How Tariffs Are Breaking the Manufacturing Industries Trump Says He Wants To Protect
When President Donald Trump announced a sweeping set of tariffs on nearly all imports, he promised that April 2—what the White House dubbed “Liberation Day”—would “forever be remembered as the day American industry was reborn.”
That’s not the way Michele Derrigo-Barnes sees it. Trump’s tariffs are “killing” small American manufacturers like hers, she tells Reason.
As CEO of Plattco Corporation, a small business that makes industrial valves, Derrigo-Barnes runs the sort of blue-collar industrial production shop that Trump and his allies say they want to help. Instead of being helped, she found herself dealing with fallout from the tariff announcement: canceled orders, higher prices, and enough uncertainty to put on hold a planned expansion of the company’s Plattsburgh, New York, manufacturing center on the banks of Lake Champlain.
What would she tell Trump if she got the chance? “Stop the nonsense. We’ve worked hard to get us to a place where we can perform well and we can take care of our customers, and this is putting that in jeopardy.”
The few dozen workers at Derrigo-Barnes’ company won’t be the only ones in jeopardy if Trump’s tariffs remain in place for the long haul. Hundreds of thousands of manufacturing jobs will be lost and only about a fifth as many created, according to an estimate by investment bank Goldman Sachs. Tariffs create higher prices for inputs, which in turn can reduce sales for manufacturers’ outputs, leaving companies worse off. While large companies such as Apple have already successfully lobbied the White House for special treatment, smaller operations such as Plattco have little choice but to eat the costs or pass them along to consumers.
The gap between Trump’s and Derrigo-Barnes’ understanding of how tariffs affect American businesses is even larger than the gap between D.C. and Lake Champlain. Trump’s global trade war has illustrated the folly of central planning, even when carried out by supposed populists who claim to be guided by the best interests of working-class Americans. It has revealed how little the president understands about the economy that he believes he can control, and how his protectionist impulses are hurting the very industries he claims to be helping.
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In an interview with Time to mark his first 100 days back in the Oval Office, the president offered a telling illustration of how he views the American economy.
“We’re a department store, a giant department store, the biggest department store in history,” Trump said. “Everyone wants to come in and take from us. They’re going to come in and they’re going to pay a price for taking our treasure, taking our jobs.”
There are so, so, so many things wrong with this analogy. America does not resemble a department store. The 170 million people in the U.S. labor force are not the president’s employees. It is not the president’s job to set prices or decide what can be bought and sold.
But an even more telling and terrible analogy is hidden inside that bizarre conception of how the economy works. Trump seems to be suggesting a successful department store would be one that raises prices without regard for the consequences on its employees or customers. In his version, a store that makes a lot of sales is giving away its “treasure.”
Walmart did not become the world’s largest retailer by trying to punish its customers or limit sales. The people who run successful businesses understand something that Trump does not: Voluntary trade is a mutually beneficial arrangement. That’s true regardless of whether the deal is between a store and its customers or a factory and its suppliers. It’s also true even if one of the traders is located abroad.
Trump will fail as the country’s department store manager in chief for the same reasons that central planners always fail. It’s simply impossible for the White House to understand and manage trillions of dollars in cross-border trade more efficiently than individuals and businesses do. Trump certainly has no clue what equi
Article from Reason.com
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