Comment by johnmaguire 2 days ago
Can you explain how tariffs are an effective tool against foreign governments subsidizing industries? It has been my understanding that tariffs typically end up being tit-for-tat and relatively zero-sum.
> The subsidy is already a tit, the tariff is tat
Why is someone else subsidizing the price of a thing you buy bad?
The subsidy is doing you a favor by reducing your input costs, or freeing up your work and capital to produce something else.
Because they are doing so to erode your manufacturing base through unfair competition.
From a national security standpoint this can be deadly in a hot conflict.
From an industrial strategy standpoint, it’s the same as any other monopolist practice - they will erode your base, take over your market, then raise prices to fleece your population’s wealth while increasing their own.
Industrial bases are economic strongholds that shouldn’t be lost, particularly not to great power competitors.
> From a national security standpoint this can be deadly in a hot conflict.
What about a cold conflict? How much do the tariffs and protectionist policies cost in the middle to long run?
For example, the Jones Act costs billions per year and has been going on for a lot of years. How many additional aircraft carriers and submarines and so on could the US have bought with that money?
> Because they are doing so to erode your manufacturing base through unfair competition.
I wouldn't say it's unfair, if other countries actually value domestic manufacturing then they'll provide the subsidies and incentives to cultivate it.
China subsidizes EV manufacturers. Non-Chinese manufacturers can’t compete with the companies that get tons of free money from their government and go out business. Now only China makes EVs, so they can raise prices.
That’s the plan.
> Sure, but if they raise prices, then US manufacturing becomes more competitive again.
Manufacturing isn't something you can just turn on like a computer program. It takes time develop the infrastructure, talented labor and product designs. For something like cars we're talking about many years. It took China decades of concerted effort and heavy subsidies to get where they are now. Without subsidies, starting this process takes even longer and may even be impossible.
Accordingly, if you already have this industrial capacity it would be mind blisteringly moronic to let it slip away from you. What can be destroyed in a few years will take many more years to build back, and won't be built back at all unless you reverse the moronic policies that let it get away from you in the first place.
It's a favor in the short term but a blow in the long term because you lose ability to manufacture. Manufacturing capacity is a use-it-or-lose-it thing.
I think I'm looking for a more substantial answer.
> The subsidy is already a tit, the tariff is tat. Zero-sum is at least better than just taking the blow and having a negative-sum outcome for yourself.
To be more clear, I meant that it was typical for foreign governments to impose retaliative tariffs. e.g. https://www.trade.gov/feature-article/foreign-retaliations-t...
To say nothing of who actually pays the cost of tarrifs.[0][1]
[0] https://taxfoundation.org/blog/who-really-pays-tariffs/
[1] https://www.cato.org/publications/separating-tariff-facts-ta...
> To be more clear, I meant that it was typical for foreign governments to impose retaliative tariffs.
And in the context of massive trade deficits, so what? IIRC, when the Trump tariffs went into effect, there was a lot written that the Chinese didn't have many levers to pull to respond, because of the US trade deficit. I think they implemented a tariff against soybeans (and some other non-tariff actions), and that was about it.
> To say nothing of who actually pays the cost of tarrifs.[0][1]
Who cares who technically pays, especially when they're correcting for some other market distortion? Focusing on that is a hallmark of libertarian anti-tariff propaganda that's pretty monomaniacally focused on free trade dogma and prices to the exclusion of all other considerations.
> And in the context of massive trade deficits, so what?
I was thinking more in the context of consumer inflation. Countries tend to go back and forth in a tariff war, effectively raising taxes and lowering incomes for their citizens.
>> And in the context of massive trade deficits, so what?
> I was thinking more in the context of consumer inflation. Countries tend to go back and forth in a tariff war, effectively raising taxes and lowering incomes for their citizens.
That's monomaniacal focus on short-term "prices to the exclusion of all other considerations." An artificially low subsidized price isn't a good deal, especially when its competing with your local industry.
or you trade industries .. you get our manufacturing but respect our ips. indirect class warfare. white collar vs blue collar.
Then one generation later it all bloes up in your face, destroying your democracy .. but you get to pretend your actions where innocent . its just like the weather , cant do anything about that ..
I can explain it.
I'd like my critical supply chains to be in North America. Ideally, I'd have a free trade zone with Mexico and Canada. Tariffs, two-sided, reduce trade, and bring me closer to that reality. I'm okay paying slightly more for that security.
I'd like the same thing in the EU too, and in other major world blocks.
There's a slight efficiency gain from specialization, where each country brings a skillset, but it's totally not worth it to me versus the brittleness which comes with it.
Remember how the Covid supply chain disruptions cascaded? That's a tiny fraction of a really bad natural disaster.
>Can you explain how tariffs are an effective tool against foreign governments subsidizing industries?
Because the US is a huge market, and if you can't sell your goods here competitively (because tariffs price you out), it hurts your business. It's a negotiating tool.
> Can you explain how tariffs are an effective tool against foreign governments subsidizing industries? It has been my understanding that tariffs typically end up being tit-for-tat and relatively zero-sum.
They neutralize the subsidy's effect on pricing and prevent the subsidizer from taking over your market, at least.
> It has been my understanding that tariffs typically end up being tit-for-tat and relatively zero-sum.
The subsidy is already a tit, the tariff is tat. Zero-sum is at least better than just taking the blow and having a negative-sum outcome for yourself.