December 13, 2016
The supporters of the TPP and recent trade deals are licking their wounds and preparing their counter-attack. Rather than thinking about things like maybe structuring trade deals in ways that don’t disadvantage large segments of the population (yes, this can be done — have free trade for doctors and other highly paid professionals and reduce patent and copyright protection — all in my book, Rigged [it’s free]), they are focusing on new messaging for more of the same. The new messaging does not necessarily involve being truthful.
Hence, the Washington Post made a tool to show “how Donald Trump’s offshoring tariff might affect your shopping.” The tool is a calculator that shows how much Donald Trump’s promised 35 percent tariff on the re-importing of offshored products will raise prices. If you click on, it shows that the retail price of the product is increased by 35 percent. For example, the price of the Carrier air conditioner, that the manufacturer had planned to make in Mexico, would rise by $800 from the $2,400 price listed by Amazon.
The problem with this story is that the basis for the calculation in the Post’s “tool” is the retail price of the product. The basis for the tariff would be the wholesale price of the imported product, which would not include shipping costs, the markup of the retailer, nor many other costs that customers would be paying when they buy it from Amazon. As a ballpark number, the basis for the tariff would likely be in the neighborhood of half of the price that Amazon is listing.
I have said it many times before, and I’ll say it again here, Donald Trump’s plan for company specific tariffs for outsourced items is completely hare-brained. It would be easy to avoid and is hardly a substitute for serious trade policy. But this is not an excuse for making up stories to scare people. The way to have a serious debate on trade policy is to have a serious debate on the issues, not dumping manure on the people who disagree with you.
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