Latest news with #Smoot-HawleyAct
Yahoo
7 days ago
- Business
- Yahoo
Murdoch-Owned Paper Roasts Trump in Fiery Op-Ed: Not a ‘Tariff King'
Rupert Murdoch-owned The Wall Street Journal ridiculed President Donald Trump after judges slammed the brakes on his sweeping trade war. The Journal, which Trump called a 'rotten' newspaper in an unhinged attack aboard Air Force One this month, published a scathing piece on Thursday titled, 'President Trump Isn't a Tariff King.' 'A sweeping trade court ruling puts the executive in his proper constitutional place,' the editorial board wrote, referring to the stinging blow dealt to the president when his sweeping tariffs were ruled to be illegal. In a unanimous decision, three judges from the U.S. Court of International Trade, which included Trump appointee Judge Timothy Reif, ruled on Wednesday that the president had overstepped his power under the International Economic Emergency Powers Act (IEEPA), which the administration had used to justify the president's imposition of tariffs. The ruling, however, doesn't affect the levies slapped on sectors such as steel and car imports. However, the U.S. Court of Appeals for the Federal Circuit placed a hold on the decision on Thursday, giving the plaintiffs until June 5 to respond. 'This is an important moment for the rule of law as much as for the economy, proving again that America doesn't have a king who can rule by decree,' the Journal's editorial board wrote. 'The Trump tariffs have created enormous costs and uncertainty, but now we know they're illegal.' 'Mr. Trump invoked IEEPA because he wanted to impose tariffs as he sees fit,' it added. 'But the Constitution doesn't let the President ignore Congress and do whatever he wants.' The ruling came after weeks of market chaos triggered by Trump's sweeping 'reciprocal tariffs' on more than 180 countries, which he imposed on April 2. Trump announced a 90-day pause on the tariffs just a week later, granting a brief window for trade negotiations to take place between every country except China. The U.S. and China agreed to a 90-day truce on May 14 to significantly lower tariffs. Then on Friday, Trump reignited his scorched-earth trade war, taking aim at Apple and Europe with fresh tariff threats. According to the Journal, owned by media mogul Rupert Murdoch, the president is able to impose tariffs using other laws, 'though most are more limited than his emergency claims.' 'The most expansive is Section 338 of the 1930 Smoot-Hawley Act, which lets a President impose duties up to 50% on countries found to discriminate against the U.S. But no President has ever done so,' the board said. The president 'would be wiser to heed the trade court's ruling as the political gift it is and liberate his Presidency and the economy from his destructive tariff obsessions,' the op-ed concluded. Earlier this month, Trump called the Journal a 'rotten' newspaper that has 'gone to hell.' 'Who are you with?' Trump asked a reporter aboard Air Force One, who said they were with the Journal. 'That's what I thought,' the president hit back. 'Boy, you people treat us so badly. Wall Street Journal has truly gone to hell. Rotten newspaper. You hear me, what I said? It's a rotten newspaper.' Trump asked the reporter to 'go ahead' with asking their question, but then refused to answer. 'I wouldn't tell The Wall Street Journal because it'd be wasting my time,' the president said. 'There are talks, but I don't want to talk to The Wall Street Journal. Wall Street Journal is China-oriented, and they're really bad for this country.' The newspaper has criticized Trump's tariffs for months. It previously ran an opinion piece claiming Trump's tariffs could 'sink his Presidency.' 'Mr. Trump was elected to control inflation and raise real incomes, but tariffs do the opposite,' the board noted, adding that 'the tariff shock he's unleashed could sink his second term.'
