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Samizdata, derived from Samizdat /n. - a system of clandestine publication of banned literature in the USSR [Russ.,= self-publishing house]
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Samizdata quote of the day – The new mercantilism There is strategic competition with economic rivals, notably China, especially around advanced technology, supply-chain dominance, and industrial sovereignty.
But tariffs raise costs for domestic firms that rely on imported components, in some cases hurting US manufacturers rather than helping them. Indeed, recent data show US manufacturing has contracted, with some firms citing tariffs as a reason for layoffs or relocation. Retaliation from trade partners can offset gains via higher tariffs abroad, disrupted supply chains, and increased uncertainty.
The welfare benefits of rising domestic output are modest under many models because gains might be outweighed by efficiency losses, higher consumer prices, and reduced variety. And the government risks politicizing trade decisions, which may lead to cronyism or poorly targeted protection by helping politically connected sectors rather than broadly boosting national economic health
– Madsen Pirie
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Who Are We? The Samizdata people are a bunch of sinister and heavily armed globalist illuminati who seek to infect the entire world with the values of personal liberty and several property. Amongst our many crimes is a sense of humour and the intermittent use of British spelling.
We are also a varied group made up of social individualists, classical liberals, whigs, libertarians, extropians, futurists, ‘Porcupines’, Karl Popper fetishists, recovering neo-conservatives, crazed Ayn Rand worshipers, over-caffeinated Virginia Postrel devotees, witty Frédéric Bastiat wannabes, cypherpunks, minarchists, kritarchists and wild-eyed anarcho-capitalists from Britain, North America, Australia and Europe.
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It’s sad that this even needs to be pointed out. Protectionism backfires almost always.
America’s most sensible policy regarding industry is on energy. US energy input costs are far below those in Europe. That’s a major edge. And largely self inflicted in Europe’s case.
For sectors that have military dimensions, it would be better to shield certain industries temporarily and with a clear limit.
What about IP theft and China in particular? My suggestion for any country is to require all Chinese exporters to enter JVs. They require that of us, so it’s fair to return the favour. That includes tech transfer.
Tariffs are a blunt instrument in response to these specific issues. That includes complaints about currency manipulation, much of which doesn’t really apply. The dollar is down quite a bit against a basket of currencies, including the yuan.
The dark night of tariff-driven bankruptcy is always descending in the United States and yet lands only in Europe.
The Ghost of Thomas Wolfe
@Johnathan Pearce
For sectors that have military dimensions, it would be better to shield certain industries temporarily and with a clear limit.
But it is more than military matters. What about antibiotics? What about silicon chips? What about rare earth minerals? There are many things that have a national defense aspect that don’t go boom. This isn’t a guess, we know exactly what happened with regards to China’s sale of PPE during the Covid crisis. Fortunately, PPE is pretty easy to make.
I’m not sure of the answer. I am opposed to tariffs for the same reason I am opposed to taxes. But I think these things do address the fundamental narrowness of some economic reasoning. We are not logical people. We are not trading partners trading with only economic goals. Trade reduces the risk of war for sure, but economics does a poor job often of factoring in the egos and ambitions of men who run countries.
What about IP theft and China in particular? My suggestion for any country is to require all Chinese exporters to enter JVs. They require that of us, so it’s fair to return the favour. That includes tech transfer.
Of course an easy way to fix this problem is to compete on a level playing field by eliminating the patent laws that are so burdensome and destructive to competition. But I think you and I have gone round on that one before.
One thing I have been thinking about is this. To be clear my thinking on this could well be muddied, so I am happy to be corrected.
Let’s say I am a US company making antibiotics. Part of my cost of selling to the US public is the taxes I pay — taxes that you might consider a fee for operating in the economic system the US government maintains. However, if I am a Chinese company making antibiotics I do not pay US taxes, and so I am not paying a fee to operate in the economic system the US government maintains. I might pay taxes at the point of sale, or my intermediaries might pay taxes, but the manufacturer itself does not pay taxes in the way a US manufacturer does. A tariff imposes just such a fee. So, by this argument I think tariffs are not much different than corporate taxes.
Would I favor eliminating both? Yes, I think so. But it seems not charging this fee to foreign producers gives them an unfair advantage in our marketplace. Of course they pay taxes at home — but those taxes do not fund the US economy, merely their own.
OK, like I say, my logic could well be flawed, but just something I am thinking about.
And by the way, Mexico’s leftist leader is also embracing tariffs, remarkably similar to those of the Trump admin.
