Why Economists Hate Trump's Tariff Plan | WSJ

Summary

The video explores the history and impact of tariffs in the U.S., focusing on the 'chicken war' and President Trump's tariff policies. It highlights how tariffs protect specific industries but often harm consumers and lead to job losses in downstream sectors. Trump's tariffs on washing machines, steel, and aluminum are discussed, showcasing mixed outcomes for job creation and economic health. While tariffs are positioned as a tool for national security and economic strategy, their long-term effects remain uncertain, raising questions about potential trade wars and economic repercussions.

Takeaways

• 🐔 The 'chicken war' illustrates how tariffs can protect local industries but raise prices for consumers.
• 📈 U.S. chicken exports to West Germany led to a tariff, highlighting the tension between international trade and local agriculture.
• 🚛 The U.S. retaliated against German tariffs with a 25% tariff on trucks, demonstrating the cyclical nature of trade conflicts.
• 💰 Tariffs on washing machines resulted in higher prices for both imported and domestically produced appliances.
• 📊 Despite job creation linked to tariffs, the overall cost to consumers was significantly higher, averaging $815,000 per job created.
• 🛠️ The 2018 tariffs on steel and aluminum aimed to penalize China but adversely affected downstream industries relying on these materials.
• 🔍 Economic studies indicate that tariffs often lead to job losses in sectors not directly protected by the tariffs.
• 📅 Once implemented, tariffs can be difficult to remove, as seen with the longstanding truck tariffs stemming from the chicken war.
• 🗺️ Trump's proposed tariffs (60% on China) aim to leverage trade for political and economic objectives, risking international retaliation.
• ⚖️ The Biden administration's continuation and expansion of tariffs reflect a significant shift in U.S. trade policy and economic strategy.

Q & A

What was the 'chicken war' and how did it start?

The 'chicken war' refers to a trade dispute that began in the early 1960s when West Germany imposed tariffs on American chicken, which angered U.S. farmers who were exporting significant amounts of chicken to Europe.

How did the U.S. respond to the tariffs imposed by Germany?

In retaliation, the U.S. imposed a 25% tariff on German trucks, which drastically reduced their sales in the U.S. market.

What are tariffs and what purpose do they serve?

Tariffs are taxes imposed on imported goods to protect domestic industries by making foreign products more expensive and less competitive.

What were the economic impacts of the washing machine tariffs imposed in 2018?

The tariffs led to increased prices for both imported and domestically made washing machines, resulting in a cost to consumers of approximately $1.5 billion while creating about 1,800 jobs at a cost of $815,000 per job.

What other tariffs did Trump implement in 2018, and why?

Trump imposed tariffs on steel and aluminum primarily to punish China for trade rule violations and for national security reasons.

What were the overall effects of Trump's tariffs on the economy?

While some manufacturing jobs stabilized, many jobs were lost in downstream industries due to increased costs, ultimately harming the economy.

Why are tariffs difficult to remove once they are established?

Tariffs are hard to remove because domestic interest groups benefit from them and they serve as bargaining chips in international negotiations.

What did the Biden administration decide regarding Trump's tariffs?

The Biden administration reviewed the tariffs and suggested that they should remain in place, even considering additional tariffs.

What are the potential consequences of Trump's proposed future tariffs?

Trump's proposed tariffs could cost American households an average of $1,700 and potentially result in the loss of over 684,000 jobs, while provoking retaliatory tariffs from other countries.

How have trade policies evolved in recent years?

Trade policies have shifted from a quiet focus to aggressive strategies involving tariffs, subsidies, and industrial policies due to changes in the global and geopolitical environment, particularly concerning China's manufacturing dominance.