Trump touts falling aluminum prices after tariffs

[nobody's_hero]

There is a clear difference in economic theory and economic reality when multiple additional variables are considered.

much truth in that sentence.

[dannno]

As if a million $#@!s cried out in terror and were suddenly silenced...

The first part is true, but seems they are doubling down now.

[goldenequity]

article on rare earth metals

[Swordsmyth]

article on rare earth metals

They can't afford to pull that trigger and we can replace their production if we had to.

[Origanalist]

Cant_stop_laughing.

[nikcers]

article on rare earth metals

Why do you think they were threatening NK?

Estimates as to the value of the nation’s mineral resources have varied greatly over the years, made difficult by secrecy and lack of access. North Korea itself has made what are likely exaggerated claims about them. According to one estimate from a South Korean state-owned mining company, they’re worth over $6 trillion. Another from a South Korean research institute puts the amount closer to $10 trillion.

Found this interesting comment on reddit under a thread Why does China defend North Korea so often at the international level?

North Korea has one of the largest, if not the largest, deposits of rare earth elements in the world. These minerals are not only used in televisions and mobile devices, but missiles and advanced defense systems as well. Some estimate that there is $6 Trillion worth in North Korea.With China already having a monopoly on rare earth elements, producing around 95% of the current supply, and their trade relationship with the DPRK, this creates an economic boon for China. It also aids the DPRK, because they don't have the infrastructure to mine for REEs, as they are very costly to extract.
China's monopoly of REE's is in fact considered a national security issue by the Worldwide Threat Assessment. Imagine if they begin to mine for them in the DPRK.
I didn't even mention the amount of other minerals in North Korea.
Sources: http://www.usnews.com/news/blogs/at-...earth-minerals
http://www.mining.com/largest-known-...h-korea-86139/

[AZJoe]

Well there you have - cause and effect. Just proved that raising taxes causes lower prices. Who'd have thunk it?
Amazing! Time to raise taxes on everything!

[dannno]

Well there you have - cause and effect. Swordmyth just proved that raising taxes causes lower prices. Who'd have thunk it?
Amazing! Time to raise taxes on everything!

I think he was just showing that when you have somebody really, legitimately smart with good intentions in charge of a corrupt, manipulated system that they can potentially change some things for the better.

Also, Trump was attacked because people thought that the price of soda cans were going to rise, and it doesn't look like that is happening.

[juleswin]

honestly I've forgotten what we are going back and forth about. The chart clearly shows the current price is lower than when the tariffs were implemented. The exact opposite of what many here predicted. You appear to be focused on the spike in the past couple days, which a trend it is not. I'm reading articles about domestic producers coming back online creating jobs here at home. When these producers enter the market will counter the price effect on imported aluminum. Its not like you suggest that prices will always be higher with tariffs and lower without tariffs. There is a clear difference in economic theory and economic reality when multiple additional variables are considered.

Don't get me wrong, I think it is very possible that the tariffs could bring in local investment in metal production, jobs and experience that could down the line lead to US being experts at producing aluminium. And given enough protection from foreign competition could lead to the point where the US metal producing companies can compete with Canadian, Mexican and maybe even Chinese companies. So yes, I can see prices stabilizing down the line but what little price drop cannot be attributed to the recent tax by Trump.

Its not like you suggest that prices will always be higher with tariffs and lower without tariffs.

This is exactly what I am saying. Prices will always go up when taxes increase. Now, if prices were on the decline before the tax increase, then said tax increase would only reduce the rate of decline. You know when I used to post of DU, I remember instances when minimum wage was raised and then unemployment rate when down. They would say the same things you said now i.e. "See, we raised the minimum wage and nobody lost their jobs". Ofc this is not what happened.

There is a clear difference in economic theory and economic reality when multiple additional variables are considered

Well, if we are to consider one variable at a time, then tariffs effect on prices matches up with the economic theory. What I mean is that if everything else remained the same and tariffs were raised, then you will see a bump in prices just as would have been predicted by the economics theory models.

[angelatc]

Why did you tag me in this? Pretty sure you DON'T want my attention.

[osan]

Bauxite production is relevant to the cost of aluminum more than politics....


https://www.mining-technology.com/fe...ucers-4274090/

Probably depends on the politics in question, methinks. But yeah, generally speaking in the absence of extremities I would agree.