Fraser: But it is more than military matters. What about antibiotics? What about silicon chips? What about rare earth minerals? There are many things that have a national defense aspect that don’t go boom. This isn’t a guess, we know exactly what happened with regards to China’s sale of PPE during the Covid crisis. Fortunately, PPE is pretty easy to make.
Well, when almost everything becomes a matter of security, then you could use that to justify autarky or worse. (I am sure that’s not your intention!)
For most of these things there are plenty of alternatives that make the case for more, not less, free trade: stockpiling of non-perishable items for when they could be needed (speculators in commodities do this all the time, from wheat to iron ore); the mothballing of steel/other facilities in “standby” mode that can be brought on-stream when needed, and so on. If the cost of these measures is more than having to pay high external prices for when there is a shortage, that is the market’s way of saying the costs aren’t worth it. It makes most sense in my view to let market participants hash this out.
Again, all of these approaches are topic-specific rather than indiscriminate, as tariffs tend to be. Also, even targeted tariffs are the result of political horse trading with the lobbyists pitching for this or that exemption, and let’s just say that politicians, even those less venal than Trump, love the power of life and death this gives them over a sector. It is inherently bad.
Patents: Fraser, yes, you are on interesting ground there. To the extent that reform makes sense, it makes sense regardless of whether a foreign power is shitting on IP law protections or not. As for taxes, it seems the overall direction of travel for governments should be to reduce the burden of government and get taxes down, including corporate ones. (As we know from what is called tax incidence, all taxes are ultimately paid by people – a fact lost on much of the Left with its endless calls to hit corporations.)
The great Free Trade economists agreed that imports had to be paid for by exports – the idea that imports could be paid for by creating money from nothing only became fashionable in the 1970s (after the break with any shred of sanity – which occurred in 1971) – as late as that.
So the entire basis of this conversation is false – as it pretends that the present system is Free Trade as Adam Smith and others understood the term. If the United States or Britain are importing non vital goods and paying for these imports with exports of goods – that is fine (that is what Adam Smith and the others meant by Free Trade – that is what John Bright or A.L. Perry stood for), but not a system of importing goods and “paying for them” with “money” created from nothing – leading to more and more of the nation, including the land of the nation, being foreign owned – as this “money” is used to buy assets inside the nation.
As for depending on enemies, such as the People’s Republic of China, for vital goods, or having vital goods (such as computer chips) made only a few miles from an enemy, and thousands of miles from the United States (basing the production of vital advanced computer parts in Taiwan), such ideas are so clearly insane, that they need no further discussion. Adam Smith pointed out that “defense is more important than opulence” as “opulence” which depends on having goods made by enemies, or in vulnerable places near enemies, will-not-last – it can not last.
The system we have now is not Free Trade as Adam Smith, or A.L. (Arthur Latham) Perry, or Frank Fetter, or any of the great economists would have understood the term – even as late as the 1960s the system we have now, “money” created from nothing and used to “pay for” endless imports, would have been considered utterly insane – because it is utterly insane.
“But Americans (or British people) are no longer capable of making advanced goods” – if (if) that is the case, then America (or Britain) is going to die, regardless of trade policy.
The education system and the culture, needs to be restored – the “Progressive” “Social Revolution” needs to be reversed.
Importing vital goods because the population has, allegedly, become degenerate, is NOT a solution – quite the contrary.
For the first time in decades the US will see fair trade as thanks to Trump levelling the playing field for American workers and businesses.
I understand the concerns about tariffs but imo they have their place as a tool for achieving economic and strategic objectives — and I certainly trust trump over the TDS media.
The tariffs are Trump’s response to a long-standing bee in his bonnet about the rest of the world “freeloading” off the US. What he should have done was moved against China but not shafted allies around the world. For example, at one point he was ranting about Japan not buying American cars, despite most of these not fitting on Japanese roads. He hit Vietnam with tariffs when the “unequal trade” was tiny in magnitude and some support for Vietnam would have cultivated another ally and trade partner in Asia. Clearly both he and Vance hate the EU, so he’d be happy to hurt the US economy a little in order to hurt the EU more.
As for the materials argument….
If the United States, which has iron ore and other materials – and all forms of energy, can not even make steel competitively – then it might as well admit death. Admit that it is dead – that it can not live.
Tariffs should not be needed – American steel should be competitive without them.
However, the American Dollar is greatly overvalued – the idea of a fiat currency being the “World Reserve Currency” is utterly insane and should be ended.
The exchange rate needs to drastically change – downwards.
“But American living standards will fall”.
Living standards based on Credit Money bubbles, rather than productive work, are artificial and can not be maintained.
