Cogito Ergo Non Serviam
Trump Exempts Chinese Electronics from Tariffs, Maybe
The tariff kerfuffle has shown the world two important things about President Donald John Trump. The first is that he does not understand how world trade works. The second is that he is a coward. His squirming on the matter of Chinese-made electronics. Initially, they were covered under the 145% tariff. Whining and gnashing of teeth followed, and he announced they would be exempt. When someone explained that such goods would not be made in the US without the tariffs, he decided they would eventually face a tariff. For now, they are either not taxed, are taxed at 10% or will be facing 145% in tax. Not that it matters. The Trump administration has not created a mechanism to collect them anyway.
The argument that Mr. Trump has put forward for decades is that tariffs are beneficial to the country that levies them. He claims they are paid by the foreign country's corporations. The US government makes money from the tariffs, and US companies are protected from foreign competition. And apparently, he feels that Americans are so patriotic that they are willing to spend extra for inferior goods just so they can say they bought American.
None of the foregoing is correct. Tariffs are horrid things that make only a bit of sense in the development of an infant industry. If Kenya wants to make super computers, it can only do so if its Kenyan industry is protected from the world market. That, however, begs the question of whether Kenya should build them or find an industry in which it can better compete.
The tariff is, in theory, levied at the port of entry. Under the standard Free on Board contract, the exporting entity pays any tariffs or fees for loading it on the ship. Once on board, the buyer becomes responsible for the goods. So when they reach the port of entry, they are owned by the importing company. For the importer, it is a cost of doing business that it will try to recoup from the consumer. The important thing to remember, though, is that the importer, a local company, has to pay the tariff to the Treasury. It is not the entity that exports it.
Reshoring an industry is expensive, and in most cases, it makes no sense. After decades of expanding international trade, a great many industries are located exactly where the market forces say they should be. Iceland is not growing oranges but is trading for them. Kenya is not building super computers, while America is not making clothes.
Mr. Trump wants to move the car industry to the US from places like South Korea and Germany. The South Korean industry is world class, and the Germans engineer cars like no one else. Both produce cars in the US using America workers. So are they really foreign cars? Is the company that made them merely headquartered outside the US while the labor is American? If the idea is to create jobs for Americans, that has already happened. The real question he may want to ask (if he were curious, and he is not) is why don't Ford and Chevy open more factories in the US?
Mr. Trump has proven himself a coward with his waffling about electronics. The story has shifted so many times it is hard to say what the policy is at this stage. But the objective is clear. Mr. Trump wants to avoid taking the blame for costing the US its status as global hegemon and destroying the post-war trading system. He could have gone golfing the last two weeks but instead he went to work and blew up $6 trillion in wealth on Wall Street. He would like to avoid being held responsible for that.
The man does not have the courage of his convictions. And one need not remind the world he has 34 felony convictions.
© Copyright 2025 by The Kensington Review, Jeff Myhre, PhD, Editor. No part of this publication may be reproduced without written consent. Produced using Ubuntu Linux.
|
|
|
