The immediate aftermath of the Trump administration announcement of tariffs on imports of foreign government-subsidized solar panels and modules and washing machines once again made clear that such developments trigger among the silliest comments heard in the economics world. Let’s call this behavior “Trade Derangement Syndrome.”
Exhibit One: Several South Carolina politicians, including Governor Henry McMaster, expressed agreement with Samsung, one of the South Korean companies hit with the washing machine tariffs, that the duties “are a great loss for American consumers and workers.” The consumers part is understandable – though not very credible unless you believe that it’s easy for companies to raise prices significantly in current and foreseeable U.S. economic conditions. But the workers part is completely off the wall.
After all, Samsung is now completing construction of a washing machine factory in the Palmetto State. Further, the company has admitted that the likelihood of the tariffs led it to begin producing in the United States. One of its senior executive American executives, John Herrington, stated earlier this month that, “Because we are committed to supplying the U.S. market from Newberry [South Carolina], no [tariff] remedy is necessary,” Locating the new factory in South Carolina was a separate decision, but Samsung’s rationale couldn’t be more clear. Ditto for the win for South Carolina and its economy.
So what’s with the state’s complaints? According to Herrington, although Samsung intends to supply most of its U.S. needs from the South Carolina facility, “We can’t supply all of those needs immediately in January. We will need to import washers so that we can supply a full range of products to our retailers and consumers during the ramp-up period.
“If we are unable to offer our full range of products to retailers and consumers, we will lose floor space and sales, impacting the success of our South Carolina operation. So the ultimate impact of the proposed tariff is a lose-lose scenario for U.S. production, U.S. employers and U.S. consumers.”
But this explanation makes absolutely no sense – unless you believe that Samsung will cut production even after the factory is running full tilt, and even permanently. What doubtless will happen is that the company will keep importing some products until that point; due to the tariffs, it will absorb lower profits in the process; and then they’ll be restored as the ramp up is completed.
So either the state’s politicians are completely ignorant about manufacturing realities, or they’ve decided that their bottom line is serving as Samsung spokespersons – not promoting South Carolina’s economic fortunes. I.e., maybe they’re not really deranged after all?
The second example of tariff derangement syndrome comes from American Enterprise Institute economist Mark J. Perry. In a post yesterday on the think tank’s blog, Perry blasted the Trump tariffs as an example of the administration’s “American Consumers Last” trade policy. That’s entirely reasonable.
What was entirely goofy was Perry’s claim that the “voice of the American consumer” has been “unheard” as the administration considered the solar and washing machine cases. Can anyone doubt that that’s been a major argument made by the plethora of politicians, lobbyists, academics, think tankers, and editorial writers who opposed the tariffs?
It’s probable that what’s thrown Perry’s compass off is not the absence of pro-consumer arguments in the trade policy debate, but the fact that the President’s decisions could indicate that a multi-decade period of overwhelmingly and singlemindedly pro-consumer American trade policies is ending. If that’s the case, then expect ever greater disorientation in establishment ranks. But what a negligible price to pay for restoring reasonable balance to the nation’s approach to the global economy.