Forbes, Laffer ask Trump for Zero tariffs, Zero Subsidies, and Zero Barriers

In a letter to Trump, the Committee to Unleash Prosperity seeks zero tariffs. There were several notable letter signees.

Steve Forbes, Arthur Laffer, Fred Smith, and Stephen Moore on the Committee to Unleash Prosperity ask Trump to seize the high ground and give U.S. firms an advantage.

Please consider the WSJ Op-Ed Mr. President, It’s Time for Zero Tariffs.

> Congratulations on the new U.S., Mexico, Canada Trade Deal. By keeping trade barriers as low as possible across North America, this USMCA will benefit businesses, workers and consumers in all three countries.

> We are writing to recommend that as you continue to negotiate new trade deals with our other allies, you pursue the endgame goal of zero tariffs. You have said on several occasions that your objective is not protectionism but to create “a level playing field” on trade. You have even suggested to our allies on several occasions that both sides “drop all Tariffs, Barriers and Subsidies!”

> We hope that you will continue to push this solution with Britain, the European Union, South Korea, Japan, and other allies. The “zero for zero” offer should include three components: zero tariffs, zero subsidies and zero nontariff barriers. The last has been a big problem for American companies in penetrating many foreign markets.

> This will help American businesses expand markets overseas and create more jobs and wealth both abroad and here at home. Zero for zero on tariffs will give American companies an advantage because, as your own Council of Economic Advisers reports, the average American tariff is 3.5%, while the average EU rate is 5%. China’s is nearly 10% and the world average is around 10%. On a level playing field, American companies and their talented and productive workers can compete with anyone, and U.S. exporters—from farmers to manufacturers to tech firms—will benefit enormously if trade barriers are abolished.

> Strategically, offering the carrot of zero tariffs will allow America to seize the moral high ground in the trade debate. It will also put the U.S. in a stronger position as you negotiate with China to end some of Beijing’s most abusive trade policies.

I endorse that letter 100% while adding. the US should do this regardless of whether any other nation follows. Business and jobs will flock to the first nation that does so.

Addendum

Disappointing comments from readers who believe in tariff parity.

Increasing tariffs because another nation does is pure silliness. It is tantamount to saying if another country does something stupid, we need to be stupid as well.

Tariffs are a tax on consumers and importers of usable goods such as steel. If China is subsidizing steel it is to the benefit of US manufacturers who use steel as well as consumers who pay lower prices for goods.

It is absolutely correct to reduce tariffs, regardless of what other nations do, on that basis alone.

Production and jobs will flow to the US if we eliminate tariffs. Consumers gain from lower prices, and even our exporters who use intermediate goods (again steel is a prime example), benefit.

Mike "Mish" Shedlock

Comments (69)
No. 1-21
Kinuachdrach
Kinuachdrach

There is logic in the "zero for zero" proposal. But there is no logic in the unilateral zero proposal. If lower unilateral tariffs and non-tariff barriers (ie, what the US has done for decades) expanded the economy, the US would look very different today; and other countries would have followed suit (They have not).

Carl_R
Carl_R

We know from history that any time government action produces undesirable results, the solution is never to reduce government action, but rather more government action.

tz1
tz1

Then why did the jobs all go to Mexico and China and earlier Japan when they had the huge barriers and tariffs?

Basically due to regulatory arbitrage (no controls on pollution, govenrment subsidies, no worker safety nor judicial mechanism to address torts), jobs go where the workers are treated the worst - which might be better than starvation, but not by much. They will go where they can just dump toxic stuff or even plastic into the rivers and oceans (where is that plastic trash thing in the pacific from? China!)

I can add debt and subsidies and currency manipulation (it doesn't work under a gold standard because the gold moves in the other direction and inflates or deflates creating an equilibrium). Meanwhile does the 20 trillion federal debt matter or not? If we had to pay for stuff with cash, it might be more expensive than putting it on the credit card.

Or put it differently - BECAUSE you can sue a manufacturer here if their product burns down your house, it will be more expensive than something cheaply made in China where you can't sue them, that a few in any batch will catch fire. There is a problem with diet suppliments that are often contaminated or don't contain what they say, but those are the cheaper ones. And if you are allergic (see "Poorly Made in China").

I don't see a problem with zero barriers across Countries with similar laws, either English Common Law or the Roman derivatives for the EU, but there is a big problem when you can basically pay less for stolen merchandise.

JL1
JL1

Zero tariffs would lead to all production moving to China making Americans even more poorer and even more dependent on Fed continually creating money out of thin air and even more of the US economy only keeping going because of ever increasing debts at every level from federal government to consumers.

Countries which only produce currency have always in history had that currency crash totally when their economies have crashed totally because nothing of value being produced in them.

