Industrial policy and tariffs
At last agreement among the left and right
By Dr. Harold A. Black
blackh@knoxfocus.com
haroldblackphd.com
In a recent op-ed piece, one of the most liberal Democrats in Congress compared his industrial policy view to that of J.D. Vance. It was a matter of degree. Both favor increased tariffs and government intervention. The Democrat is for more immigration especially that of skilled workers while Vance opposes more immigration. Another difference is Democrats love the Green New Deal and subsidies flowing to their big business bros. Vance says that the Green New Deal will be shut down on Day 1. Vance’s industrial policy centers around economic nationalism, trying to protect American jobs from foreign competition. Both think the FTC’s Lina Kahn is doing a great job even though Kahn keeps losing in court.
Speaking of industrial policy, why are there so many Chinese EV companies? One can look to China as evidence of failed industrial policy. The Chinese EV industry is heavily subsidized. There are at least 46 EV manufacturers in China. Every year more and more fail despite the subsidies, endangering the viability of the suppliers that service the manufacturers. It seems to me that Xi should have concentrated his subsidies on only a few manufacturers such as BYD and Li rather than wasting billions of all comers. Chinese industrial policy is a drain on their economy, restricts China’s economic growth, and has a negative effect on its people’s well-being. Of course, Biden’s industrial policy also is forcing automobile companies to build unprofitable EVs and losing billions of dollars.
Trump wants to impose a 100% tariff on Chinese EVs and on this Biden agrees. Supposedly it is because American manufacturers cannot compete with the Chinese and if the Chinese were allowed into the U.S. they would push the American manufacturers out of the market. Does this make sense to anyone other than Trump, Vance, Biden and Harris? Consider that the manufacturers in the US market sell high-priced EVs. If the greenie weenies want widespread adoption of EVs then why should they want to price the lower-priced Chinese EVs out of the market? I guess they want EVs only for the rich and let the great unwashed be forced to ride mass transit. The main impact of keeping the Chinese out of the U.S. market is to limit the incentive of car companies in the U.S. market to produce better, cheaper, more efficient EVs. Moreover, economists will tell you that Chinese subsidies constitute a wealth transfer from the Chinese to the rest of the world. The Chinese bear the cost of the subsidies while the rest of the world gets an underpriced product. If the Chinese are fools enough to engage in such an economic policy, we are bigger fools not to let them.
Trump’s tariffs harm American workers and American consumers. Instead of protecting jobs, there is a loss of jobs. Studies show that imposing tariffs hurts American suppliers who then lay off workers. Harley-Davidson is laying off workers and shifting production to Thailand. Why? First, as a result of Trump’s tariffs on steel and aluminum, the EU retaliated, imposing an increased 31% tariff on Harleys. The average price of a Harley increased $2,200, forcing Harley to move production of its bikes slated for sale outside the states to Thailand. Harley’s market value fell by over $1.5 billion. Harley’s increased costs to its U.S. customers helped fuel a 20% drop in U.S. sales. With the Asian market increasing in importance, Harley has announced it is moving even more production to Thailand. What has the Biden Administration done? Instead of getting rid of the tariffs, it has instead given Harley a $89 million grant to its union worker plant in Pennsylvania that manufactures the Livewire, Harley’s electric motorcycle. Never mind that Harley loses over $177,000 on every electric bike it sells. Not surprisingly, Pennsylvania Senator Bob Casey now wants a $7,500 subsidy on electric motorcycles. I can’t be the only one who sees the sheer stupidity in all this. But hey, blame the Chinese for problems caused by U.S. politicians and then waste taxpayers’ money by incurring more debt.
Speaking of which, have you noticed that neither Trump nor Harris is talking about the national debt? In fact, both of their policy agendas will significantly raise the debt. But what’s another $2 trillion a year?