Standard economic theory suggests the tariff is a bad thing. All else equal, I agree. One thing the books do not seem to cover, at least not in any detail that I can recall, is the case where one nation imposes tariffs in response to another nation's market-distorting practices. The only case of this I can recall from my own texts (particularly Mankiew, regarded as a standard across many of the top business schools), is that of trade wars, which is something of a reductio ad absurdum example - two nations duking it out in tit-for-tat fashion until the respective populations are each reduced to states of hunger-infused poverty.

Has China not been exercising protectionist policies, at least against American products for many years? They have by all means been distorting the global labor market by running what is in all practical terms a slave labor market, which has so very clearly distorted the global economy as to be nearly unworthy of argument.

As some here may recall, I have for years posited the possibility that tariffs may actually work as intended when applied for the sake of neutralizing these market-distorting practices. In another post from some years ago, I suggested that a tariff calculated to bring the typical effective price (whether retail or wholesale) to within some percentage of that commonly found in one's homeland for a given widget, say 20%, might well give the foreign producer (China) the incentive to ease up on its tyrannical and distorting administration of slave labor.

The unweighted average hourly wage in America is about $29/hour, calculated very casually (did not include dollar fractions in hourlies because I am lazy) from https://www.bls.gov/news.release/empsit.t19.htm.

The average hourly in China is now, shockingly, $3.60 per hour, way up from the $0.66/hr in 2006. Nonetheless, it costs American employers an average of eight-times the labor cost of their Chinese counterparts. That discrepancy cannot be credibly argued as not distorting the markets. There are additional factors here, of course, such as the relative productivity of Chinese workers v. American, but I do not believe that American workers are so much more efficient that they produce 8x per unit time, at equal or better quality, than do their Chinese competitors. Let us generously place it a 4x, leaving the effective relative labor costs of Chinese to American as 1/4. I will argue that that remains a significantly distorting factor precisely because the discrepancy is not "organic". It is the result of tyrannical government economic policies that see workers punished with deep severity for so much as asking for a raise.

So here we have America slapping them with a 10% tariff on aluminum. It will be interesting to see the longer-term result. As for now, it is too soon either to crow or condemn over it. It will be interesting to see how the US responds if and when the prices from China begin to align more closely with those in America. Will the tariff be lifted? Only time will tell, but given the proclivity to greed combined with a generally deplorable ignorance on topics like economics by those in Congress and so forth, my optimism would remain tempered until such time as we see the beef.

But if it proves out to work when prudently applied, the economic texts will all stand in need of some revision on the matter of tariffs.

Therefore, rather that either cursing Trump or getting on one's knees before him for happy time, perhaps we are better served to sit back and watch the fun as it unfolds.

Just a thought.

[osan]

But not to as low as it was. Prices are still higher.

It took time to rise and it will take time to drop.
Also there are other factors involved in setting the price.
The fact is that the doom and gloom predictions are not happening.

You are each missing a point.

Firstly, Zippy pal, the dollar loses value by the minute. Therefore, short of a quantum improvement in the cost of production, such as ordinary people suddenly crapping pigs of pure aluminum ready for processing into the products you know and love, the price will continue to rise. Your implication of FAIL is, therefore, FAIL.

Secondly, we do not know how far it will drop or for how long it will remain down in relative terms, so I would advise a bit more caution with the optimism. Four percent is significant, even though some here so not seem to think so. But I would not be handing out the cigars just yet, not breaking out the DP ($#@!ty tasting champagne anyhow, to my palate).

"Hurry up and wait" is the proper prescription at this time, which could change in a moment. But until it changes, it remains my choice.

[TheCount]

U.S. aluminum prices are dropping, despite a 10% tariff imposed by President Donald Trump on the metal in early March intended to protect U.S. companies and allow for the creation of new manufacturing plants, one of his main promises during the 2016 presidential election.
The president touted the falling aluminum costs -- down 4% from when the White House first announced the tariffs -- on Twitter early Friday morning.
“Despite the Aluminum Tariffs, Aluminum prices are DOWN 4%. People are surprised, I’m not!” he wrote. “Lots of money coming into U.S. coffers and Jobs, Jobs, Jobs!”

Wasn't the supposed purpose behind these tariffs to save domestic aluminum manufacturers from prices which were too low for them to compete?

And now you and your god emperor are celebrating that the prices are even lower?

