Trump’s Tariffs Are Going to Screw Us Hard
Even U.S. businesses oppose import taxes
by ANDREW DOBBS
Like many an aspiring autocrat before him, U.S. president-elect Donald Trump has told us exactly what he intends to do once he has the power, and like many a doomed intelligentsia before them our political class assumed he was just fucking with us.
The latest exhibit. Trump promised protectionism at more or less every event during his campaign, but the political, business and intellectual elites assumed that this was just his public position and that his private position would be acquiescence to the neoliberal orthodoxy of “free trade.”
Now he is making fools out of them for the zillionth time in the last two months. CNN reported that anonymous sources are getting the hard sell from Trump transition officials, and that they made commerce secretary-designate and billionaire financier Wilbur Ross prove he could sell a five-percent tariff before they would nominate him.
A day or so after elite opinion first lost its shit over the tariff, word came out that Trump & company had changed their position — they actually wanted a 10-percent tariff.
There is a major internal contradiction in the regime’s stances and intentions here. Despite his electoral base in resentful elements of the former industrial middle class, Trump’s rule is all about unbridled corporate power.
Populists of this sort always stir up the crowds in order to get power for the very ruling class elements that are screwing those crowds in the first place. His banker, billionaire, polluter and corporate extremist cabinet should be enough proof that Trump’s regime is corporate rule with the gloves off — George W. Bush’s compassionate conservatism without the compassion … or the conservatism, for that matter.
But roughly 100 percent of those ruling class elements and their propagandists are deadset against the imposition of any tariffs. They are getting whatever they want except for one thing they really really don’t want — how are we to understand this contradiction, how does it resolve itself and what does this indicate about the future path likely for this coming regime?
Let’s start by doing away with some mistaken premises that have come to dominate conventional wisdom on the topic of trade and industrial fortunes in the United States. The first is the notion that “we don’t make anything here anymore.”
In fact, the United States is still one of the major manufacturing centers on the planet, second only to China in output, and with a per-capita output more than three times greater than theirs. The drop off after us is steep, with the number-three manufacturer — Japan — less than half our size. We produce more than the next three major manufacturers combined.
We have 17.2 percent of the world’s manufacturing here in the United States with only 4.4 percent of its population, and manufacturing still represents more than a third of our domestic economy — its largest sector — directly or indirectly supporting about a fifth of all workers.
What is the United States making? Mostly advanced products like engines, automobiles, specialized chemical products and other goods that require sophisticated production and highly skilled labor.
China, on the other hand, tends to dominate in primary materials and intermediate goods — the pieces and parts that go into the more sophisticated goods then manufactured in the United States. This is true for many of the manufacturing centers outside the United States, though Japan and Germany compete with us for advanced manufacturing — at a fraction of our capacity.
This is one reason that U.S. business interests are very skeptical of broad-based tariffs. Many of the raw materials and primary components they depend on for their enterprises are made more cheaply by other countries than we can make them, and U.S. industry can’t simply start pumping this stuff out at the flip of a switch.
If across-the-board costs for all of these inputs go up by 10 percent, that both comes out of manufacturing’s already tight profit margins and gets passed onto consumers — also often the foreign markets we are now taxing. If they respond to our trade barriers by erecting some of their own, it could raise prices for our exports to a point that their markets collapse altogether.
Trump doesn’t seem to understand this, and with the heavy-handed pressure on Ross and reportedly of incoming White House Chief of Staff Reince Priebus, he doesn’t seem to care.
This might be because Trump is convinced of the second bad premise endemic to discussions about trade and manufacturing — that the neoliberal “free trade” regime has killed manufacturing jobs in the United States. Indeed, despite the continuing dominance of U.S. manufacturing, there has been a steady decline in U.S. manufacturing jobs.
Between 2000 and 2010 US manufacturing shed 5.6 million jobs, according to the Center for Business and Economic Research at Ball State University. Manufacturing jobs actually peaked much earlier than that — in 1979 according to the Department of Labor — and since that time they have seen a 37-percent decline.
This decline began prior to the cascade of trade agreements that began in the 1980s and 1990s, and there is no data to suggest that job losses correspond in any way to major trade agreements.
Economists agree that automation is killing these jobs. Employers lay off workers when recessions hit and then invest their savings into technological improvements in productivity so that they don’t have to rehire the workers when the economy turns around.
Bosses manipulate the threat of outsourcing to undermine workers’ bargaining positions, and so the whole picture reflects the basic internal dynamics of capitalist development — fewer workers paid less to produce more.
