San Juan Mountains

San Juan Mountains
San Juan Mountains: Grenadier Range

Wednesday, January 18, 2017

King Donnie's Tariff on German Cars

Earlier this week I posted a piece to this blog about King Donnie's terrible idea to impose a 35% tariff on all cars imported into the Socialist Democracy of Amerika.  Donnie believes that only cars that are made in Amerika should be permitted to be sold to Amerikans.  As a part of his grandiose plan to make Amerika great again he believes that everything ever purchased by any Amerikcan must first be produced in the good, old USA.  Anything not produced here will be hit with a tariff so high it essentially guarantees nobody will buy it, thus ensuring that only Amerikan-made products are ever sold in the Amerikan Empire.  Let's think about that plan for a moment today.
After a quick Google search I discovered that, "The average car is made up of about 1,800 separate parts. This includes some large components, such as the engine, which is inserted as a unit during the car-making process but contains thousands of individual pieces itself."  I also discovered that, "A single car has about 30,000 parts, counting every part down to the smallest screws. Some of these parts are made at Toyota, but we also have lots of suppliers that make many of these parts. The 30,000 or so parts use different raw materials and different manufacturing processes."  These two observations give me occasion to consider our beloved King's proclamation in light of economic reality.  In particular:
  1. How is our King going to define a "foreign" car?  Is the definition of a foreign car exclusively related to where final assembly takes place, as the King seemed to be saying?
  2. If the definition of a foreign car is exclusively related to the point of final assembly, will there be any restrictions on how many of the 30,000 parts in that car must be made in Amerika?  If so, what will the percentage be?  In other words, must Amerikan assembled cars consist of 37% Amerikan made parts or some other percentage?  
  3. Once King Donnie determines the percentage of Amerikan made parts required to make a car Amerikan, who is going to do the counting?  What bureau will be created to count car parts and classify them according to their country of origin?  How much will the taxpayers be forced to pay for this new bureau?
  4. Once Donnie has determined whether a car part is actually a foreign or Amerikan car part, how will he determine if the elements that went into the production of that part influence its final classification? For example, if Donnie determines that a screw is Amerikan made but 51% of the metal in the screw was actually mined in Mexico, will that still be an Amerikan part?  If not, why not? What percentage of Amerikan materials in each part are required to make it an Amerikan part? 
  5. What about exceptions to the general rule?  What will Donnie do if a screw was manufactured in El Paso using ore from Mexico but extracted from the earth with equipment made by Deere?  How will he determine what is Amerikan made and what is not?
  6. If the definition of an Amerikan made car is that it is exclusively assembled on SDA soil, without regard to where the 30,000 parts come from, how can Donnie present himself as a champion of Amerika if almost all the parts in the car came from some stinkin' foreign country?  Surely that is hypocrisy of the highest degree.  Donnie must slap punitive tariffs on all car parts that are not manufactured in the SDA.  He must also slap punitive tariffs on all car parts that are not manufactured using materials extracted from SDA soil.  He must also slap punitive tariffs on all parts of the manufacturing process that utilize some foreign made good such as a foreign made tractor-trailers or railroad cars.  Indeed, if Donnie really wants to make Amerika great again he must shut down all international trade, forever and ever, amen.
King Donnie's ridiculous tariff threats are nothing more than a reconstituted version of "Buy Amerika First."  Proponents of that economically devastating doctrine self consciously ignore the fact that restricting trade to a particular geo-political entity inevitably drives up the prices of all final goods produced, thus gouging the consumers and benefiting the career politicians who administer the programs to enforce their immoral laws.  In addition, King Donnie is utterly oblivious to the fact that his jobs creation program will destroy far more jobs than it creates as the countries of the world erect their own barriers to trade, thus bringing international trade to a halt.  The last time a program like the one being proposed by Donnie was enacted was 1930, when Congress passed the economically destructive Smoot-Hawley Act.  Here are some things you should know about that piece of legislation:

What is the Smoot-Hawley Act?
"The Tariff Act of 1930 (codified at 19 U.S.C. ch. 4), otherwise known as the Smoot–Hawley Tariff or Hawley–Smoot Tariff, was an act sponsored by Senator Reed Smoot and Representative Willis C. Hawley and signed into law on June 17, 1930. The act raised U.S. tariffs on over 20,000 imported goods."   (https://en.wikipedia.org/wiki/SmootHawley_Tariff_Act)

What is a direct result of the Smoot Hawley Tariff Act of 1930?
"The Smoot-Hawley Tariff Act of June 1930 raised U.S. tariffs to historically high levels. The original intention behind the legislation was to increase the protection afforded domestic farmers against foreign agricultural imports."  (future.state.gov/when/timeline/1921_timeline/smoot_tariff.html)

How did tariffs on world trade lead to the Great Depression?
"Eighty four years ago on this day President Hoover signed the now-infamous Smoot-Hawley tariff bill, which substantially raised U.S. tariffs on some 890 products. Other countries retaliated and world trade shrank enormously; by the end of 1934 world trade had plummeted some 66 percent from the 1929 level."  (americastradepolicy.com/did-the-smoot-hawley-tariff-cause-the-great-depression)

So there you have it.  Do you want economic contraction on a grand scale?  Do you want job losses that will make the Great Recession look like child's play?  Do you want soup lines and government "make work" projects? Do you want a return to the good old days of government control over all aspects of economic production, as this country experienced under FDR?  Do you want rationing and gas stamps? If you do, King Donnie is your man. But that is not all.  King Donnie's highly publicized "job creation" is nothing more than a grain of sand at the beach.  It makes for nice photo-ops but has no impact upon the real economic world.
 According to this website, "There were 145,303,000 jobs in the US in December 2016 according to the CES survey of employers. The CPS survey of households showed 152,111,000 employed persons for the month. The US added 156,000 jobs in December 2016 according to the CES survey while the broader CPS employment measure rose by 63,000."  According to CNN, "At least 34,000 - Donald Trump has created about 34,000 jobs: A CNNMoney analysis calculates at least 34,000 jobs attributable to the Donald."  That seems like an overly generous number to me, based upon news reports I have read, but I will give CNN the benefit of a doubt.  Based upon the figures quoted above King Donnie has already increased the number of jobs in the SDA by .02%!  Certainly that is worthy of bestowing the Congressional Medal of Honor upon him, isn't it?  On the other hand, since nobody ever measures this statistic, there are no reports as to how many jobs King Donnie's bombastic economic policies have already eradicated.  Nor are there any projections as to precisely how devastating his reign will be to the economy of the SDA.  All we know for sure is that the last time this country decided to practice King Donnie's economic vision with a vengeance we were plunged into the Great Depression.  Don't come crying to me if that happens again, I didn't vote for the man.

Note:
After writing this post I found an article by Walter Williams in which he made an excellent point.  He wrote, "Life Savers, a candy manufacturing company, was based in Holland, Michigan, for decades. In 2002, it moved to Montreal. It didn’t move because Canada had lower wages. Canadian wages are similar to ours. The mayor of Holland offered Kraft, the parent company of Life Savers, a 15-year tax break worth $25 million to stay. But Kraft’s CEO said it would save $90 million over the same period because sugar was less expensive in Canada."  The reason sugar is much less expensive in Canada is directly due to tariffs on sugar imported to the SDA.  Those tariffs were enacted to prop up inefficient and bloated SDA sugar producers at the expense of the Amerikan consumer.  This is a fine example illustrating how tariffs end up destroying Amerikan jobs.   Well written Mr. Williams. 

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