[osan]

It took time to rise and it will take time to drop.
Also there are other factors involved in setting the price.
The fact is that the doom and gloom predictions are not happening.

You are linking the price for aluminum in London which is not conducive to the price in the USA. You graduated from the school of Zippyjuan...

Aluminum is a base commodity, traded in and between global markets. Were there a significant discrepancy, say, between the London and Chicago exchanges, the arbitrageurs would be on that like stink on rice. The differences would disappear in a matter of ours at the most, and more likely minutes.

In this world of virtually instantaneous access and interoperation, there is very little difference in the prices of commodities such as aluminum between markets anymore. Therefore, short of momentary spike-changes, which are rapidly absorbed back down to the mean, London prices should be valid most of the time.

[osan]

It took time to rise and it will take time to drop.
Also there are other factors involved in setting the price.
The fact is that the doom and gloom predictions are not happening.

honestly I've forgotten what we are going back and forth about. The chart clearly shows the current price is lower than when the tariffs were implemented. The exact opposite of what many here predicted. You appear to be focused on the spike in the past couple days, which a trend it is not. I'm reading articles about domestic producers coming back online creating jobs here at home. When these producers enter the market will counter the price effect on imported aluminum. Its not like you suggest that prices will always be higher with tariffs and lower without tariffs. There is a clear difference in economic theory and economic reality when multiple additional variables are considered.

Well said.

If producers are in fact coming back online, that is real. Will one say that it's not happening, or that it is of no consequence? If so, then stand before the bulldozers that are not there, not clearing the building sites and see whether you get run flat.

The levels of irrationality I am witnessing here, the apparent lust to rush to judgment, is very puzzling. I recall a time here where the measure of men's comments were far more carefully carried forth. Speaking in terms of the gestalt, we used to criticize the "left", or whatever you want to call them, for doing precisely this - for knee-jerking based on emotion whilst abandoning reason, logic, and the facts. What happened here? Why is there so much of the same going on now? I see no justification, as yet, for going all apey about the guy in the egg-shaped office. It's as if some have rejected the prudence of being patient.

I also find it odd that, given the position in which every last one of us finds himself in terms of rights, economics, and so on, that there are those for whom no amount of good news, however marginal it may seem to him, is accepted with grace and appreciation. "Meh... four $#@!ing lousy percent... $#@! TRUMP!"

Come now - we have all proven ourselves (well most of us anyhow) more than capable of being the better man regarding our habits and thoughts on such matters. I also thought we were all friends here, despite our sometimes rather vociferous differences of opinion. Getting all worked up and fleeing from basic sense is pointlessly destructive of the fabric from which I have always assumed this forum to have been woven. Have I been mistaken?

I'll be over here, donning my Nomex, if anyone needs me.

[osan]

It took time to rise and it will take time to drop.
Also there are other factors involved in setting the price.
The fact is that the doom and gloom predictions are not happening.

Wasn't the supposed purpose behind these tariffs to save domestic aluminum manufacturers from prices which were too low for them to compete?

Methinks you have completely misconstrued, but if you can substantiate this with solid facts, I will demur.

Otherwise, the rest of your post face-plants with a <thud>.

[TheCount]

Methinks you have completely misconstrued, but if you can substantiate this with solid facts, I will demur.

Otherwise, the rest of your post face-plants with a <thud>.

https://www.whitehouse.gov/president...united-states/

1. On January 19, 2018, the Secretary of Commerce (Secretary) transmitted to me a report on his investigation into the effect of imports of aluminum on the national security of the United States under section 232 of the Trade Expansion Act of 1962, as amended (19 U.S.C. 1862).

2. The Secretary found and advised me of his opinion that aluminum is being imported into the United States in such quantities and under such circumstances as to threaten to impair the national security of the United States. The Secretary found that the present quantities of aluminum imports and the circumstances of global excess capacity for producing aluminum are “weakening our internal economy,” leaving the United States “almost totally reliant on foreign producers of primary aluminum” and “at risk of becoming completely reliant on foreign producers of high-purity aluminum that is essential for key military and commercial systems.” Because of these risks, and the risk that the domestic aluminum industry would become “unable to satisfy existing national security needs or respond to a national security emergency that requires a large increase in domestic production,” and taking into account the close relation of the economic welfare of the Nation to our national security, see 19 U.S.C. 1862(d), the Secretary concluded that the present quantities and circumstances of aluminum imports threaten to impair the national security as defined in section 232 of the Trade Expansion Act of 1962, as amended.