Bizarrely a majority of the American House of Representatives (including some RINO members) believe that “Collective Bargaining” in government service, which even Franklin Roosevelt held was a conspiracy against the taxpayers, is somehow a “good thing” – and wish to overturn President Trump’s March 2025 Executive Order against Collective Bargaining in large parts of the government service.
The political establishment is a long way from understanding that government backed “Collective Bargaining”, rightly held by W.H. Hutt (“The Strike Threat System”) to be a machine for creating UNEMPLOYMENT, needs to be ended in industry – steel, cars and so on on.
Neither government or government backed (and they have been government backed for more than 90 years) “Collective Bargaining” unions, have any legitimate place in American industry.
“But Britian – what about Britain”.
Sadly a long discussion of the British economy would be a waste of time – as there no longer a real foundation for the British economy, we import food, raw materials and manufactured goods (yes we have farming, mining and manufacturing – but nothing like what a nation of some 70 million people should have) and “export” Credit Bubbles – discussing the British economy is like discussing a bucket – that has no bottom on it.
Given the relative (relative – there is some, just not enough) lack of farming, mining and manufacturing in the United Kingdom in relation to a population of some 70 million people – this bloated population can not be sustained, so there will be, in due course, a radical reduction in the population of the United Kingdom.
That reduction is likely to be a very unpleasant process.
The population density of the Czech Republic is 137 people per square kilometer.
The population density of England is 430 people per square kilometer.
It is true that the population density of Scotland, Wales and Northern Ireland is much lower than England – but they, in part, depend on subsidies from England – which is, itself, not a sustainable economy (it used to import food and export manufactured goods – and whilst it still has both farming and manufacturing industry, it now imports BOTH food and manufactured goods – it also imports raw materials, whereas the United Kingdom used to be a major exporter of coal and so on).
The population of England will fall dramatically in due course – as its economy (its real economy) can not sustain the present population.
Those who have the financial means to do so would be well advised to leave the United Kingdom before this adjustment gets under way – as the process is likely to be very unpleasant.
Many people of financial means have already left, or are leaving.
Paul, you sound like the “population bomb” doom-monger, Paul Ehrlich, from
the early 1970s. He famously lost a bet vs Julian L Simon.
Population density isn’t the issue: weak real productivity, lack of innovation and upward mobility are the problems.
Marius is spot on. Hammering other countries as well as China is one of Trump’s main errors. It undermines his own stated goals, to the extent he has them. That’s a point that ragingnick to consider.
None of this criticism should be dismissed as “TDS”. That’s getting a bit shopworn as a line.,
Marius – neither the European Union or the United Kingdom can really be considered “allies” of the United States.
After all if President Trump or Vice President Vance spoke or wrote in the way they normally do, and were citizens of the United Kingdom or of the European Union (“Hate Speech laws” are mandatory for E.U. “member states”) they would be sent to prison – and it does not take more than a few minutes watching the BBC or “France 24” English language (but French government owned and run) television to see the vicious hatred of the United States (not just hatred of President Trump and Vice President Vance – hatred of American principles generally).
The United States is already, and rightly so, in the process of granting political asylum to people persecuted for their political beliefs by the GERMAN government (Germany is the most important economy in the European Union) – where even mild mockery of the political elite may result in fines and imprisonment.
So it makes no sense to consider these governments “allies” – allies do not want to send you to prison, allies do not hate you. The United Kingdom, France, Germany and so on, are not allies of the principles of the Constitution of the United States – indeed these governments consider the Bill of Rights (the First Amendment, the Second Amendment – and so on) to be “Crime Think”, and ALSO have a deep hatred (actual hatred) for the principles of Christianity – for example France holds abortion to be a “Constitutional Right” and the British government considered abortion, but NOT cancer care, to be “essential medical care” even during the Covid lockdowns – and is pushing the chemical sexual mutilation of children, to leave them infertile.
Vietnam is a Communist Party Dictatorship – and whilst it did have border clashes with the People’s Republic of China in 1978 (and still has a border dispute now), it can never really be an ally – under the current regime, the situation may change if the Communist Party regime there falls.
However, I AGREE with you about Japan.
It is true that some governments of European Union “member states” insist they are allies of the United States – and that they reject the (utterly evil) principles of the European Union and the rest of the “International Community” (United Nations agencies and-so-on).]
However, these nations (Hungary springs to mind) are caught in a contradiction – in that what they say they believe in, is not compatible with European Union membership.
So they will have to choose – are they friends of the United States, or friends of the “International Community” (of which the European Union is part) – they can not both, the contradiction must be resolved one way or the other.