Instead of zero tariffs Trump should have put more tariffs so in addition to steel and aluminum tariffs there should have been tariffs on everything made from steel and aluminum.

On top of that there should be environmental tariffs to make it cost China something to continually use destruction of environment by destroying air, water and land as competitive advantage in a communist controlled economy.

On top of that there should be wage-parity tariffs so if producing a widget takes 1 hour and Chinese worker gets paid 1 dollar an hour and producing the same kind of widget in USA takes one hour and costs 15 dollars and hour then the Chinese widget has a tariff of 14 dollars.

Also there should be worker-rights tariffs so when Chinese factory makes their workers live in the factory area and makes them work 6-7 days a week in 12 hour days and has suicide netting around the buildings where the workers live to stop suicides there should be an economic cost through tariffs for also that.

With this latest inanity from economists I am starting to think they got their degrees from cereal boxes.

No tariffs only works when there is not rampant debasement of currency and ever growing mountains of debt and Fed goosing the economy through their loose monetary policy since without these offshoring of production would have crashed consumer demand and led to huge drop in tax revenues leading to huge cuts in government so companies offshoring production would have seen demand for their products crash making said offshoring of production impossible.

No tariffs only works when the countries having no tariffs betwen them have similar environmental, legal, worker etc. protections and wage levels are similar. Letting China into WTO was a massive mistake only benefiting the 1% and Bush should be forever reminded of his mistake.

The current offshoring of production and still keeping consumers consuming model is only possible because of Fed, ever growing mountains of debt and deficit spending since it keeps the profits of companies up so they get the sales and the lower cost of production so they get to eat their cake and still keep their cake.

The current importing tens of millions of illegal immigrants and millions of legal low wage immigrants and still keeping consumers consuming model is only possible because of Fed, ever growing mountains of debt and deficit spending since it keeps the profits of companies up so they get the sales and the lower cost of wages so they get to eat their cake and still keep their cake.

The current version of capitalism namely debt based consumption while destroying ability to repay the debts does not work and needs to be fixed before USA and Europe end up with no production and only mountains of debt and broken chinese made widgets.

JL1
JL1

Btw notice how the economists admit USa has NOT been playing on a level playing field: " the average American tariff is 3.5%, while the average EU rate is 5%. China’s is nearly 10% and the world average is around 10%. On a level playing field, American companies and their talented and productive workers can compete with anyone,"

The solution to that is create tariff parity immediately so raise American tariffs to a minimum of 10% for China and minimum of 5% for EU.

Then consider environmental, wage parity and worker rights tariffs on top of that.

Mike Mish Shedlock
Mike Mish Shedlock

Editor

"The solution is create tariff parity immediately so raise American tariffs to a minimum of 10% for China and minimum of 5% for EU."

Very Wrong as is the claim "there is no logic in the unilateral zero proposal."

Not just wrong bordering on idiotic as I have explained many times. Tariffs are a tax on consumers as well as industries that use those imports. The tax on steel is beyond idiotic.

mbass100
mbass100

when have the letter writers ever been correct about anything?

mbass100
mbass100

I don't agree with trump on much, but he's doing a great job with China. Don't see where China's growth comes from long-term if they can't continue to pilfer intellectual property from the west.

Webej
Webej

Except that the letter's facts are cherry-picked bullshit. Average tariff means nothing, it's the weighted mean tariff that counts, which is around 1.6% for the US (25% on light trucks and vans) and the EU. The US also heavily subsidizes agriculture, to say nothing of the massive subsidies routed via military spending.

If you want to have an even playing field, you have to start by being honest, not some propaganda. The idea that Americans would do just fine on an even palying field is self-congratulatory malarkey. America has huge rackets in medical care, education, and pharma which is effectively a huge tax that makes American labor uncompetitive. Start by destroying all the monopoly rackets, and make sure you include the banks.

The idea that the US is being taken advantage of by the ROW is self-serving and dangerous BS -- countries acting from some sense of fake victimhood and grievance are countries that start wars.

MaxBnb
MaxBnb

there are many people who believe this:

I'm from the government and I'm here to help."

in this case it is :

My government is going to protect my job from cheating chinese or any other cheating people

My government will make “even playing field”, “playing on a level playing field”....

a ha ha ha ,and a ho ho ho

stillCJ
stillCJ

Editor

I am trying to decide if it is funny or sad that so few people understand what Trump is doing. He is using ultimate negotiation to get what he really wants which is to get free trade. He is fighting fire with fire. I am really impressed with him. Very few people understand negotiation, even though he HAS SAID no trade tariffs or barriers are his ultimate goal. Imagine using tariffs and trade barriers to get free trade! I am loving it.

