According to press reports, the Biden administration is on the verge of announcing a quadrupling of the customs tariff (a tax on American importers) on EVs made in China. He may also announce other Trumpian tariffs (“Biden to Quadruple Tariffs on Chinese EVs,” Wall Street Journal, May 10, 2024). That would not be surprising.
In a Regulation feature three years ago, I predicted that Biden would be Trump 2.0 (“Joe Biden’s Economic Agenda: An Early Appraisal,” Spring 2021). I wrote:
In general, the basis of Biden’s economic approach seems to be the belief (which was largely shared by Trump) that voluntary exchange among free individuals cannot be counted on to ensure economic prosperity and individual flourishing. This is perhaps most obvious in international trade, where Biden is likely to continue Trump’s policies. The one difference is that the benefits will go to a different corner of the Washington swamp: trade unions instead of inefficient American companies. But it is all one big swamp. Trump had Peter Navarro to oversee his protectionist agenda, and Biden has an entourage of Navarro imitators to oversee his. Apparently, Biden and his entourage have no more understanding than Trump did that economic efficiency is defined in terms of consumer satisfaction, not producer privilege.
… Like Trump, Biden does not believe in free trade but in “fair trade” as he (and his union‐boss supporters) defines it. He promises to “stand up for America.” Protectionism is the area where Biden is most likely to be Trump 2.0.
If he goes ahead with his reported protectionist plans, Trump 2.0 would be, in this area, more Trumpian than Trump 1.0. As I argued in a recent post, protection against environmental goodies is especially farcical: see “The Farce of Clean Energy Dumping,” EconLog, April 1, 2024. But it is no more economically absurd and dangerous than Trump’s nationalism.
Underlying all this are phenomena that the economics of politics has accustomed economists to see: the politicians’ power greed before organized interests and the logic of interventionism begetting interventionism. In this morning’s Wall Street Journal, Holman Jenkins encapsulates one aspect of the logic of politics (“Whose Trade War Is Worse, Trump’s or Biden’s?“):
Mr. Biden shows every sign of wanting to start a global trade war to protect the high-cost, uncompetitive green-energy industry he’s been building at home with taxpayer dollars.
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I am using for the present post the same featured image (reproduced below) that appeared in the previous one, “The Farce of Clean Energy Dumping.” As I explained there, my idea for DALL-E was that Chinese solar panels and EVs were falling from the sky like manna, and Commerce Department agents were trying to shoot the goodies and prevent people from collecting them. To get DALL-E’s half-cooperation, I had to explain that the guns of Commerce Department agents shoot roses.
Commerce Department agents stop Americans from harvesting green manna from China (DALL-E)
READER COMMENTS
Jon Murphy
May 11 2024 at 4:23pm
Both are equally bad on rule of law, too. Both have openly defied Supreme Court rulings against them and both have worked to undermine and delegitimize the other branches of the Federal Government
Pierre Lemieux
May 11 2024 at 4:29pm
Jon: You may be right, but I think Trump is still difficult to beat in this area. I would say that both share a deep ignorance of the conditions of a free society.
Scott Sumner
May 12 2024 at 3:37pm
Trump is far worse on rule of law, it’s not even close. But Biden is also bad on that issue, as you suggest.
Richard W Fulmer
May 11 2024 at 4:42pm
Trying to determine which of the two leading candidates will be worse for America is far beyond my crystal ball’s power. I didn’t vote in 2020 because the sphere was no more communicative then than it is now. Trump’s post-election antics convinced me that Biden was less bad (“better” and “best” being completely inapplicable), but Joe’s been working hard to change my mind ever since.
The election glass is neither half full nor half empty; it’s lying on the ground, smashed into tiny pieces.
robc
May 11 2024 at 7:01pm
Jo Jorgensen was clearly a better choice than either of those two.
Yeah, low bar and all that, but it enabled me to vote.
Craig
May 11 2024 at 4:54pm
Became aware of BYD EVs from a youtube video of somebody I enjoy who actually resides in Colombia. He noted BYD selling for $10k in Colombia and people there are noting them.
“BYD launched a price war on ICE vehicles last month with the new Qin Plus EV and PHEV models. Starting at $15,200 (109,800 yuan), the new EV officially opened a “new era of electricity is cheaper than oil”
His peso/dollar math may have been off thr cuff, but perhaps a $10k Hilux.
Can these vehicles be purchased in the US right now? Nope.
I would suggest libertarians should consider making this an issue which, at this particular moment, might strike a chord; really might resonate. Right now many Americans are frustrated with the price of new cars and even used cars.
Craig
May 11 2024 at 4:57pm
Something along the lines of, “Subsidizing cars you can’t afford and taxing the cars you can.”