They can not be an ally of the United States AND an ally of the governments of the United Kingdom, France and so on.
By the way – “France 24” is, in a way, deeply amusing.
They have some sort of folk memory that they are supposed to have “discussions” – so they invite on guests, but the guests always have the same opinions (world-view) as the presenters of “France 24” – so the “discussions” are just repeated statements of the same opinion (“Trump evil”, “yes Trump evil”, “I agree – Trump evil” – or whatever the subject for the “discussion” is).
Of course if a guest were to express a dissenting opinion, for example on whether it is desirable to have an increasing number of followers of Islam in France, that guest would risk arrest and imprisonment in France – as in other Western European nations, and in Canada, Australia and so on.
Johnathan Pearce – please read my comment again.
I made it clear that I was not objecting to population as such, I was pointing out that production does not match this population.
I have typed that we do not produce anything like what we need to in to sustain a population of this size – because that is so.
It is NOT just a matter of food – as we also import raw materials and manufactured goods.
It is NOT that we have no farming, mining or industry – it is that we do not have enough farming, mining or industry to sustain a population of some 70 million people.
British production, of food, or raw materials, or manufactured goods is not going to massively expand – it is (with endless taxation, regulation, and crippling energy costs) going to contract – we are going to produce even less than we do now.
This is not very complicated – and you are a highly intelligent person, I suspect you (deep down) understand this matter very well and have contingency plans to leave this country before it falls apart – and you are wise to have such plans, should things turn very bad – which they will. Indeed you yourself have written, and written very well, on how British farming and manufacturing is being crippled – production is not going to expand, production is going to contract – the population of 70 million people will not be sustained.
But then I am breaking my own rule – and going into a long discussion of a hopeless situation, so I will stop here.
It is possible (unlikely – but possible) that America will survive – that is why there is still the torture of hope about the United States, sadly, tragically, there is no such torture of hope about the United Kingdom.
And now the British Museum is being looted – some 400 items stolen.
The decay continues – a little while ago it was Louve in Paris, first the robbery (made easy by the new “inclusive” cabinets which, unlike the old ones, did not go into to the floor when attacked – and the new “inclusive” cabinets were also ugly, as one would expect), and then by water damage – destroying ancient books and documents.
But why preserve the history of historic nations when it is the obvious intention of the international establishment to destroy these historic nations.
Treason, treason, treason.
That word, treason, sums up the policies of the international establishment – their economic policies (“spend, spend, spend” “it is good for GDP”), and their cultural and social policies.
Most certainly including their migration policy – which will eventually lead to genocide, the death of peoples who have existed for thousands of years.
@Johnathan Pearce
Great comments as usual. However, I want to focus on practicalities — the reality that we do no live in a world of perfect markets and the reality of politics and public sentiment profoundly interfere with market action.
For most of these things there are plenty of alternatives [to tariffs to ensure supply of critical goods]
Yes there definitely are market mechanisms to manage this however, a lot of these mechanisms are not approved of, and oftentimes criminal. We see this all the time. A hurricane hits and the normal market mechanism is that Walmart would anticipate, over stock, and then move into the area and sell the necessary goods at much higher prices to compensate them for their risk and good planning. Or Johnathan the entrepreneur would get a boat, float through the flooding and sell hot food and emergency supplies at three times normal market costs.
However, this is called “price gouging” and is frequently illegal, and even if not illegal, is highly frowned on, destroying reputations and may start riots in the street. No amount of arguing about Milton Friedman is going to fix that problem.
As to having steel mills or whatever on standby — who is going to pay for those? Probably not the steel company — sure in a free market they might as an insurance against supply shock or whatever, where they could charge far higher prices to compensate them for that. But, as we just discussed, that is often illegal. The government could fund it or subsidize it, but that is really the opposite of what you want anyway.
that is the market’s way of saying the costs aren’t worth it. It makes most sense in my view to let market participants hash this out.
Except that the government won’t allow that. When the market says this the government and large swaths of the general public consider it hate speech and want to throw someone in jail.
So let me say this a different way. Jesus tells us that the wise man builds his house upon a rock and the foolish man on the sand. Were companies and trade built on the solid rock of a free market economy, everything you say would to spot, on, high five, 100% agree. But companies and trade are built on the sand of a highly interventionist, politicized economy. And when you build your house on the sand you have to do a lot of stuff that seems counterproductive and stupid, but is necessary to keep it afloat.
Patents: Fraser, yes, you are on interesting ground there. To the extent that reform makes sense, it makes sense regardless of whether a foreign power is shitting on IP law protections or not.
