Tariffs vs. tax cuts: the Very Stable Genius is undermining what his right hand is doing with the actions of his left

Two pieces for your consideration today.

One is a lengthy - as in cover story of the print edition - piece by Kevin Williamson at National Review entitled "Trump's Trade War Casualties." It's the kind of study Williamson is particularly good at. He profiles two South Dakota farmers, to the extent of tracing the number of generations their families have had roots in the area, and their trade-association activities and extra-agricultural business interests, and paints a spot-on portrait of Sioux Falls ("one of those midwestern gems . . . that punches above [its] weight . . [with] wine bars and ambitious little restaurants").

It's so wonderfully crafted and in need of being read in its entirety that I dare not give you a bunch of money paragraphs, but two little excerpts get to the essence of his point.


This:

Farmers in large part are paying the price for somebody else’s crusade. This is really not their fight. They’re farmers. They don’t do drama and hysterics and Sturm und Drang: They do business. VanderWal said as much in congressional testimony not long ago: “Farmers are patriots. We were willing to step up and take one for the team. But, at some point . . .” 

What’s really annoying to farmers is that none of this is really about them. This is about BMWs and Toyotas and steel and Boeing and the fact that Americans don’t like seeing “Made in China” on socks and flipflops they buy at Walmart because we are losing our position of worldwide sock and flipflop dominance, of front-runner status in the flipflop race, whatever. “For years, this was a nonpartisan issue,” VanderWal says. “I didn’t like Bill Clinton very much, but he did a fine job on trade. Obama worked on trade. The president is right about the theft of intellectual property, and we do broadly support what the president is trying to do.” 

But is it getting done? VanderWal smiles. “The president doesn’t respond well to criticism.”

And this:

“I want to let people know they need to make their planting decisions and cropping decisions, all production decisions based on where they see the market and where they see their own weather pattern and when they can get into the fields in their own area,” says Sonny Perdue, the secretary of agriculture. Translation: Don’t count on a bailout for tariff-crippled farmers to make you whole. There’s going to be something, yes, but that’s just a patch. It is a big wide complex world and, the grand tradition of U.S. farm policy notwithstanding, a check from the government is not a long-term solution.

The other piece I want to bring to your attention is a more straightforward presentation of facts and figures. It's an article at Yahoo Finance entitled "Trump's Tariffs Have Already Wiped Out Tax Bill Savings for Average Americans."

President Donald Trump’s trade wars have already wiped out all but $100 of the average American household’s windfall from Trump’s 2017 tax law. And that’s just the beginning.

That last $100 in tax-cut gains also could soon disappear -- and then some -- because of additional tariffs Trump has announced or is considering. If the president makes good on his threats to impose levies on virtually all imports from China and Mexico, those middle-earning households could pay nearly $4,000 more as they shell out more for a vast range of goods -- from avocados to iPhones.

Subtract the tax cut, and the average household will effectively be paying about $3,000 more a year in additional costs.

“It’s giving with one hand and taking with the other,” said Kim Clausing, an economics professor at Reed College in Portland, Oregon, who’s written a book promoting free trade.

Here’s how the math works: middle earners got an average tax cut of $930 for the tax overhaul passed in late 2017, according to the Urban-Brookings Tax Policy Center. The tariffs already in effect cost the average household about $831, according to research from the New York Federal Reserve.

China Goods

Add in the additional tariffs on another $300 billion in Chinese goods that Trump proposed in May, and is still considering, and that increases the cost for an average family of four to about $2,294 annually, according to research from “Tariffs Hurt the Heartland,” a coalition of business groups.

Trump has also threatened to levy tariffs on all imports from Mexico, starting with a 5% tax beginning as soon as Monday that would increase monthly to 25% in October unless Mexico curbs illegal migration to the president’s satisfaction.

If the tariffs reach their highest level, the annual cost to households would increase by $1,700, according to Gary Hufbauer, a senior fellow at the centrist Peterson Institute for International Economics.

The VSG is not playing 5-D chess, people. He's winging it.

As I've said before, I really have to wonder what private conversations between Larry Kudlow and Stephen Moore are like - when Wilbur Ross and Peter Navarro are not around.