Pierre Lemieux
May 11 2024 at 6:05pm
Craig: I understand that one-fifth of EVs sold in Europe now come from China. One reason why the percentage is 0% in America is that the tariff on imported Chinese cars in America is 27.5% (thanks to Trump 1.0 for imposing 25 points of this tariff). A difference of 17.5% in the retail price (tariffs are paid by domestic consumers) is not insignificant. It seems that safety regulations also prevent the sales of Chinese EVs in the US. The regulations are probably partly disguised protectionism, but I would think that Chinese producers could comply at a cost that would still make their cars competitive on the US market. This is probably why Biden, in his attempt to bribe car manufacturers and their unions, wants to increase the tariff on Chinese EVs to 102.5%, doubling the import cost at the border. And if the Chinese producers and their American partners (dealerships or independent repair shops) think the tariff could still increase, their incentives to invest what’s necessary to sell the cars here are further reduced.
Craig
May 11 2024 at 7:16pm
“think the tariff could still increase, their incentives to invest what’s necessary to sell the cars here are further reduced.”
Precisely, a business model subject to the arbitrary and capricious whims of Leviathan.
With respect to Hilux I suspect emissions because at 10k even with chicken tax I’d buy two sight unseen (They’re Toyotas).
With respect to BYD safety might be an issue, they do an EV, also do a plug in hybrid but also have an ICE car. So not entirely sure why they’re not here, but the mere threat of a punitive tariff would be enough to give me pause.
Craig
May 13 2024 at 9:23am
This is a Y! story on the BYD EV, the Seagull: https://www.yahoo.com/tech/small-well-built-chinese-ev-055434766.html
“Earlier this year, Tesla CEO Elon Musk said Chinese EVs are so good that without trade barriers, “they will pretty much demolish most other car companies in the world.”
steve
May 12 2024 at 9:46am
Neither of these guys is a great thinker. I think this reflects the fact that the idea of tariffs is now widely viewed by the public as a positive. Older poll but the large majority of Republicans support tariffs and a small majority of Democrats support them. That being the case while it would be nice to see actual leadership and opposition to tariffs it wont happen and they will give the voters what they want. Thinking people will oppose the idea of tariffs but as Stevenson noted long ago they make up a minority of the country.
https://www.statista.com/statistics/913391/share-americans-support-raising-tariffs-steel-aluminum-party/#:~:text=U.S.%20support%20for%20tariffs%20between,trading%20partners%202021%2C%20by%20party&text=According%20to%20a%20July%202021,prominent%20industries%20in%20the%20country.
Steve
vince
May 12 2024 at 3:16pm
Instead of continuing its longstanding and unsuccessful campaign to eradicate protectionism, the (mainstream) economics profession should try to determine why it can’t sell the message.
Felix
May 12 2024 at 11:14pm
You’re better than you realize. 2021 is three years ago, not two. (sorry, can’t resist quibbling in your favor)
Pierre Lemieux
May 14 2024 at 9:33pm
Thanks, Felix, for catching this error! I just corrected it.
Laurentian
May 13 2024 at 1:59am
I find this title strange. Joe Biden has an over 50 year long career (much linger than Trump) of being a terrible person with terrible politics so why did we expect him to suddenly do what we want him to do?
Biden did vote for NAFTA and the WTO by the way.
Also most trends are due to group think rather than genuine beliefs. Free trade became popular not because there was genuine belief in it but because expedient to do so after the 1970s stagflation and it became the Current Thing that all sensible people had to support though there was serious opposition. Now that is no longer expedient to be a free trader and it is no longer the Current Thing then it is falling apart.
Also Bastiat, Bright, Cobden, etc. Claimed that free trade would lead to the rise of civilized values? How is that working out? US debt has massively increased since NAFTA and the WTO were created.
Richard W Fulmer
May 13 2024 at 2:21pm
America’s national debt was not caused by free trade. Rather it’s the result of government’s propensity to spend far more than it takes in. Its biggest expenditures are Medicare and Medicaid (about 5.4% of GDP in 2022), Social Security (4.8%), non-defense discretionary spending (3.6%), defense spending (3.0%), and interest on the debt (1.9%). The latter has increased significantly over the last year or so.
Laurentian
May 13 2024 at 4:51pm
I didn’t say that. What did happen was that the welfare state and central planning never went away and are making a big comeback. And that free traders seriously overestimated NAFTA’s ability to turn Canada, the US and Mexico into freer societies.
