About those Tariffs

The President, through his adviser Peter Navarro, has offered a powerful argument for tariffs on steel and aluminum: national security.  National security, no pun intended, is the ace of trumps in the policymaker's deck.  But it is so powerful an argument that only one counterargument is available: national security.  Everything else is just whinging about the tax that must be paid to cover the cost of the national security interest advanced by the tariff.   Orrin Hatch says that the steel and aluminum tariffs will be a "tax" on the American people.  Yes, Senator, they will be.  We pay overt taxes to fund battleships, so why not pay indirect taxes to protect strategically vital industries?  Hatch's claim is true; it just isn't relevant.

But, tariffs being a political football, all sorts of irrelevancies must be dealt with.  The mainstream media are fixated on jobs, not wonkery.  They don't really care about the national security argument.  They don't even understand it.  The President is implying, correctly in my view, that for our national security, we need to roll our own steel, just as we must grow our own staple foods and supply our own energy.  We must not depend on the kindness of strangers for our survival.  

Mr. Navarro has been making that case on the Sunday morning news shows, but the hosts won't engage him on that level.  They tell us instead that more people have jobs using steel than making it.  So what?  We don't need those jobs for our national security.  GM may sell fewer cars, and we may drink less beer.  We will need to adjust for those losses somehow.  But we must roll our own steel, says Mr. Navarro, so what else matters?  At least, that's what he could say.  Instead, Navarro denies that the downstream effects will be significant.  No point relying on the trumpiness of your card if you can rely on its just having a  higher face value than the other guy's.  And why admit you're imposing a tax if you don't have to admit it?  

To make matter worse, Mr. Navarro cannot resist offering an irrelevant argument of his own, viz., that the US is for free trade if it's fair.  That argument neuters his trump card.  Would Mr. Navarro be for fair trade if it meant importing steel rather than producing it?  What if China responded to our steel tariffs by offering, in exchange for their removal, to lower the tariffs on US goods and to enforce US intellectual property claims?  That would certainly make the tariffs look like a stroke of genius (for a while, but see below).  But it would give the lie to the principal argument advanced by the White House for the tariffs in the first place.  

Both Trump and Navarro are China bashers from way back.  Their concern was not that China was preventing us from making our own strategic goods.  Their concern was jobs.  As Navarro says, we are exporting our wealth and jobs under current trade rules.  Well, what do we care about more?  Would we give up the strategic goods argument if we could get our jobs and wealth back?  I don't understand the WTO's rules, and maybe the organization is just where the rest of the world unites to fight the US.  But, for some reason, WTO rules allow nations to impose tariffs for national security reasons.  Is Trump's national security claim just eyewash for the WTO?  Could the best argument for the tariffs be a lie?  Would Trump lie?  

It would be nice if the MSM could ask Mr. Navarro about the conflict between his national security argument and his free trade argument, but they don't understand the implications of the national security argument, so they don't.  Rather, they address the national security argument by pointing out that the tariffs will piss off our allies, which is bad for national defense in a different dimension.  That is the DOD's position, but, even if we take it at face value, is it reason enough for us not to make our own steel and aluminum?  

The problem, as with all things Trump, is execution.  Was there no way through diplomacy and negotiation to reach an agreement with our allies whereby we could make our own steel and aluminum?  Did this surgery have to be done with a cleaver?  Granted, our aluminum industry, in particular, is on its last legs.  But Trump's been in office for over a year.  What evidence is there that he has worked the steel and aluminum issue from a national security perspective with our trading partners?  

Sadly, the best argument for these tariffs is the least attractive politically.  That's why we will hear about what it is going to cost us in economic terms instead of what it is going to gain us in national security terms.  How do you measure the value of not having to rely on Chinese steel?  (China accounts for 2% of US steel imports, but it's not clear how much steel from other places is transshipped from China.)  What is the value of not having to rely on Canadian steel?  Brazilian steel?  It's very difficult to understand and evaluate the benefits of resource independence in the abstract.  And yet, that's the best reason for the tariffs, if they will, in fact, make us safer.

Meanwhile, what about Trump's real trade agenda, getting rid of the trade deficit that he says arises from unfair trade.  I doubt our feckless leader has ever heard of Robert Triffin.  Mr. Navarro should have heard of him, as Triffin's Dilemma lies at the heart of Mr. Navarro's misguided trade policy.  The "unfair" trade that creates our trade deficit is how we put dollars in the world so that it can be the world's reserve currency.  We translate the benefits of being the issuer of the world's reserve currency into benefits to US consumers via lower prices and interest rates (as our trading partners lend us back the dollars we pay them for things they send us).  "Fair trade" means no more exorbitant privilege.  Is that a good thing or a bad thing?  I don't expect these issues to be aired publicly.  But I do expect them to be aired privately within a White House with working brains at all levels.  I wonder if they were....

[Update a day later: Trump tweets that tariffs will be lifted if NAFTA is renegotiated.  In other words, act first, then negotiate to undo the damage.  Sounds like "Take the guns, then give them due process."  This is not a bad way to deal with a weak enemy.  It was how the Russians used the Cuban missile crisis to get rid of American missiles in Turkey.  The tariffs are a demand for ransom.  Mostly from our friends!  What happened to national security?  Oh, well.]