in profits to the treasury. If “They” pay, where did the profits originate? Obviously, a tariff will cost everyone on both import and export sides, but consumers will pay, just as if it were a new income tax, hidden by consumer price increases. My wife found a pack of last years’ fireworks bought from Sam’s Club and never used. They were $14.95. The exact same pack cost over $65, thanks to Trump’s tariffs on China. I didn’t buy any.
Smoot-Hawley Tariffs
From an article on April 4th, Newsweek: “Signed into law June 17, 1930, The Smoot-Hawley tariff act, sharply raised tariffs on over 20,000 imported goods to protect American farmers and manufacturers during the early days of the Great Depression. Although designed to protect American industry, the law quickly triggered retaliation from major U.S. trading partners. Exports collapsed. U.S. imports fell by two thirds within three years, and exports saw a similar decline.
“Smoot Hawley focused largely on agriculture and manufacturing; Trump’s plan targets all major exporters to the U.S. with punitive rates not based just on current tariffs, but also on non-tariff barriers such as quotas and regulatory standards. The economic risks are similar: Both policies could prompt foreign retaliation. China has already announced a 34% retaliatory tariff on U.S. goods. Whether Trump’s tariff strategy will bolster U.S. industry or backfire like its 1930 predecessor remains to be seen, but Americans are bracing for potential consequences.”
The Foundation for Economic Education has a long report on Smoot Hawley, which is far too long to forward here, but two sentences might be of some help. “The Dow-Jones Industrial Average fell 23 percent in the first two weeks of June 1930 leading up to President Hoover’s signing the bill into law. On June 16th Hoover claimed, “I shall approve the tariff bill,” and stocks lost a billion that day, which in those days was a huge drop.” Smoot-Hawley was signed into law on June 17, 1930.
From an editorial in the same Friday’s Journal: “A major reason that he U.S. doesn’t mine or refine more copper (and other critical metals) is the government permitting morass. Developing a new mine in the U.S. takes on average, 29 years, the second longest in the world after Zambia. By all means, Mr. President blast the permitting obstacles, and urge Congress to reform the National Environmental Policy Act that the left uses to tie up every new mining or refining project.”
(A new factory producing tariffed anything, would take at least five years to build and staff.)
“But in the meantime, tariffs won’t spur companies to build new smelters that could get tired up in litigation. Mr. Trump is going to make U.S. firms pay 50% more for a vital metal, while they wait five more years for U.S. sourcing. How does making it more expensive to build aircraft, ships and ammunition promote national security? This is national insecurity.”
From the same Journal, part of which are quoted above, comes the first paragraph of a feature story on the first page. “President Trump’s threat for a 50% tariff on Brazilian (coffee) imports expanded his use of punitive duties over matters that have nothing to do with trade, breaking with more than a half-century of global economic precedent.” Coffee futures went up of course, and now my morning cup of coffee will cost more, as will yours. Please consider all the bureaucrats and paper work which will be connected with tariffs, and collecting the money from them on both sides.
As I was finishing writing this piece, Fox News said that Trump has placed a 35% tariff on all Canadian goods. This will make aluminum cans of Coke go up a couple of cents, because a proposed new aluminum mill here, will take five years to build and staff. In the mean time?
Practically 100% of the earth’s economists have told, pleaded, and cajoled Mr. Trump, to not use tariffs for anything other than a world war or similar circumstances, pointing out that tariffs cost consumers, and are a sure way to create enemies out of what used to be friends. They have written columns and given speeches, saying that free trade is wonderful, and tariffs are bad. They are! Down south in Argentina, a new president has reformed their virtually communist government, fired excessive government employees, eliminated wasteful programs, thrown out the lefties, and made their currency stable once again. Argentina is on the road to a wonderful future, and it was done without a single tariff.
Trump has finally ‘discovered’ that Putin is an evil man, has no plans to stop attacking Ukraine. Putin’s attacking Chechnya and Crimea, were simply proof of his evil plan to rebuild the Soviet Union, considering its demise, as an earth shaking catastrophe, rather than the blessing it was. Will Trump eventually realize that his absurd tariffs are good for his unquenchable ego, but bad for America, before it’s too late? I for one, hope so.
-Don Stott. don@coloradogold.com