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This seems to be the standard justification for tariffs that I hear. I don't think it's realistic, but then again, I have only a cursory understanding of the subject.
From the numbers I've seen, most western countries have a some small niche industries that they protect, and so they have high tariffs on those. But those niche industries account for a very small percentage of overall trade. Take, for example, the US and Canada (before the current Trump tariffs). Canada puts huge tariffs on US dairy. And the US puts huge tariffs on softwood lumber. But those are only a tiny percentage of total trade. So while there were double digit tariffs in those specific categories, the overall effective tariff rate was very low (1-2%) flowing both ways.
Is that not the case?
Kind of.
'Overall effective tariff' is always a bit of a shell game that depends on how you calculate averages. It is basically always in your interest to present your 'overall average' as low as possible to look better than the opponent / disqualify critiques. This in turn leads to incentivizing constructing a standard that lets you average things in a more favorable way. Note the dispute over formal tariffs and informal trade barriers, which were factored in to the trump tariff claims. Or how media on EU vs US cartariffs emphasize the US pickup truck tariff versus an EU automative tariff. How you gerrymander the boundaries matters. Which numbers you draw attention to matters. As they say, there are lies, damn lies, and statistics.
Because there is no single standard on how to calculate such an 'overall effective tariff,' it is a claim that requires either perfect transparency, or trust. And since governments tend not to be perfectly transparent even at the best of times, let alone when money is at stake, this comes down to trust. Critically, this is both trust in the other side (who you know has an incentive to present their best face), but also a trust in your own side's negotiators to actually meet that 'fairly.'
Part of the issue in the current trade war is that the American foreign trade establishment, like much of the rest of the political establishment, has broadly lost trust / credibility. This has been part of the dynamic since the neoliberals were forced to concede major policy negotiating mistakes, such as the deindustrialization of the rust belt due to various trade concessions with, say, NAFTA, or Europe, or letting China into the WTO. Some of these were explicit tradeoffs 'for a greater good', where economic forecasts of 'we know you'll lose these jobs, but we're sure you'll get better jobs' never materialized. The regional-specific dynamics of free trade were somewhere between under-recognized, dismissed, or actively mislead by interests with their own priorities. (See the favored trade policies of city-based service-industry establishments that tend to prioritize, well...)
What this means is that 'niche industries are well protected but relatively small' is a bounding argument whose bounds relies on trust. Trust in those numbers, trust in the people providing the numbers, and trust in the judgement of people who helped create those numbers, i.e. previous institutional elites caught up in the anti-establishment political movement.
I mean, I agree on a bunch of the points about why the establishment has lost credibility in terms of protecting domestic manufacturing interests. In my view, letting China into the WTO was the single largest political blunder of the last 50 years. But that doesn't change the fact that mathematically an overall effective tariff rate should be relatively straight forward to calculate. TOTAL_TARIFFS_PAID / TOTAL_VALUE_OF_GOODS doesn't leave a lot of wiggle room. I suppose you could always add other taxes onto the goods once they've entered the market and not charge them at the border, but that wouldn't exactly be subtle or easy to cover up.
That's meaningless. If Canada puts a 1000000% tariff on US dairy, the US will export 0 dairy to them and there will be 0 tariff paid.
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The reason it's not relatively simple is because states, and more importantly corporations, don't use TOTAL_TARIFFS_PAID / TOTAL_VALUE_OF_GOODS as the basis of evaluating tariffs.
For one thing, that's a retrospective evaluation (how much you did pay) as opposed to the forward-planning factor that comes with things like quota-steps (first X amount receives Y tariff, second X amount receives Z tariff, etc.). Companies are looking at their marginal gains for continuing to ship more product to the location. When the marginal costs exceed the marginal gains, the rational members stop, regardless of if they'd still 'average' a net positive overall.
Even the premise of 'Total Value' is totally gameable. What, specifically, is a particular country using for the value they are using? The cost of the product at time of purchase? At time of entry into the market? Value-added tax at a particular point in assembly? At time of sale to final customer?
Further, how are you combining categories? Are you biasing the data with mean averages, or median averages, or are you- more likely- mixing the two methods?
Yeah, but I don't think the details add much in the context of this conversation.
We're not talking about a specific corporation deciding whether to ship one more container load based on marginal costs hitting a quota step. We're talking about the justification for blanket "reciprocal" tariffs, i.e. zeke's point about hypocrisy "fuck you for doing the very thing we do." It seems to me that the overall effective tariff burden is the relevant stat when discussing whether the existing tariffs justified the kind of blanket tariffs currently being enacted, simply because the burden of the new blanket tariffs will approximate how that stat is calculated. If that stat is actually about 1% then that's a defense against the hypocrisy claim.
Part of the challenge is that you don't see trade that doesn't happen. We don't know the counterfactual of how large trade would be in a heavily tariffed vertical absent the tariffs. Sure the US exports very little milk to Canada so the high tariff there doesn't mean much, but that just assume the conclusion, maybe exports of milk to Canada would be way higher if the tariff was lower.
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The MSM seems to think canada's dreaded dairy tariff is effectively 0%.
It's not 0%. It's effectively a (maximum) quota rather than a tariff, though it is written as a tariff with a cliff. It's still a trade barrier.
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