The result is a crisis of overproduction. We produce a lot more while paying people a lot less, creating a huge supply of consumer goods and a mass base of consumers unable to buy them. This is happening right now, and it’s the source of global commodity glut contributing to the persistent stagnation plaguing the world economy today.
One commodity with such a glut right now — steel. Trump’s appeal to the one-time booming steel towns of the industrial Midwest was key to his victory, but the last thing the world needs right now is more steel. A sluggish economic “recovery” weighed down by austerity politics has suppressed demand for steel even while the Chinese state capitalist regime continues to increase production in order to serve their own narrow political interests.
If the U.S. economy needed more steel right now it would have it at bargain basement prices from China, but we have no more demand than anybody else. Protectionism for a commodity that the domestic economy doesn’t need much of doesn’t make much sense.
The best hope for a solution is the very sort of massive infrastructure bill Trump has promised. Matched with barriers to foreign commodities this could create a short-term, entirely unsustainable, but significant boost to domestic steel production. The same could go for other primary industrial products and basic manufacturing.
Oh, and if Trump and the GOP congress pay for this bill the same way GOP congresses have paid for every major spending project they’ve authorized in the last 35 years — by increasing the federal deficit and debt — it could devalue the dollar and if this drop is significant enough it could overcome any increased tariffs brought about in retaliation to our trade barriers.
The result would be that Trump looks like a winner — we get a boost in domestic production without any impact on exports.
Again, this would be entirely unsustainable and ultimately short-lived. Other countries would just increase their tariffs more. When the infrastructure bill runs out of cash the new domestic production has no market for their products and they contribute to the very glut that has kept them underperforming.
But for Trump it really wouldn’t matter — because in that short-run his critics and business opponents lose big. Once again he makes the smart kids look stupid. By the time the worm turns there is nobody and nothing with enough independent power to really hold Trump accountable, and he can use his then even more overwhelming political power to deflect blame to immigrants or treacherous foreigners or unions or liberals or his congressional opponents or whoever else he wants to turn the masses against.
It’s here that we begin to see the resolution to the contradiction above. Business experts have all come up in an era of neoliberalism, believing that nearly unlimited market forces are guaranteed to create continual growth and generalized prosperity. They treat real-world enterprises as platonic ideals.
Trump, however, represents the collapse of the neoliberal order, and he knows that there are no platonic ideals and that economic models are no match for brute force and real-life power. Can these other countries really afford to block U.S. exports?
Their industries depend on them, their economies need them, and can Japan and Germany and other advanced manufacturing economies possibly meet the demand? Maybe at a price that’s higher than any tariffs that get imposed, maybe not at all or not in a timeframe that real-life businesses operate in.
Trump is betting that these eggheads don’t know what the fuck they are talking about, that when you have more money you get to make rules that other folks don’t. It’s the American way and it’s the story of his life.
Again, he may not know what the fuck he’s talking about either, but he knows power like only an abusive narcissist can. He’s focused on something threatening that he can do unilaterally because this is yet another fundamental power that Congress has surrendered to the executive. Even if he decides not to do it, he knows that the big shot business folks now know that he might, that he can, and that they better respect his power in the meantime.
It’s the same as his recent bluster on the F-35 and the nuclear arsenal — he’s signalling to the power elite that despite all their buddies getting cabinet positions, regardless of the fact that they are writing his regulatory policy and that they’ll get whatever they want out of Congress, the price they pay is that they have to give him extraordinary, world historic personal power.
Finally he knows that his real economic base, the peak financial elites, won’t lose money — they never really lose money. They’ll move their investments to industries that will benefit from the crash or they’ll bet against the economy as a whole with novel financial instruments invented by their banker buddies for the sole purpose of creating money for the people that already have all the money anyways.
That’s how the contradiction is resolved — the vast majority of businesses in this country and the smart kids writing the op-eds aren’t his base. His base is a group of guys that could fit on a city bus. They know that new tariffs may be a small price to pay for the end of any pretense towards democratic oversight of economic power, and that a billionaire dictator serves their interests far more than “free trade” ever has.
At the same time his mass base gets to freak out the geeks on T.V. who opine endlessly about how great it is that the hillbillies got laid off and how we just need to teach them to build windmills or program computers or whatever. It’s win-win for Trump.
Trump said in his convention speech that he was the only person that could fix things, that he individually possessed the power and vision to save our country. Liberals of every stripe laughed at him, but the people they’ve ignored and insulted and abandoned for two or three generations took Trump at his word.
He’s keeping it now — taking the boldest possible executive steps to move the economy in an illiberal direction and to consolidate power in his salvific hands.
He’s promised many other things in his pursuit of the office we’ve decided to grant him. The lesson today is to expect him to do exactly those things too.
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