President Donald Trump gathered the CEOs of several top US companies at the White House this past Monday and put them on notice: Move your manufacturing operations overseas and you’ll face a “substantial border tax.”
If you go to another country … we are going to be imposing a very major border tax on the product when it comes in, which I think is fair,” Trump said. “All you have to do is stay. Don’t leave. Don’t fire your people.”
Trump’s notice inspired deeper thought. The biggest of which, is that if tariffs apply to manufacturing products like automobiles and air conditioners, does it apply to other imports such as food and clothing?
China — by far America’s biggest source of clothing — accounted for 37 cents of every dollar’s worth of clothes imported, thereby sucking up the top spot with 37% of all clothing imports. Bangladesh was number 2, accounting for 5.8 percent of all U.S. clothing imports.
The food category is a little different. As the U.S. population has grown in both size and ethnic diversity, the volume and variety of food consumed and imported in the United States has increased correspondingly. American consumers prefer an increasingly wider selection of food products, such as tropical fruits and vegetables, premium coffee, and a greater variety of wines, beers, cheese, grain products, and preserved meats. In 2013, U.S. food consumption totaled 635 billion pounds, or more than 2,000 pounds per capita. Of this amount, imports accounted for 19 percent (123 billion pounds), or 390 pounds per capita.
So how would tariffs impact the clothing and food? A 35 percent tax on imported goods certainly would turn up the heat. It may also give pause to companies deciding where to produce their wares. But if tariffs are implemented, would they work? And what about the unintended consequences?
Concerns vary. Willem Buiter, chief economist at Citi, wrote to clients stating new protectionist trade policies might spark a global trade war, “which could easily trigger a global recession.” Deutsche Bank also weighed-in. The Deutschland opined team that negative risks of a potential trade agenda were “the biggest threat and a possible protectionist turn, which could depress global trade and even trigger trade wars.”
While both Trump and Hillary Clinton zeroed in on worker anxieties over job losses, it’s important to note that at least some American job losses were not due to trade. Losses were due to automation. And crucially, automation not only hits manufacturing, but also affects jobs that require advanced degrees, such as neuroradiology.
Protectionism policies Neglect the concept of “dependent origination,” that nothing exists in isolation, Life cannot be independent of other life. The Japanese term for dependent origination is engi, literally meaning “arising in relation.” In other words, our existence only occurs because of our relationship with other beings. Everything in the world comes into existence in response to causes and conditions. Nothing can exist in absolute independence of other things or arise of its own accord.
We must remember that, if we as a society, choose “protectionism” as the rule of life, we’re most likely to implode. Interdependence is the rule life, whether country or state, business to business, family or friends. You hit one (meaning tariff one) there’s usually an equal and opposite reaction.