Yahoo
21-05-2025
- Business
- Yahoo
Trade war tremors: A Q and A with a Kansas economist about tariffs, manufacturing and the workforce
Bekah Selby-Leach, director of the Wichita State University Center for Economic Development and Business Research, considers the trade war and the future of U.S. manufacturing. (Submitted) TOPEKA — Last week's news that the U.S. and China had reached a 90-day tariff deal elevated the uncertainty surrounding President Donald Trump's trade war. But at Wichita State University's Center for Economic Development and Business Research, director Bekah Selby-Leach watches the trade war with the interest of an economist whose deep knowledge helps her interpret what's happening. She answered questions about tariffs, their impact, and what it would look like to strengthen the manufacturing economy. 'A tariff is a tax on the businesses that are bringing goods and services into the country,' Selby-Leach said. 'It really is a tax levied against domestic businesses to encourage them to not import as much but rather produce locally.' 'Oftentimes, people who don't understand tariffs think it's going to be paid by the other country,' she added. 'It might indirectly be paid through a reduced amount of purchasing from those countries, but in this case it really is trying to threaten them with reduced purchasing to get them to change their own policies.' She said Trump administration policies could address trade imbalances. 'About one-third of goods and services are being produced out of the China region,' she said. 'That puts them at a huge advantage in terms of their control of global markets, and the United States wants to reclaim some of that control. It is really just a strong arm move, I think. I don't think they really want to damage the global economy. It doesn't make sense for any governmental entity to put any country or the whole world into a recession.' Selby-Leach and economists nationwide are seeing slow-downs indicative of an approaching recession. The short-term China trade deal led some analysts to reconsider but that news was quickly followed by a U.S. credit rating downgrade from Moody's. That news caused mortgage rates to jump up near 7%. Yet inflation also increased at a lower-than-expected rate, the Bureau of Labor Statistics reported. Much depends on how Trump trade deals benefit the United States, Selby-Leach said. 'If it doesn't go right, it could very well lead to a deepening recession. It is a risky move, but if it does pay off and advanced manufacturing does relocate to the United States, that could have long-term gains,' she said. Current tariff policies in the United States are reminiscent of a similar situation from the past. 'The Smoot-Hawley Act, just after the Great Depression, was the closest version of this as a country,' Selby-Leach said. 'It wasn't worldwide, but it was a substantial number of tariffs that were levied. We do know from history what to expect from these types of policies.' The act passed in June 1930, under President Herbert Hoover, and it increased U.S. tariffs on agricultural imports and thousands of imported goods. Many economists credit it with deepening the Great Depression because of retaliatory tariffs and causing decreased U.S. exports. 'The economist in me knows very much how tariffs play out in terms of taxes — it almost always leads to inflation in prices. There's really no case in which prices won't change if these tariffs take effect,' Selby-Leach said. Almost all goods the United States consumes have some portion of their supply chain that will be affected by tariffs, she said. For instance, the truck that transports products may have parts that are imported. 'That global connection has really helped us grow as a country,' Selby-Leach said. 'Every step of the way, there's an international component that's going to increase the total cost.' In terms of global economic power, Selby-Leach said, there is value in reclaiming and maintaining the country's status. Global economic power has shifted toward China for some time, and pulling some of that back would add more democracy to the global markets, with less centralization in one country, she said. 'It also reduces risk, so if there's something massive that happens in that one country, it won't damage the entire world as much,' she said. 'I can see the reasoning for it, but I don't think the current actions are consistent with the reality of what it would take to shift that manufacturing back to the United States.' Selby-Leach said consumers will 'most certainly' see rising costs of items typically purchased from abroad, even if companies move manufacturing to the United States. 'Take, for example, a T-shirt produced in China. Their labor costs in China are considerably lower, so they're able to produce that T-shirt at a remarkably low cost,' she said. 'Whereas labor laws in the United States, as well as our history of higher-wage jobs, do mean that when that production happens it necessarily will increase in the labor cost to produce that thing.' Bringing manufacturing back to the U.S. isn't as simple as it may appear to be, Selby-Leach said. 'Most countries start off predominantly agricultural,' she said. 'On average, we typically see this movement from agricultural to industrial and manufacturing and then into the service industry, what we would typically think of as part of economic growth, a shift towards services as we become higher educated.' 'Manufacturing is then located in areas that are at that stage in their economic development,' she added. Most of the richest countries in the world do not have a lot of production, Selby-Leach said. 'They offer an incredible amount of service, and that's what economists would say is a natural progression. Whether it's good or not good, that's just the way it works,' she said. 'Moving the opposite direction, I don't know if a country's ever done that without some sort of massive wartime event. During World War II, for example, we produced a lot of goods and services.' High-tech manufacturing, though, can be considered its own new industry, which could complicate the understanding of what a shift toward manufacturing would mean for the United States. Selby-Leach said maybe it means delving into quantum computing or things as yet unknown. Multiple factors influence how the United States would manage a return to manufacturing, Selby-Leach said. China has a head start, as the country has been working on advanced manufacturing for at least a decade. Advanced manufacturing refers to the use of robotics, artificial intelligence, automation and other high-tech advances. 'They have a tremendous investment into high-tech manufacturing that a lot of Americans don't even understand,' she said. 'We often think of their manufacturing as traditional manufacturing but a lot is really high-tech, and they have a lot of investment that went into it. They have some production centers that have 500,000 workers. That's the entire city of Wichita.' Selby-Leach said she's not sure the U.S. could sustain large production centers. Low unemployment rates already create challenging workforce issues. 'You also have to develop the talent pool,' she said. 'There aren't people who know how to do those things in the United States because we haven't done them for so long. So you'd have to go through a huge human training program to develop those skills. That will take at least a couple of years.' Although there might be ways to train existing manufacturing workers and move them around to fill positions, there isn't an available labor pool to reskill and place into newly created manufacturing jobs, Selby-Leach said. Places like Wichita, with its highly skilled workforce in the aerospace industry and other advanced manufacturers, would have an advantage, she said. 'Fortunately, we have a big innovation with AI occurring simultaneously, and I think that can add efficiency into some of this, so that we can do more with fewer workers,' she said. 'On the economic side of things, uncertainty has a very known effect and people tend to consume less and save more,' Selby-Leach said. 'They tend to invest less and hold onto their money in what they consider to be more stable places, such as a savings account, or even cash and assets like that.' Such individual decisions impact the economy, she said. 'The way we measure economic activity is through spending,' Selby-Leach said. In her opinion, that's the biggest concern right now — people are so uncertain that they're just pulling back from economic activity.