...

7. In the exercise of these authorities, I have decided to adjust the imports of aluminum articles by imposing a 10 percent ad valorem tariff on aluminum articles, as defined below, imported from all countries except Canada and Mexico. In my judgment, this tariff is necessary and appropriate in light of the many factors I have considered, including the Secretary’s report, updated import and production numbers for 2017, the failure of countries to agree on measures to reduce global excess capacity, the continued high level of imports since the beginning of the year, and special circumstances that exist with respect to Canada and Mexico. This relief will help our domestic aluminum industry to revive idled facilities, open closed smelters and mills, preserve necessary skills by hiring new aluminum workers, and maintain or increase production, which will reduce our Nation’s need to rely on foreign producers for aluminum and ensure that domestic producers can continue to supply all the aluminum necessary for critical industries and national defense. Under current circumstances, this tariff is necessary and appropriate to address the threat that imports of aluminum articles pose to the national security.

...

10. In the meantime, the tariff imposed by this proclamation is an important first step in ensuring the economic viability of our domestic aluminum industry. ... It is my judgment that the tariff imposed by this proclamation is necessary and appropriate to adjust imports of aluminum articles so that such imports will not threaten to impair the national security as defined in section 232 of the Trade Expansion Act of 1962, as amended.

[nobody's_hero]

Well, if we are to consider one variable at a time, then tariffs effect on prices matches up with the economic theory. What I mean is that if everything else remained the same and tariffs were raised, then you will see a bump in prices just as would have been predicted by the economics theory models.

Seldom in reality is only one variable considered at a time, and that is the point. The problem is that many people who come from the free market schools of thought adhere strictly to economic theory as though it was economic law, and will not view anything in terms other than cut-and-dry. No gray area allowed. If it cannot be explained, it must simply be wrong.

[bunklocoempire]

I think he was just showing that when you have somebody really, legitimately smart with good intentions in charge of a corrupt, manipulated system that they can potentially change some things for the better.

Also, Trump was attacked because people thought that the price of soda cans were going to rise, and it doesn't look like that is happening.

Meh. President Torture is "attacked' because he is piddling around with symptoms and never mentions the f'n truth.

Protect my natural rights is supposed to be job # 1, but he's never even mentioned them.

Double-down on truth? Every time - hasn't failed me yet.

[juleswin]

Seldom in reality is only one variable considered at a time, and that is the point. The problem is that many people who come from the free market schools of thought adhere strictly to economic theory as though it was economic law, and will not view anything in terms other than cut-and-dry. No gray area allowed. If it cannot be explained, it must simply be wrong.

I worked in medical research after college and all we did was try to isolate one variable to see the effect on xxx biomaterial. Regardless my whole reason for coming into the thread is to dispell the implication that raising the price of aluminium via tariff can led to reduced aluminium prices. When the opposite is the case, stated differently, tariffs will 100% of the time lead to an increase in price of x tariffed goods.


Btw, I believed in the law of supply and demand before I became a free marketer. Think of it this way, when a tariff is imposed, it is done to reduce the supply of the tariffed goods. When this is done, it raises the price of the material hopefully to the point where local producers can produce the good and still make some profit. Now imagine if real prices dropped when a tariff is implemented, how would the local producers ever get into the market? If they couldn't make a profit at price level 10, then no way they can do the same at price level 8.

So yea, the economic theory better work on this one or else everybody will be screwed. Btw, I think it is still possible for locally produced prices to drop to the pre tariffed good price with time. Just not days after the tariff is imposed.

[Swordsmyth]

Wasn't the supposed purpose behind these tariffs to save domestic aluminum manufacturers from prices which were too low for them to compete?

And now you and your god emperor are celebrating that the prices are even lower?

Price and market share are two different things, in any case the point is that people howled that prices were going to skyrocket and wreck the economy and that isn't happening.

[bunklocoempire]

Well said.

If producers are in fact coming back online, that is real. Will one say that it's not happening, or that it is of no consequence? If so, then stand before the bulldozers that are not there, not clearing the building sites and see whether you get run flat.

The levels of irrationality I am witnessing here, the apparent lust to rush to judgment, is very puzzling. I recall a time here where the measure of men's comments were far more carefully carried forth. Speaking in terms of the gestalt, we used to criticize the "left", or whatever you want to call them, for doing precisely this - for knee-jerking based on emotion whilst abandoning reason, logic, and the facts. What happened here? Why is there so much of the same going on now? I see no justification, as yet, for going all apey about the guy in the egg-shaped office. It's as if some have rejected the prudence of being patient.