Also classical liberals and libertarians like to argue that Everything is Fine yet debt is a serious problem. However if Everything is Fine then the debt should not be a problem. But if the debt is a serious problem then Everything is Very Much Not Fine. They argue like this because they are afraid that acknowledging that things have gotten worse is conceding too much to the socons and natcons. If acknowledging serious problems with modern society threatens your entire ideology then I think your ideology has serious flaws.
Richard W Fulmer
May 13 2024 at 5:29pm
Your statement certainly implied it. How else would someone interpret your claim that, “US debt has massively increased since NAFTA and the WTO were created”?
Please find one quote from one reasonably prominent classical liberal or libertarian who is currently arguing that “everything is fine.”
The classical liberals and libertarians whose work I read are arguing that things aren’t fine precisely because the nation’s political parties have largely abandoned the classical liberal principles of individual freedom and responsibility, free markets, limited government, the separation of powers, the rule of law, and constitutional democracy.
If you have to create straw men to support your ideology, then I think your ideology has serious flaws.
Richard W Fulmer
May 14 2024 at 3:29pm
Free trade does, by definition, make people freer. However, it cannot by itself cure all ills and eliminate all government interference in a nation’s economy and society.
vince
May 14 2024 at 1:24pm
Foreign countries hold $8 trillion of US debt. Much of that is from the trade deficit. Maybe not causality, but there’s a connection.
Richard W Fulmer
May 14 2024 at 6:34pm
If by U.S. debt, you’re referring to government securities, then, no, that’s not driven by the trade deficit. Imagine two scenarios: The first in which the government runs a balanced budget where revenues equal expenditures, and the second in which the government borrows to cover its expenditures.
In the first scenario, foreigners who hold U.S. dollars because they choose not to buy American goods have only three other options: buy American assets (land, businesses, buildings), buy American investments (stocks, bonds), or create assets in America (factories, stores, restaurants). So, in this case, there is a trade deficit but no debt.
In the second scenario, those holding U.S. dollars have a fourth option: buy U.S. government securities. They have that option only because our government leaders have chosen not to balance the budget and spend more than they take in. But that debt would exist whether the holders of government securities are American citizens or citizens of other countries. The trade deficit is irrelevant.
vince
May 15 2024 at 3:44pm
And why have our government leaders chosen not to balance the budget? Part of that answer could easily be that the trade deficit offers a ready source of cheap financing. There’s no proof of causality in either direction.
Pierre Lemieux
May 14 2024 at 9:50pm
Laurentian: Trade agreements between national governments should not be confused with free trade, which is among individuals. You may like to have a look at my “The Unbearable Lightness of Free Trade” and “Free Trade Agreements Revisited.“
Laurentian
May 13 2024 at 2:05am
Also Pierre you complained about post-Truth yet support NAFTA and the WTO. How do you square that with the fact that NAFTA and the WTO were passed by notorious liars like Clinton, Biden, Jean Chretien along with Carlos Salinas de Gortari who was elected through vote fraud? The rise of post-Truth was directly caused by the globalization you support.
Richard W Fulmer
May 13 2024 at 2:30pm
The fact that many, if not most, politicians were and are liars suggests that our era is not uniquely “post truth.” However, that doesn’t prove that NAFTA and the WTO are fraudulent any more than it proves that every piece of legislation ever passed is fraudulent.
Before the North American Free Trade Agreement (NAFTA) went into effect on January 1, 1994, there were warnings of a “giant sucking sound” that would accompany the flow of jobs from the United States to Mexico. “In reality,” wrote economist, Thomas Sowell, “the number of American jobs increased after the agreement, and the unemployment rate in the United States fell over the next seven years from more than seven percent to four percent, the lowest level seen in decades. In Canada, the unemployment rate fell from 11 percent to 7 percent over the same seven years.”
Thomas Sowell, Basic Economics: A Common Sense Guide to the Economy, 5th ed (New York: Basis Books, 2015), pages 475-476.
nobody.really
May 14 2024 at 11:39am
At the end of Hamilton, various characters briefly eulogize the main character. Jefferson says “[H]is financial system is a work of genius. I couldn’t undo it if I tried. And I tried.”
In that vein, I cannot fault David Henderson’s economic analysis here. And I tried.
Instead, I will fault people’s discussion of psychology.
Psychologically, people are prone to exaggerate the differences between the in-group and the out-group. Thus, people in each political party will expect to see big differences between the behaviors of members of each group. But game theory suggests that rivals will tend to grow more SIMILAR over time, as each tries to adapt the successful strategies of the other.
People who follow politics might have noted that there’s a kinda tight political race right now. Under these circumstances—ok, under ALL circumstances, but especially under the current circumstances—I would not count on a politician’s words or deeds reflecting anything about his actual beliefs. Rather, I would expect those words and deeds to be tailored to address the beliefs of persuadable voters in swing districts (or perhaps the beliefs of major donors).