Yahoo
15-05-2025
- Business
- Yahoo
Contributor: So far Trump has betrayed any hopes for free markets
If you voted for Donald Trump last November because you believed he'd increase economic freedom, it's safe to say you were fooled. Following a reckless tariff barrage, the White House and its allies are preparing a new wave of tax-code gimmickry that has more in common with progressive social engineering than pro-growth reform. And don't forget a fiscal recklessness that mirrors the mistakes of the left. Defend these policies if you like, but let's be clear: The administration shows no coherent commitment to free-market principles and is in fact actively undermining them. Its approach is better described as central planning disguised as economic nationalism. This week's example is an executive-order attempt at prescription-drug price control, similar to Democrats' past proposals. If implemented it would inevitably reduce pharmaceutical R&D and innovation. Tariffs remain the administration's most visible economic sin after Trump launched the most extreme escalation of protectionism since the infamous Smoot-Hawley Act of 1930. Unlike the 1930s, however, today's economy is deeply integrated with global supply chains, making the damage extensive and far more immediate. Tariffs are only nominally imposed on imports. Ultimately, they're taxes on American consumers, workers and businesses. The president has made it clear that he's fine with limiting consumer choice, blithely telling parents they might have to 'settle' for two dolls instead of 30 for their children. Smug pronouncements about how much we should shop (not much) or which sectors we should work in (manufacturing) are economic authoritarianism. They're also indicative of a deeper government rot. Policymaking is now done by executive orders as comatose congressional Republicans, like some Biden-era Democrats, allow the president to rule as if he's a monarch. A full-throated, assertive Congress would remind any president that manufacturing jobs were mostly lost to technologies that also create jobs and opportunity in members' districts. Prosperity increases only through innovation and competition and isn't restored by dragging people backward into lower-productivity jobs. Now, even Trump's tax agenda — once considered a bright spot by many free-market advocates — is being corrupted. Instead of championing the broad-based, pro-growth reforms we'd hoped for, the administration is doubling down on gimmickry: exempting tips and overtime pay, expanding child tax credits and entertaining the idea of raising top marginal tax rates. These moves might poll well, but they're unprincipled and unproductive. They undermine the 2017 Tax Cuts and Jobs Act, which aimed (however imperfectly) to simplify the code and incentivize growth, and not to micromanage worker and household behavior through the Internal Revenue Service. And then there are the administration's misleading, populist talking points about raising taxes on the rich to reduce taxes on lower- and middle-income workers. The U.S. income-tax system is already one of the most progressive in the developed world. According to the latest IRS data, the top 1% of earners pay more in federal income taxes than the bottom 90% combined. These high earners provide 40% of federal income-tax revenue; the bottom half of earners make up only 3% of that revenue. Thankfully, the House of Representatives steered away from that mistake in its bill. Meanwhile, some Republican legislators are pushing to extend the 2017 tax cuts without meaningful offsets, setting the stage for a debt-fueled disaster. As noted by Scott Hodge, formerly the longtime president of the Tax Foundation, the GOP's proposed cuts could add more than $5.8 trillion to the debt over a decade. That's nearly three times the cost of the 2021 American Rescue Plan, which many Republicans rightly criticized for fueling inflation and fiscal instability. To be clear: Pro-growth tax reform is essential. But not every tax cut is pro-growth, and no tax cut justifies further fiscal deterioration. Extending the 2017 cuts, which I generally support, shouldn't be confused with true tax reform. Some of the provisions being floated — expanded credits, exclusions for tips and overtime, rolling back the state and local tax (SALT) deduction cap — are not growth policies. They are wealth redistribution run through the tax code, indistinguishable in substance from the kind of demand-side, Keynesian stimulus Republicans once decried. Hodge notes that these measures would do more to mimic the American Rescue Plan than to reverse its pricey mistakes. And with the Federal Reserve still fighting inflation, adding trillions in unfunded liabilities to the national ledger is profoundly irresponsible. None of this should surprise anyone paying attention. This administration is packed with advisors and surrogates who glorify union power, rail against globalization and scoff at the very idea of limited government. Some sound more like Bernie Sanders than Milton Friedman. Whether it's directing industrial policy or distorting the tax code to reward their favorite behaviors, they are hostile to the competition and liberty of the free market. Sadly, that hostility has real consequences: higher prices, greater economic uncertainty, sluggish investment and fewer opportunities for middle- and lower-class families. Veronique de Rugy is a senior research fellow at the Mercatus Center at George Mason University. This article was produced in collaboration with Creators Syndicate. If it's in the news right now, the L.A. Times' Opinion section covers it. Sign up for our weekly opinion newsletter. This story originally appeared in Los Angeles Times.
