That President Trump is making a mistake with tariffs and sanctions is obvious enough. We impose sanctions upon Iran so they cannot trade and thus punish them. We impose tariffs upon ourselves so that we cannot trade and thus we benefit.
The logic cannot possibly hold for both of these. Not trading makes us poorer – thus the sanctions work but the tariffs don’t. But that’s to continue to beat that dead horse.
However, there’s another mistake being made by the administration. Sen. Elizabeth Warren, D-Mass., as usual, manages to misidentify it. She complains that too many foreigners are gaining exemptions from the tariffs. Well, yes, foreigners do tend to be involved with imports. Further, foreign owned companies do tend to buy some of their inputs from their original home nation.
Elsewhere we see that partial waivers have been granted to India and South Korea over buying Iranian oil after sanctions start to bite. This is the same mistake as those tariff exemptions.
Yes, obviously, both sets of actions have costs, heavy costs for some people. It might even be that we don’t want either sanctions or tariffs because of those costs – or that we do despite them. The following being true whatever the righteousness of the original actions – we don’t want exemptions or waivers. That’s just the temptation the lobbying industry needs to swing into action.
Recall what one of the basic Trump appeals was, that he was going to drain the establishment swamp. Kill off that self-perpetuating oligarchy of special interests which carve up the nation to their own benefit. Stop the merry go round of favor-trading that benefits one small group at the cost to society as a whole.
So, what are we observing? Two sets of laws, both of which have exceptions in them – exceptions which, to gain the privileges of them, you need to appeal to exactly that Washington swamp and those lobbyists.
No, really, how do you think that some firm hard-pressed by steel tariffs gains exemption from them? By hiring a lobbying firm, going to meet the varied elected officials, and donating to the right election funds. That nearly ensures the system looks kindly on the granting of that privilege: That competitors are hamstrung by the tariffs, that you yourself are not.
There are indeed restrictions upon lobbying for a foreign power (as various people are being forcibly reminded, by Robert Mueller). But that some countries will gain waivers to import Iranian oil, others will not – foreign agents are going to be working hard on that, aren’t they?
That is, the president who told us he’d drain the swamp has instead thrown barrels of chum to the circling sharks. Just in order to survive, swathes of American industry has had to go beg for their special case. For example, pretty much everyone who uses steel, or countries in the oil market.
I am firmly convinced that both sanctions and tariffs are a bad idea. But if they are to exist, then they must do so equally. To have exemptions and waivers just increases the rent the swamp can charge us all for gaining them. And if the imposition of those trade restrictions without fear or favor is too expensive, well, that’s my original point, isn’t it – they’re a terrible idea in the first place.
Tim Worstall (@worstall) is a contributor to the Washington Examiner’s Beltway Confidential blog. He is a senior fellow at the Adam Smith Institute. You can read all his pieces at The Continental Telegraph.
