Category Archives: Trade

Trump Tariff Costs to Outweigh Benefits from Deregulation

Early in the Trump administration, a series of executive orders slowed the growth of new regulations and removed some existing rules. From the start of the administration through June 30, 2019, the total savings from these policies are an estimated $46.5 billion, according to a new study by David G. Tuerck and William Burke for the National Foundation for American Policy. More importantly, they also find that annual costs from the Trump tariffs will soon outweigh these cumulative benefits. This is despite the first new tariffs not appearing until January 2018, giving deregulation a one-year head start on impacting the economy.

By the end of 2019, the dead loss (more commonly called “deadweight loss”) from the Trump tariffs will total $32.1 billion. This includes the just-imposed 15 percent China tariffs that took effect on September 1, and the planned 30 percent tariffs set to take effect in December. Given the uncertain nature of tariff implementation in the Trump administration, this figure is subject to change at any time.

If all planned tariffs are implemented, the annual deadweight losses from the Trump tariffs would be $121.1 billion—nearly triple the cumulative deregulatory benefits over the Trump administration’s first two and a half years.

Furthermore, Tuerck and Burke’s estimates only count deadweight losses from tariffs. They do not count tariff revenue, which is costing U.S. consumers an additional tens of billions of dollars per year.

There is another, more esoteric way in which Tuerck and Burke underestimate tariff costs. In a traditional supply-and-demand graph, which they provide on p. 10 of their report, the deadweight loss appears in a pair of triangles. These are called Harberger triangles, in honor of their discoverer, Arnold C. Harberger. These triangles do not tell the full story.

Gordon Tullock, in a famous 1967 article titled “The Welfare Costs of Tariffs, Monopolies, and Theft,” pointed out that rent-seeking and similar wasteful activities are not captured in Harberger triangles. These costs are in an adjacent rectangle that many analysts forget to include. Moreover, this Tullock rectangle in many cases is larger than the traditional deadweight loss Harberger triangles.

Trump has already implicitly admitted that his tariffs are hurting U.S. consumers. This admission has come in the form of tens of billions of dollars in money transfers to farmers; in his recent delay of some tariffs on Chinese-made consumer goods until after the holiday shopping season, which presidential adviser Peter Navarro called “President Trump’s Christmas present to the nation;” and most recently by Trump’s belief that the stock market would be 10,000 points higher without the China trade war. Even if hyperbole, this is still a shocking admission.

Tuerck and Burke have now put some numbers to these tariff costs, and found out they will soon well exceed the total benefits so far from deregulatory efforts. Not only that, but they have likely underestimated the harms tariffs are causing.

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On the Radio: China Tariffs

Earlier today, I appeared on the Alan Nathan Show to talk about tariffs and a possible trade deal with China.

I’m not sure how to access show archives, but if I can find audio I’ll post a link.

Tariffs Are Not Encouraging Chinese Reforms

In a syndicated piece at Inside Sources, Kate Patrick quotes me on President Trump’s China tariffs:

The Competitive Enterprise Institute (CEI), in response to China’s latest tariff retaliation, criticized the Trump administration for continuing a trade war that has not produced the kind of trade agreement Trump wants, adding that Congress should reclaim its constitutional tariff-making authority to stop the trade war.

“Tariffs have once again failed to get China to make needed reforms, instead of responding to Trump administration tariffs with retaliation,” Senior Fellow Ryan Young said. “The administration should change course and re-engage the World Trade Organization dispute resolution process and rejoin the Trans-Pacific Partnership. China has already been lowering trade barriers against other countries and could do so with the U.S.”

Read the whole thing here.

U.S.-China Trade War and the 2020 Election

I just saw this now, but I was quoted in an August 13 U.S. News & World Report article on China tariffs:

“The administration has been saying otherwise, but it is good to see that they do not believe their own words,” Ryan Young, a senior fellow at the libertarian Competitive Enterprise Institute, said in a statement Tuesday. “Several rounds of China tariffs have so far failed to encourage the Chinese government to make needed reforms. Beijing has instead consistently retaliated with its own trade barriers, hurting the U.S. economy as well as its own.”

Read the whole thing here.

China Tariff Retaliation Shows Failure of Trump Policy

This is a CEI press release. The original is posted here.

On news that China plans to raise tariffs on Sep. 1 and Dec. 15, respectively, in retaliation for President Trump’s recent increase, Competitive Enterprise Institute senior fellow expert Ryan Young said failure of the tariff policy was predictable.

“Tariffs have once again failed to get China to make needed reforms, instead responding to Trump administration tariffs with retaliation. The administration should change course and re-engage the World Trade Organization dispute resolution process and rejoin the Trans-Pacific Partnership. China has already been lowering trade barriers against other countries and could do so with the U.S.

“Ultimately, Congress needs to reclaim the tariff-making authority it gave away to the president back in the 1960s and 1970s. In the meantime, economic adviser Peter Navarro should take Brett Favre’s advice to a referee and take two weeks off, then quit.”

Related reports:

Wicksteed on Trade

Philip H. Wicksteed’s 1910 textbook The Common Sense of Political Economy is accurately titled. Though not as well known today as his rough contemporary Alfred Marshall, Wicksteed influenced a number of prominent economists, including Nobel laureate James Buchanan. On p. 667, Wicksteed makes an important point about trade policy:

Thus the matter of investigation is the policy of directing a man’s bargaining along lines which he would not choose for himself in order to benefit certain people in whom we are specially interested at the expense of others in whom we are interested less or not at all. The area and grounds of our interest may be important in many ways, but they do not affect the economic theory.

A Tacit Admission of Who Pays for Tariffs

Over at the Washington Post, Heather Long has a writeup on President Trump’s partial delay, until near the end of the holiday season, of new tariffs on popular Chinese-made consumer products. I found this quote interesting:

“The decision to delay new tariffs on Chinese-made toys, smartphones, laptops and other popular holiday gifts is a tacit admission that consumers pay for tariffs, not Chinese producers,” said Ryan Young, a senior fellow at the Competitive Enterprise Institute.

Read the rest of the otherwise-excellent piece here.