Los Angeles Times
15-05-2025
- Business
- Los Angeles Times
So far Trump has betrayed any hopes for free markets
If you voted for Donald Trump last November because you believed he'd increase economic freedom, it's safe to say you were fooled. Following a reckless tariff barrage, the White House and its allies are preparing a new wave of tax-code gimmickry that has more in common with progressive social engineering than pro-growth reform. And don't forget a fiscal recklessness that mirrors the mistakes of the left. Defend these policies if you like, but let's be clear: The administration shows no coherent commitment to free-market principles and is in fact actively undermining them. Its approach is better described as central planning disguised as economic nationalism. This week's example is an executive-order attempt at prescription-drug price control, similar to Democrats' past proposals. If implemented it would inevitably reduce pharmaceutical R&D and innovation. Tariffs remain the administration's most visible economic sin after Trump launched the most extreme escalation of protectionism since the infamous Smoot-Hawley Act of 1930. Unlike the 1930s, however, today's economy is deeply integrated with global supply chains, making the damage extensive and far more immediate. Tariffs are only nominally imposed on imports. Ultimately, they're taxes on American consumers, workers and businesses. The president has made it clear that he's fine with limiting consumer choice, blithely telling parents they might have to 'settle' for two dolls instead of 30 for their children. Smug pronouncements about how much we should shop (not much) or which sectors we should work in (manufacturing) are economic authoritarianism. They're also indicative of a deeper government rot. Policymaking is now done by executive orders as comatose congressional Republicans, like some Biden-era Democrats, allow the president to rule as if he's a monarch. A full-throated, assertive Congress would remind any president that manufacturing jobs were mostly lost to technologies that also create jobs and opportunity in members' districts. Prosperity increases only through innovation and competition and isn't restored by dragging people backward into lower-productivity jobs. Now, even Trump's tax agenda — once considered a bright spot by many free-market advocates — is being corrupted. Instead of championing the broad-based, pro-growth reforms we'd hoped for, the administration is doubling down on gimmickry: exempting tips and overtime pay, expanding child tax credits and entertaining the idea of raising top marginal tax rates. These moves might poll well, but they're unprincipled and unproductive. They undermine the 2017 Tax Cuts and Jobs Act, which aimed (however imperfectly) to simplify the code and incentivize growth, and not to micromanage worker and household behavior through the Internal Revenue Service. And then there are the administration's misleading, populist talking points about raising taxes on the rich to reduce taxes on lower- and middle-income workers. The U.S. income-tax system is already one of the most progressive in the developed world. According to the latest IRS data, the top 1% of earners pay more in federal income taxes than the bottom 90% combined. These high earners provide 40% of federal income-tax revenue; the bottom half of earners make up only 3% of that revenue. Thankfully, the House of Representatives steered away from that mistake in its bill. Meanwhile, some Republican legislators are pushing to extend the 2017 tax cuts without meaningful offsets, setting the stage for a debt-fueled disaster. As noted by Scott Hodge, formerly the longtime president of the Tax Foundation, the GOP's proposed cuts could add more than $5.8 trillion to the debt over a decade. That's nearly three times the cost of the 2021 American Rescue Plan, which many Republicans rightly criticized for fueling inflation and fiscal instability. To be clear: Pro-growth tax reform is essential. But not every tax cut is pro-growth, and no tax cut justifies further fiscal deterioration. Extending the 2017 cuts, which I generally support, shouldn't be confused with true tax reform. Some of the provisions being floated — expanded credits, exclusions for tips and overtime, rolling back the state and local tax (SALT) deduction cap — are not growth policies. They are wealth redistribution run through the tax code, indistinguishable in substance from the kind of demand-side, Keynesian stimulus Republicans once decried. Hodge notes that these measures would do more to mimic the American Rescue Plan than to reverse its pricey mistakes. And with the Federal Reserve still fighting inflation, adding trillions in unfunded liabilities to the national ledger is profoundly irresponsible. None of this should surprise anyone paying attention. This administration is packed with advisors and surrogates who glorify union power, rail against globalization and scoff at the very idea of limited government. Some sound more like Bernie Sanders than Milton Friedman. Whether it's directing industrial policy or distorting the tax code to reward their favorite behaviors, they are hostile to the competition and liberty of the free market. Sadly, that hostility has real consequences: higher prices, greater economic uncertainty, sluggish investment and fewer opportunities for middle- and lower-class families. Veronique de Rugy is a senior research fellow at the Mercatus Center at George Mason University. This article was produced in collaboration with Creators Syndicate.
