Erratic Trade Policies Hurt Businesses, Consumers
Trump’s ever-shifting tariff pronouncements make it hard for businesses and consumers to plan ahead.
SACRAMENTO, Calif. — Donald Trump unburdens himself with many unusual social media posts, but a recent one should be an eye-opener for Republicans who still believe the president is carrying on the free-market traditions of GOP politicians since Ronald Reagan. “Walmart should STOP trying to blame Tariffs as the reason for raising prices throughout the chain,” he wrote on Truth Social. “Walmart made BILLIONS OF DOLLARS last year, far more than expected. Between Walmart and China they should, as is said, ‘EAT THE TARIFFS,’ and not charge valued customers ANYTHING.”
I’ve seen some lefty politicians take a break from bashing Trump’s, say, immigration policies to nod in general agreement on the tariff issue. Tariffs, of course, are the equivalent of taxes imposed on private U.S. businesses. Despite Trump’s claims, they are not paid by foreign countries but by the importing company. His Walmart post at least backhandedly acknowledges as much, although it’s bizarre that he slammed corporations for the crime of making money.
Tariffs replace the marketplace — i.e., the free decisions made by individual buyers and sellers — with the decisions of central planners, as bureaucrats and politicians adjust duties to get specific outcomes. Progressives have this nasty habit of proposing tax hikes and then failing to account for taxpayers’ changed behavior in response to those hikes. It’s like the old saw about a million-dollar tax on poodles. I suppose thousands of them are sold every year, but such a tax would bring in ballpark zero revenue. Dog lovers wouldn’t buy them, or would insist that the poodle-looking dogs they bought really were mutts.
Likewise, tariff supporters claim that tariffs will bring in gobs of new government revenue — and why exactly do we want the feds to have even more money? — but they always bring in less than expected as consumers adjust their buying habits. In a recent interview, famed free-market economist Thomas Sowell warned that “if you set off a worldwide trade war that has a devastating history. Everybody loses, because everybody follows suit, and all that happens is you get a great reduction in international trade.”
Sowell did add that they aren’t as problematic as a short-term tool to achieve strategic objectives, but this is where I find myself confused when talking to the president’s supporters. They pivot from “tariffs will rebuild American manufacturing” to “Trump’s just negotiating to eliminate tariffs and even the playing field.” The two positions are incompatible. The first assumes that tariffs are fundamentally good, whereas the second assumes they are destructive.
I’m skeptical of those who argue that Trump is just trying to negotiate better trade deals. As a libertarian, of course, I see tariffs as the apogee of big-government central planning, an attempt by government planners to determine how individual consumers can behave. They also raise prices in an even more insidious way than typical tax increases, as they distort supply chains, prop up the least efficient businesses, and serve as a special favor to unions. They spark trade wars, which in history have also led to shooting wars. Count me as skeptical when tariff supporters claim that those revenues might ultimately replace the income tax.
The best way to reduce tariffs across the board is to just reduce them for your own country’s consumers. If other countries want to punish their consumers, there’s not that much we can do. But even if I were to give the president the benefit of the doubt, it’s hard to give his economic advisers any such deference. Trumpist policies are based closely on the thinking of paleoconservatives. One of the most preeminent ones was the late writer Sam Francis, who never hid his hostility to free markets.
I’ll never forget his infamous essay, “Capitalism, The Enemy.” In it, Francis wrote: “Capitalism, an economic system driven only, according to its own theory, by the accumulation of profit, is at least as much an enemy of tradition as the NAACP or communism, and those on the ‘right’ who make a fetish of capitalism generally understand this and applaud it. The hostility of capitalism toward tradition is clear enough in its reduction of all social issues to economic ones.” National conservatism is about promoting its adherents’ views on culture.
Trump’s economic policies remind me of those advocated in the Reagan era — although they were the ones promoted by Reagan’s foes in the union-controlled Democratic Party. Those Democrats (and modern progressive Democrats, too, albeit in a somewhat different way) and modern national conservatives obviously have vastly different cultural preferences, but they both want government policies that make the economy subservient to their preferred societal outcomes. Nothing promotes freedom like the marketplace, so both sides want to control it because they don’t like the end results.
But even if you still like tariffs for whatever reason, Trump’s erratic imposition of them wreaks havoc in the business community. The latest policy is a 10 percent tariff across the board, which everyone can at least understand. But there’s a reason the stock market fluctuated wildly upon his ever-changing tariff pronouncements, with the markets falling every time he promised higher ones. There’s something of a truce now with China, but shipments halted abruptly during different phases of the president’s bluster.
Business decisions take time to implement. Supply chains take time to construct. Changing the terms causes confusion, as businesses cannot count on existing prices and relationships. I recently shopped for a new car and saw the confusion at dealerships, with some still offering discounts and others adding huge markups in anticipation of higher tariffs and trade disruptions.
As the Guardian reported, “Firms across the world have been trying to come to terms with the rapid rate of presidential knee jerks: where policies can be announced, adjusted and shelved as quickly as the leader of the free world can publish a social media post.” At the very least, the administration should pick a policy, announce what it is, and stick with it, thus giving manufacturers and consumers a shot at planning ahead. And the president should stop channeling progressives by blasting companies for trying to make a profit.