That’s true, but I think it misses a nuance. If I have 100,000 problems to solve which do I solve? I prioritize and chose the most pressing one. So if patent law is one of 100,000 things the government needs to fix the fact that it is exacerbated by the Chinese IP situation pushes it much further up the priority list. Of course the fact that it would be impossible to change the patent law significantly in the west immediately pushes it back down again. But I can dream, can’t I?
As for taxes, it seems the overall direction of travel for governments should be to reduce the burden of government and get taxes down, including corporate ones.
That’s true, however, I just wish those who railed against trade tariffs were as equally vocal about corporate taxes, because, as I said earlier, to my lights they are kind of the same thing, except that those tariffs are imposed on foreigners, and I think we should be more concerned about our domestic industry than foreign industry, much though trade is a good thing.
Now I should also say that Trump is using Tariffs for more than revenue collection, but to manipulate behavior. But it is worth pointing out that all tax codes do this too — they manipulate the taxes to encourage you to buy a house or donate the charity or buy municipal bonds. And I certainly have mixed feelings about this. There is a lot I like about Trump, but I do feel in a number of ways he is getting over his skis. But with this, and the aforementioned house on the rock or the sand, I am reminded of these stupid game shows. You are starving and are given the option of eating spiders or worms. You might dream of a steak dinner with a nice cold beer, but you still gotta pick one or you’re gonna starve.
“So the entire basis of this conversation is false – as it pretends that the present system is Free Trade as Adam Smith and others understood the term.”
Of course. Sure.
And the elephant in the room is the welfare state.
You can’t have a welfare state financed by high taxes (and money printing) and compete with China. You can’t subsidize dozens of millions of people so they can do drugs on welfare money, and refuse to work. You can’t inflate wages artificially, by minimum wage laws, unions, and most of all by welfare – and the compete with China manufactured goods. ( Welfare inflates wages because people have the alternative of living on welfare, and will refuse to work for low wages).
And regulation. You can’t regulate industry to death (especially environmental regulation) and compete with China.
So, with or without tariffs – there is no an iota of free trade in the world.
Of course, tariffs, especially tariffs alone, won’t help correct all the problems mentioned above. They might help a little to correct some minor problems (like imbalance of trade), and might not. But this is a minor problem, if at all.
We do not see Trump address the real problems. Like the deficit and money printing. He seems happy with the deficit and only wants to increase it. He is happy with the welfare, he refuses to contemplate entitlements reduction. Etc…
So, Trump’s economic policy is mostly empty bluster.
Trump should be praised for some of his initiatives. Mostly for fighting the climate change idiocy. Maybe a little for reducing illegal immigration. And, of course, for fighting wokeism. On these issues he is a huge improvement over his predecessors.
As for tariffs – and his frequent and arbitrary oscillations on them – it would have been much better if he would have refrained from wasting his energies on this.
Its weird that mercantilism was never complained about much when China did (and does) it, or indeed when Germany did it, but when Trump tries to do it all hell breaks loose, with the free trade zealots denouncing him left right and centre, in a way they never did for anyone else. Funny that.
Both Chinese & German economic policies have always been rather frowned upon on this particular website well before Trump became a thing 😀
Paul,
A densely populated country like the U.K. makes a living in a number of ways. I doubt there’s some calamity of such a scale in the offing to lead to the kind of collapse you seem to keep predicting. The same risk can apply to many other Western countries.
What I suspect is more probable is a slow, relentless downward erosion of things here in the U.K.
Jacob: my sentiments exactly.
Fraser: the problem with your arguments is that, as I wrote earlier, the real-world imperfections you give, including government stupidity, could be used to justify even more stupidity and intervention in a ratchet effect. Tariffs also feed on a sense of resentment and entitlement that rarely produces good outcomes. And the political corruption, lobbying and all the rest is not good.
I don’t understand the “hate speech” point and how it applies to leaving certain things to a market.
In things like a standby steel mill: there no reason why a defence department couldn’t have a basic budget to keep a few things under its oversight so it has resources to built ships or whatever. It’s like having a backup generator in a remote farmstead.
If governments are meant to provide a safety net then then providing things like backup resources (lifesaving equipment, some production facilities, medicines, etc) seems a legit thing. But again, this is about a targeted approach. And there are benefits to having as free economy as possible: fast-growing places can buy lots of stuff, forge supply chains, invest in new ideas, R&D, etc. There are risks in trying to do everything ourselves. Trade can be a risk mitigator.
That’s what the direction of travel should be.