Six000mileyear
Six000mileyear

What surprises me most about Laffer is he has a theory that too low or too high a tax rate generates lower tax revenues than expected; and yet he supports a 0% tariff. A self contradicting "expert" can't be taken seriously.

RonJ
RonJ

It doesn't really matter whether something is silly or not, human nature is unstable, as pendulums swing back and forth, changing people's attitudes as cycles progress. Glass-Steagall was created to prevent what is happening now from ever happening again. Then it was dismantled so that what is happening now could happen again. Nothing stays the same.

The economics of the world's countries is not one size fits all. There are numerous currencies of different values. There are different standards of living and standards are rising or falling depending on which country one resides.

If everyone went to ZERO tariffs tomorrow, it would only be a matter of time before some countries would be rebelling against it. Same for a gold standard. It works until it gets in the way, just as Glass-Steagall did.

Mike Mish Shedlock
Mike Mish Shedlock

Editor

I am surprised how few people understand Trump is a complete fool on Trade. The EU even offered to remove all tariffs. Supposedly Trump's goal. Trump refused. He is a liar and a fool on trade. Moreover, as I have explained, if China wants to subsidize the US, it is to OUR advantage. Trump's legitimate gripe is on IP theft. Tariffs are not the solution.

JL1
JL1

I just had a tariff related idea:

Tariff rebates:

In cases where for example there are tariffs on some materials that are not manufactured in USA there should be tariff rebates for the products USA companies manufacture from tariffed materials in USA but then export abroad.

So if a company uses tariffed materials to build products and exports 30% of their production outside of USA they should get a 30% rebate from the amount of tariffs that they paid for the tariffed materials.

This way US companies exports will stay competitive even with the materials they use in manufacturing being tariffed.

JL1
JL1

NOT having a wall is an existential threat to USA and Americans and without a wall illegal immigrants and drugs flow to USA.

ACA removal is issue which only excites small numbers of Republican activists. Trump already removed the forced mandate so nobody is anymore forced to buy Obamacare coverage.

Trump has now even started saying that pre-existing conditions coverage will be protected.

The problem with ACA aka Obamacare is that it tried to fix an insurance problem of getting everyone insurance when the problems in insurance are just the symptom and the actual problem is cost of healthcare which is high because lack of competition.

If the cost of healthcare dropped then most people could pay cash for healthcare not needing insurance and if they wanted insurance it would be much cheaper.

Denninger has written a good list how to fix healthcare problems:

Dsgn
Dsgn

I would like to see ConGress working on a one page trade law: "Effective in 60 days, all laws affecting trade in any way are hereby repealed." The back would have a watermark: "This Page Intentionally Left Blank."

But that couldn't work alone. Along with that sort of open borders for trade, people would want to cross too. So to make sure the immigrants want Freedom - not Free Stuff - every aspect of the welfare state - anybody receiving big.gang.guv money - would have to end. All of it.

But since fiat / fractional reserve bankstering prevents saving, that would have to end too. What an extraordinarily complex puzzle. :)

Those (now) immigrants would want to / have to work, and small biz is the real engine of jobs, so we would have to repeal all tax laws, because by their nature they favor big.gang.biz and Fascism. Bezos can't have His Billions with armies of minimum wage slaves without favorable tax laws and the welfare state making it possible.

The Collective Farms created by the Bankster class of the 1930's will end suddenly with the advent of a petrol or credit crisis anyway, so all laws favoring them would have to be repealed. Small farmers will either take them over in abandonment, or like the foreclosing Banksters of the 30's, for pennies on the dollar.

Denninger has the "heath crisis" covered, the other leg of the BigMAC (the Big Medical Agribiz Complex), so tell ConGress "Just do it!"

Gee, if we repeal the entire United States Code, this begins to look like 1785, when the people had ZERO connection with a tiny trade association between states - funded by tariffs(!) - called the United States.

Realist
Realist

Mish. I completely agree with you on this topic.

Realist
Realist

Stuki; be succinct!

Advancingtime
Advancingtime

Trade policy has massive long-term ramifications on the strength of a nation's economy. Often people fail to note the difference between free and fair trade. In many ways, the global economy has become an ill-regulated business model tilted to favor big business and giant conglomerates. We should not lose sight of the fact that while free trade is important, fair trade is far more so and should be the main issue.

Nationalistic exploitation of trade agreements has occurred throughout history and it is naive to think such schemes will suddenly end. Developing a long-term sustainable economic system that is balanced would also contribute to global cohesion and the world economy. The article below delves into how the promise of widespread prosperity from trade has fallen short with benefits flowing to a limited few.

avidremainer
avidremainer

Pursue Free Trade and be eaten alive like the USA and the second Reich did to the British Empire.