An Alabama economist goes roadtripping through South Dakota and finds us growing steel and aluminum in our corn fields…
Imagine, for example, that someone invented an amazing new machine. Imagine something out of a Doctor Seuss book: You pour corn into one end of the machine and steel and aluminum come out the other end. It seems miraculous, and it would be incredible if there were actually a chemical change taking place that turned corn into steel.
But, as David Friedman points out, the rest of the world is like that machine. We pour corn and Star Wars movies into the global economy, and the rest of the world gives us steel, aluminum, and all the other things we might want. It’s not really different from having a magic corn-into-steel machine.
President Trump says, “we’d save a hell of a lot of money” without trade. We might save dollar bills, but those dollar bills wouldn’t buy nearly as much. It’s not the kind of saving any of us should want.
Driving through the heartland was a vivid reminder of one of my favorite examples of clear and careful economic reasoning. As David Friedman and Steven Landsburg explained, we can get more and better cars at lower prices by “growing” them in Iowa or South Dakota—or on the set of a Hollywood Studio [Art Carden, “How Do You Grow Steel in South Dakota?” Forbes, 2018.07.30].
Trump continues to put South Dakota’s “steel” farmers at risk with his own recklessly escalating tariff threats and the predictable Chinese response of tariffs on more American goods (liquefied natural gas, aircraft, semiconductors, condoms…).
Carden’s analysis applies to soybeans and all of the other products in which we’ve chosen to specialize. Americans for Prosperity—whose funders, the anti-tariff Koch Brothers, Trump now calls a “globalist” “overrated” “joke”—sends its South Dakota mouthpiece Don Haggar out to say that our soybeaners are out a quarter billion dollars already, thanks to Trump:
In South Dakota, we’ve probably seen losses of over a quarter billion dollars to soybean producers in South Dakota alone…[Don Haggar, in “Tariffs Hitting South Dakota Producers,” WNAX Radio, 2018.08.03].
Instead of Trump’s thuggish, big-government socialist intervention in the economy, Haggar says we need to get back to the free market:
The right way to deal with situations dealing with fair trade is through the negotiation process… because when you impose a tariff… the other side retaliates…. When there are open markets, when individuals and businesses make decisions about products and their pricing, economies prosper. That’s historical. And so that’s the key is, you just let the economy, you let private industry work out those solutions, and they’ll bring… that kind of pressure to bear in terms of fair trade [Haggar, 2018.08.03].
But I guess this is what South Dakota’s farmers and other voters wanted: a world in which the White House scrambles free trade and wrecks South Dakota’s ability to grow better, cheaper steel and aluminum in its corn and bean fields.
According to the Wisconsin Gazette, Tangerine Wankmaggot is supporting large corporate “steel” producers with his bailout plans while ignoring smaller family “aluminum” growers, just as we expected. In other words, they’re taking our individual and family tax dollars and giving even more of them to Smithfield, Monsanto, etc.
https://goo.gl/Cmbgu1
Trump was foolish to challenge a strong armed Communist powerhouse. China waited us out in Vietnam and they’ll wait us out over tariffs. USA will be the one giving discounts to win markets not the Big Red Dragon.
*I predict the best USA will get out of this is a promise by China to stop stealing American company’s blueprints. Trump will call it a victory. China will do what North Korea is doing. Ignoring the promise, once Trump looks the other way.
https://www.nytimes.com/2017/08/22/opinion/vietnam-was-unwinnable.html
More winning trade deficit setting record highs with no end in sight. Just waiting for the other shoe to drop like an anvil.
“The United States trade deficit widened in June and is on track to be the biggest in a decade despite President Trump’s efforts to slash it.
For the first half of 2018, the trade deficit in goods and services hit $291.2 billion, the federal government reported Friday, which is higher than last year and puts the nation on track to have the largest annual deficit since 2008.
Trump has repeatedly promised to reduce the trade deficit during his White House tenure, but so far, it has grown under his watch.” Washington Post 08/03/2018
I am shocked, I tell you shocked, that trade wars and tariffs just don’t make sense… unless you get a payoff.