The most recent job numbers released on March 9th by the Bureau of Labor Statistics, represented a strong preliminary number for February that, should they hold, could be a solid piece of good economic news since the tax reform bill passed last year. It remains likely that the numbers will not survive the tariffs put into place last week, assuming they aren’t revised downward next month, and, despite the bump in the stock market from the positive preliminary jobs numbers, it’s important to keep in mind the greater perspective.
First, even if we assume that tariffs represent any kind of sound long-term trade policy (it isn’t), there’s the problem of the country the policy is primarily meant to punish, China, which represents only 2.9% of the steel imports into the US. China isn’t likely to be hurt as much by this tariff policy as Brazil and South Korea, which both export four times and three times (respectively) as much steel to the United States. The tariff punishes important trade partners on three continents, which are just as much victims of the Chinese global steel market as the US, and as their economies suffer so will any company that trades with them.
Second, tariffs are a terrible long-term trade policy, because they can only harm domestic consumers by increasing prices and, to a lesser extent, the global market by decreasing market consumption below natural demand. Even if the domestic market is given preferred access to the domestic market, foreign consumers will still prefer cheaper foreign producers, because foreign producers are still far less expensive than American producers. Further, even if American steel and aluminum producers get a larger share of the US domestic market, that market will be smaller, because steel and aluminum are simply more expensive, and the market will still prefer cheaper foreign producers over more expensive domestic producers.
Third, increasingly provocative trade policy from the White House, including the tariffs on steel and aluminum can only increase, not decrease, political pressure on foreign governments to respond in kind. Such antagonistic trade policy can only give a long term economic advantage so long as foreign competitors don’t respond with tariffs of their own. The only reason sovereign nations wouldn’t respond with trade restrictions of their own is if popular conditions don’t make political action untenable. If economic conditions within foreign trade partners begins to deteriorate, trade barriers will become unavoidable.
“For example, the supporters of tariffs treat it as self-evident that the creation of jobs is a desirable end, in and of itself, regardless of what the persons employed do. That is clearly wrong. If all we want are jobs, we can create any number–for example, have people dig holes and then fill them up again, or perform other useless tasks. Work is sometimes its own reward. Mostly, however, it is the price we pay to get the things we want. Our real objective is not just jobs but productive jobs–jobs that will mean more goods and services to consume.”
Decades of exportation of not just trade goods, but the very principles of capitalist trade policy that won the Cold War are being put at risk by the uneducated lowest common denominator and its doddering reality television president, who couldn’t even manage to make money at selling water, despite the benefit of billions to back his investment and name recognition; whose only successful enterprise outside of a reality television and property development (of which there are many questions) is a line of clothing that he doesn’t even bother to have made in the United States.
Keep these things in mind over the next few weeks. Should any of the three things mentioned above come to pass, the impact on the stock market will be immediate and will, eventually, be reflected in the economic reports for April.
Liberty is For The Win!