The Daily Dish

Tariffs, Protectionists, and Rhetoric. Oh My!

This is the era of wrong-headed industrial policy and protectionism, and Europe is an industry leader. Now, it has joined the tariff wars on Chinese electric vehicles (EVs). Bloomberg reported:

The European Union will impose additional tariffs on electric cars shipped from China starting next month, taking levies to as much as 48% in a move that further escalates trade tensions and adds to the cost of buying an EV. The bloc formally notified carmakers including BYD, Geely and MG owner SAIC of the charges on battery-electric cars due to be implemented around July 4, the European Commission said, following an investigation of subsidies that started last year.

As the article notes, the European Union is accusing China of granting illegal subsidies to its EV manufacturers. China’s Ministry of Commerce shot back: “The EU ignored the facts and WTO rules, ignored repeated strong objections from China, and ignored the appeals and dissuasions of many EU member states’ governments and industries.”

This comes on the heels of President Biden hitting Chinese EVs with a 100 percent tariff to protect U.S. EV manufacturers. (And, especially in an election year, their unionized auto workers.) Among the bad news left out of the president’s rhetoric is that the tariff protection will allow domestic EV makers to raise their prices. The average American ends up worse off because of the tariffs. (That’s a general result of protectionism. For a good exposition of the issues, see here.)

These moves are similar in spirit to the so-called Section 301 tariffs that then-President Trump levied against China. His rhetoric has since morphed into support for a 10 percent tariff on all imports, a sweeping, unprovoked, and unapologetic protectionist stance. That tariff is in the same neighborhood as the Smoot-Hawley tariff whose fingerprints were all over the Great Depression. It is also a $300 billion per year tax on U.S. consumers. Yesterday Trump went all-in on protectionist tariffs, floating the idea of getting rid of the income tax and financing the government with tariffs.

To replace the individual income tax would require a tariff raising roughly $2.1 trillion a year. That is seven times as much as the 10 percent tariff, so the starting point is 70-percent tariffs. Of course, if you put a 70-percent sales tax on imports, imports would likely decline a lot. Eakinomics has no idea what the final rate would have to be, but it is the only proposal that can make the FAIR Tax look reasonable – and start a global recession.

As with the other proposals, it is either rhetoric or lunacy, and the U.S. public is praying for rhetoric.

But perhaps the most laughable of the recent protectionist chatter emanated from Airbus CEO Guillaume Faury. Yahoo Finance reports that he:

…agreed that the rise in protectionism had forced the company to engage in more “nearshoring” as a security measure for its supply chain. It currently manufactures 60% of its aircraft in Europe, and 20% each in the U.S. and China.

But he diverged from the typical Western sentiment of blaming China for rising hostilities. Instead, Faury appeared to point the blame at Europe’s greatest ally, the U.S.

“Trade wars are in full swing. And I want to remind you that in recent years, it was not the Chinese who imposed tariffs on European aircraft, but the Americans,” Faury said.

Uh, no. The Trump Administration did impose a 10 percent tariff on European aircraft in 2019, but that was part of a dispute over governmental subsidies to Airbus dating to 2004. It is worlds away from dueling EV tariffs, national security tariffs, carbon border adjustment tariffs, and the remainder of the domestic protection detritus that passes as economic policy these days.


Fact of the Day

Since January 1, the federal government has published rules that imposed $1.23 trillion in total net costs and 43.2 million hours of net annual paperwork burden increases.

Daily Dish Signup Sidebar