President Donald Trump has lived his entire life in a crony-capitalist business world – not one allowed to flourish in freedom. That makes him extremely unlikely to look at trade as a game better played on the ground by free actors from all nations, not dictated from the top by bureaucrats.
When Harley-Davidson, the classic American motorcycle maker, announced it would have to take its manufacturing overseas because of the trade wars provoked by Trump, the president doubled down. Instead of going back on his decision to place tariffs on steel and aluminum imported from Europe, which prompted European officials to impose 25 percent tariffs on U.S. products, Trump threatened the company, saying it would be “taxed like never before” if they moved overseas.
But the company is in a tight spot.
Every single motorcycle would cost $2,000 more to produce if the manufacturer didn’t move overseas. This would add $90 to $100 million to the company’s overall manufacturing costs every year, which is a fortune. These costs would get passed down to Harley-Davidson customers, who would either stop buying the product or search for something less expensive. In this case, European customers would be the first ones to feel the heavy burden created by this trade war.
However, this isn’t the first time a trade war has impacted European customers in the recent past.
Trade Wars Hurt Everyone, Accomplish Nothing But More Hardship
As Ángel Manuel García Carmona explains, the European Union has engaged in this very destructive game in the name of protectionism as recently as 2017, adding a 28.5 percent increase to the overall cost of Chinese steel. This is because China was making “corrosion-resistant steel” and the European steel industry was angry with all the “dumping” of Chinese goods, so they complained.
So when European leaders criticize Trump, they do so by ignoring their own protectionist policies. Still, criticism is warranted, but not simply because Trump is the one doing it.
Protectionism appears whenever a president or administration wants to make a point that it’s fighting for American jobs and the American consumer. But what trade restrictions do is to actually hurt those they intend to help.
As artificially raised barriers make the cost of producing higher to the producers, consumers get a more expensive end product. That shifts the supply versus demand balance, making it harder for consumers to balance the budget while continuing to buy what they need and/or want. These industries then suffer, as fewer customers can afford their products. And as a result, they engage in crony capitalism, lobbying governments, and lawmakers to help them fight off the competition with even more regulation.
If Trump was sincerely concerned about American jobs and consumers, he would lower tariffs across the board, not raise them.
As economist Richard M. Ebeling said, “the best policy is to simply lower your own existing import tariffs regardless of what any of your nation’s trading partners may or may not do.” Why? Because “the country that raises or lowers its import duties injures or benefits itself much more than it injures or benefits its neighbor,” as put by Henry Dunning MacLeod and quoted by Ebeling.
Unfortunately, the Trump administration doesn’t seem to care much about liberty. So we’re willing to assume this lesson will never really get through until it is too late.