As proposed, Obamacare included funds to help people with end-of-life decisions. Republicans started referring to this policy as “death panels.” So Obama eventually demanded that the policy get removed from the bill, too. Do we take Obama at his word that he suddenly had a change of heart about end-of-life matters—or do with think the politics changed, and he felt the need to pander?
Hillary Clinton was a big advocate of the Trans-Pacific Partnership (TPP)—an effort to develop better trading relationships with Pacific-ish nations, and arguably to leverage this agreement to extract better trading policies from China. Then Trump began campaigning that the TPP was an abnegation of American sovereignty. And lo, Clinton began campaigning against the TPP, too. Do we take Clinton at her word that she suddenly had a change of heart about the TPP—or do we think the politics changed, and she felt the need to pander?
Democrats and Republicans negotiated a deal involving military aid to Israel and Ukraine and some more funding to address undocumented immigrants and the southern border. Then Trump began campaigning against the new border funds. And lo, Republicans suddenly backed away from the bill they had negotiated. Do we take them at their word that they suddenly had a change of heart about the new border funding—or do we think the politics changed, and they felt the need to pander?
In short, I commend people’s analysis of the economics. But the suggestion that politicians’ words and deeds reflect something about their actual beliefs strikes me as facile.
ALL THAT SAID, perhaps it is my analysis here that it facile. Perhaps Henderson well understands everything I have said, and does not actually believe that politicians’ words and deeds reflect their actual opinions. Rather, perhaps Henderson is merely trying to influence public opinion, and is pandering to what he perceives to be the prejudices of the people who read this blog. And perhaps he thinks that he will be better able to persuade people if he disparages politicians’ opinions rather than disparaging the swing voter to whom they must pander.
As Walter Lippmann remarked in The Public Philosophy (1955), “[W]e must adopt the habit of thinking as plainly about the sovereign people as we do about the politicians they elect. It will not do to think poorly of the politicians and to talk with bated breath about the voters. No more than the kings before them should the people be hedged with divinity.” U.S. Representative Barney Frank was blunter: “[E]veryone hates Washington. But let me tell you something: the voters are no picnic either.”
Pierre Lemieux
May 14 2024 at 10:16pm
Nobody: I am not sure why you introduced David Henderson here–not that I would be ashamed to be compared to him! The questions you raise have been analyzed by public choice economics for three-quarters of a century. I have often written, including on EconLog, about this economic approach (the economics of politics). I give a quick impression of it in my post “Public Choice vs. Homo Politicus.” Note that one cannot analyze voters’ behavior without integrating rational ignorance in one’s analysis.
nobody.really
May 14 2024 at 11:21pm
Ha! My appologies to David Hendeson and Pierre Lemieux–or my compliments; you pick.
My point is simply to question statements such as these:
Do Biden and his entourage lack an understanding of economics? Do they not believe in free trade? For all I know, they may have the same understanding and beliefs that you do–but they may also have an understanding of their field of expertise, politics, and may have learned that pandering better promotes success in that field. Thus, I try to avoid saying that people’s failure to behave as I think they should reflects a lack of understanding/belief on their part; it may reflect a lack of understanding/belief on my part, or on both sides.
Richard W Fulmer
May 14 2024 at 12:28pm
No one short of a mind reader can divine a politician’s actual opinions. The best we can do is look at their words and deeds along with the results. If we choose to give them the benefit of the doubt and believe it possible that they’re sincere (cue laugh track), we might venture to infer their actual opinions from their actions and rhetoric. But, as you observe, such a venture is probably doomed to failure.
Beyond that, Dr. Henderson’s analysis is spot on; Biden’s protectionist policies are similar to Trump’s and will almost certainly hurt the economy.
nobody.really
May 14 2024 at 4:56pm
Please note that I was not suggesting that we interpret their remarks as candid. Quite the opposite: I was suggesting that we interpret their remarks as calculated–that politicians speak and act in a manner designed to achieve their desired ends. The idea that we should believe that politicians DO speak with candor, and thus we could treat their words as a reliable indicator of their views–THAT’s what should trigger a laugh track.
Recall the definition of a “gaff”: A gaff does not occur when a politician accidentally says something false. It occurs when a politician accidentally makes an accurate statement about a topic that the politician desparately wants to avoid acknowledging. When Republican politicians claim that the 2020 election was stolen, should we criticize them for lacking the cognative capacity to recognize their factual error? Or should we acknowledge that they’re speaking to demonstrate loyalty to their tribe, and the accuracy of their statement is (from their perspectives) beside the point?
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