Econ 101 Lessons from Highway 61 Revisited
A year ago, I wrote about twin examples offered by one of Minnesota’s Twin Cities, St. Paul, of the principles of Econ 101 in action. The Saint Paul City Council passed a minimum…
I wasn’t a fan of President Trump’s trade policy. In April 2018, I wrote: ‘Trump’s tariffs could spark trade war that will cost many Americans‘; in May 2019, I wrote: ‘There’s No “Lost Money” in Trade, Mr. President‘; and, in August 2019, I wrote: ‘President Trump’s misguided trade war is hitting Minnesota’s farmers‘.
I feel the need to point this out because when I criticize one administration for doing something a common response is: “Well, you didn’t mind when the other guy was doing it.” So, I want to point out that I did mind when the other guy was doing it as I criticize President Biden’s trade policy.
Economist Anne O. Krueger was also no fan of President Trump’s trade policy. In a recent article for Project Syndicate titled ‘Biden’s Trumpy Start on Trade‘, she writes:
Trump’s trade policies were not only a disaster for US and world trade; they also have made it more difficult for the US to achieve a broader range of economic and foreign-policy goals. Reversing those policies thus should be a top priority for the new administration.
Krueger outlines what she she sees as these policy disasters, but then adds:
Although Biden has reasserted America’s commitment to internationalism and multilateralism, he has moved slowly to repair the damage that Trump did to critical institutions like the WTO.
Nor has Biden reversed Trump’s withdrawal from the TPP. Now called the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, US membership in this 11-country pact would be a boon for US exporters. Currently, US companies are at a distinct disadvantage relative to their competitors in CPTPP countries, because their exports to those economies are subject to duties that do not apply to exports from members of the bloc.
Biden also has not ended the trade war with China, even though that effort has utterly failed to achieve its stated objectives. While the US bilateral trade deficit with China has fallen somewhat, the deficits with Vietnam, Malaysia, and others have risen commensurately as their exports have replaced those from China.
Although the Biden administration has finally agreed to a new director-general for the WTO, it has done little to reduce Trump’s tariffs, and has even announced that it will strengthen “buy American” provisions in government procurement contracts. Biden says he wants to protect American jobs, yet the Trump administration’s tariffs on imported iron and steel, which have cost a net total of around 75,000 jobs (leaving out the additional losses caused by other countries’ retaliatory tariffs), remain in place. If Biden really wants to help American workers, he should recognize that exports create good jobs, and that the export sector’s contribution to US GDP has doubled as a result of open multilateral trade.
I wasn’t the only economist to hit President Trump for his trade policies. But there are fewer of us hitting President Biden for policies which are essentially the same.
Take lumber. Last month, Kare 11 reported:
It’s no secret that the housing market is hot in the Twin Cities.
There’s just one problem for those soon-to-be homeowners who would rather build their own dream home: skyrocketing lumber prices.
“In my segment of the market, the lumber prices would have been $100,000 to $200,000. Now, literally we’re $175,000 to $300,000+ and then going up 5% month over month. That’s not sustainable,” said Rebecca Remick, COO for home builder City Homes.
Remick is familiar with the theories about what’s driving prices up. The increasing price of lumber could be due to COVID restrictions in the mills, combined with more people starting their home projects during quarantine.
“The demand is putting more pressure on the mills and they’re at 50% capacity and they just can’t keep up,” said Remick.
While City Homes hasn’t seen a decrease in demand quite yet, Remick said builders are reaching a breaking point, with no sign of lumber price increases slowing down anytime soon.
In the meantime, Remick suggests those looking to build a home talk to their builder about how to handle the prices increases.
“We really need the mills and the government to figure out how they’re going to fix this problem,” said Remick.
One thing the federal government could do is cut tariffs on Canadian lumber. The Trump administration hiked these in 2017, but cut them again, from 20 percent to 9 percent, in late 2020 amid concerns about rising lumber prices.
Instead, incredibly, the Biden administration is planning to raise tariffs on Canadian lumber. Reason reported last week:
The Commerce Department announced on Friday that it was taking the first step toward hiking so-called “anti-dumping tariffs” on Canadian lumber from an average rate of 8.99 percent in 2018 to 18.32 percent for 2019. Yes, 2019. If approved through what is likely to be a lengthy review process, the tariffs would apply retroactively to purchases made for the past two years. That means American importers could be on the hook for millions of dollars in taxes they didn’t even know they would owe—taxes that will likely be passed down the supply chain in the form of higher prices.
This is crazy. And if you’re wondering where that affordable housing went, here you go: government took it.
When then-candidate Trump said that he and Senator Bernie Sanders had “very similar” views on trade, Politifact rated it ‘Mostly True’. It is often said that bipartisan agreement is the aim of the political game, but if you find yourself agreeing with Sen. Sanders on an economic issue, it is worth going away and thinking about it some more. These trade policies were harmful to America under President Trump, and they are harmful to America under President Biden. Bad policy is colorblind.
John Phelan is an economist at the Center of the American Experiment.
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