The Herald Scotland
12-05-2025
- Business
- The Herald Scotland
Trade discussions jeopardised by simple zero-sum maths
Developments 3,500 miles away in Washington DC have been the dominant factor in shaping a fast-moving set of economic conditions this year. While economists had long warned of the global trade risks from a new Trump administration, the scale of protectionist measures and their chaotic rollout has surprised even seasoned observers. Read more: At the time of writing, significant uncertainty remains about future US and third-country trade policies, even in the short term. This is dragging down growth expectations and fuelling market volatility. Unsurprisingly, the IMF has downgraded its global growth forecasts for this year and next. If fully implemented in July, the effective tariff in the US would rise to around 25%, the highest rate in over a century, and even greater than during the infamous Smoot-Hawley Act at the start of the Great Depression. The UK economy is relatively trade-intensive, with trade (imports plus exports) as a share of GDP around 64%, above the G20 average of 55%. The OBR estimates that a scenario of US tariffs, alongside retaliation from trading partners, could reduce UK growth by around 1% in 2026/27. There would also be higher inflation, increased borrowing costs, and a weaker outlook for the public finances. The idea of the benefits of trade dates back to Adam Smith and David Ricardo. Trade enables countries to specialise in producing goods and services in which they have a comparative advantage, exchanging them for other goods and services they find relatively costly to produce. In contrast, reduced trade intensity tends to weaken productivity and act as a barrier to economies of scale from overseas markets. Read more: Of course, unrestricted free trade is not costless nor desirable. There are legitimate concerns about how the benefits of trade are distributed between and within countries. Important questions also arise with regard to trade and emissions and the environment, and how globalisation interacts with human rights, democracy, and the rule of law. However, these are questions that can be addressed with appropriate measures, not by a blunt fall back into protectionism. The heightened scepticism towards recognising the benefits of trade, not just in the US but globally, reflects a wider trend toward zero-sum thinking within economic policymaking. This view holds that gains for one individual or country must come at the expense of another. As Anton Muscatelli and I have written in a paper for the National Institute for Economic and Social Research, this simplistic framing of economic questions has become prevalent in political discourse, not just in trade, but in immigration, net zero, and public spending too. A zero-sum thinker will argue that trade only brings benefits at the cost of domestic producers and workers displaced by cheaper imports. They will also claim that immigration might boost growth, but at the expense of higher unemployment and falling wages. Read more: Economics can counter these zero-sum arguments. It is entirely possible, for example, to ensure that workers in import-competing industries benefit from international trade through the redistribution of national gains; to implement policies so that immigration boosts productivity and benefits all; and to design progressive fiscal policies that do not hamper growth but still achieve greater equality. Far from providing solutions, zero-sum thinking can make things worse. Complex long-term challenges, like climate change, can become impossible to solve in a zero-sum world with an increasingly divided electorate. The challenge, of course, is that the solutions are not straightforward. Economic theory might be a good guide, but the multiple effects, including gains and losses, are complex, messy, and difficult to track over time. A key lesson for policymakers is that to counter zero-sum thinking, we need to avoid single, de-coupled policy debates. The way in which debates are framed, discussed, and trade-offs understood will be critical in guarding against zero-sum thinking dominating economic policy debates and widening division. Adam Smith warned against "speculative physicians" with simple answers to complex problems. That warning is just as relevant today as it was in the 18th century. Graeme Roy is professor of economics at the University of Glasgow's Adam Smith Business School.
