As we all know every economist on the planet has been shouting that we don’t want to have a trade war. The reason being that such trade wars just make everyone poorer. Making people poorer not being known as a useful goal of economic policy. Of course, what does Donald Trump, egged on by Peter Navarro, actually go and do? Have a trade war.
The result is obvious, people become poorer:
“Harley Davidson has struggled with Tariffs with the EU, currently paying 31%. They’ve had to move production overseas to try and offset some of that Tariff that they’ve been hit with which will rise to 66% in June of 2021.” @MariaBartiromo So unfair to U.S. We will Reciprocate!
— Donald J. Trump (@realDonaldTrump) April 23, 2019
As is said elsewhere:[perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””] Donald Trump has threatened to impose further sanctions on the EU after Harley-Davidson posted a slump in sales and profits. Last year the EU hit imports of the Milwaukee-based company’s motorcycles with tariffs of up to 31pc, which Harley-Davidson referred to as it posted quarterly figures on Tuesday. The levies were part of a package of retaliatory measures on US products after President Trump imposed tariffs on steel and aluminium exported into the US. [/perfectpullquote]
Sure, we can see that Harley Davidson shareholders and possibly workers have lost out here. But the people who are really harmed? The Europeans who would like to buy a Harley Davidson. They must either pay 31% more or buy some other, lesser, machine. This makes the European consumer poorer – the point economists keep trying to get over. Whatever the effect of trade tariffs upon producers it is consumers in the place imposing the tariffs who really lose out.
So, let’s walk through this sequence of events then. The US imposes tariffs upon aluminium and steel flowing into the US. This harms US consumers. The EU retaliates. Tariffs are imposed upon Harley Davidsons flowing into Europe. The losers are middle aged European males who wish to pose. Not a group there’s much sympathy for to be sure but that’s who is harmed. In response Trump declares that he’s going to make US consumers poorer again?
Note what the politicians are repeatedly doing. In order the threaten foreigners they are making their own citizens poorer in each cycle. Now do you understand why we don’t want to have trade wars?