I also find it odd that, given the position in which every last one of us finds himself in terms of rights, economics, and so on, that there are those for whom no amount of good news, however marginal it may seem to him, is accepted with grace and appreciation. "Meh... four $#@!ing lousy percent... $#@! TRUMP!"

Come now - we have all proven ourselves (well most of us anyhow) more than capable of being the better man regarding our habits and thoughts on such matters. I also thought we were all friends here, despite our sometimes rather vociferous differences of opinion. Getting all worked up and fleeing from basic sense is pointlessly destructive of the fabric from which I have always assumed this forum to have been woven. Have I been mistaken?

I'll be over here, donning my Nomex, if anyone needs me.

Friends can name names, so please name names, friend, so friends have a chance to address specific concerns. Thanks.

[TheCount]

Price and market share are two different things, in any case the point is that people howled that prices were going to skyrocket and wreck the economy and that isn't happening.

Are you arguing that tariffs caused the domestic production to be cheaper?

If not, then the tariffs were ineffective at what the tariffs were supposed to do, in which case congratulations, taxes were increased for nothing.


No matter what the cause of this change is, it is not persuasive for your argument.

[osan]

The Secretary found and advised me of his opinion that aluminum is being imported into the United States in such quantities and under such circumstances as to threaten to impair the national security of the United States...

This relief will help our domestic aluminum industry to revive idled facilities, open closed smelters and mills, preserve necessary skills by hiring new aluminum workers, and maintain or increase production...

Under current circumstances, this tariff is necessary and appropriate to address the threat that imports of aluminum articles pose to the national security...

the tariff imposed by this proclamation is an important first step in ensuring the economic viability of our domestic aluminum industry. ... It is my judgment that the tariff imposed by this proclamation is necessary and appropriate to adjust imports of aluminum articles so that such imports will not threaten to impair the national security as defined in section 232 of the Trade Expansion Act of 1962, as amended.

I don't see how his supports your position. Rather, it would seem to support mine. The longer US facilities remain idle, the more practical knowledge is faded or lost. In a better world where nations do not plot and scheme against others, this would not be a problem. In this world, it is a problem. China is not our friend by any stretch and if they think they can get away with it, they would endeavor to cripple us piecemeal. Some would say that that would not be in their better economic interest, but they would be mistaken. The economic bottom line take a back seat to that of ultimate material power. After all, in this sense economics is warfare by other means, to borrow a notion.

A problem I see with people is the apparent inability or unwillingness to recognize and accept that the world is not as they would have it. Our liberty-normalized ideals cannot be fully practiced in a hostile world full of alien states that have no desire for liberty, whose people lack the same desire, and whose leaders scheme and scam to get over on other nation states. This has been going on forever in the "civilized" world. Such problems were not at all common in most anarchic societies, so far as human study of such populations reveals. The very structure of the Empire fabric brings this evil quality of humanity to the fore. The point here is that until we learn to live with each other as proper human beings, some the measures taken that offend our ideals of liberty will remain as necessities in order to avert greater evils. I'm sorry that it is this way, but on the whole humanity accepts the current scheme of things as somehow unavoidable. The mental juggernaut that this represents is difficult to overstate. Thoughts form reality. So long as people think they want this or must do that, things that are anathema to human liberty, the practicalities will continue to hamstring we who are prepared for true freedom and all that it requires of us, risk as well as reward.

Think of Israel as a good example. They maintain stern control of borders. Why? Because if they opened up, the Arabs would wipe them from the earth in no time. That is an issue of material national defense against genocide, but it is directly and strongly analogous to the economic equivalent.

The fact is that there are nations out there of non-trivial economic reach who would love nothing more than to see America set to wrack and ruin. Many Islamic nations hate us, rightly or otherwise. Russia is not our buddies, not China. Right there you have a set whose combined power easily rivals ours and whose regard for us is less than warm on the best of days.

I want the world to be free, but most of the world has no interest in it. What do we, the truer liberty lovers of the world, do? I don't see much hope here. Recall in days past how I noted that Americans cannot even get it up to take over one measley, miserable, mostly frozen $#@!-dump of a state to restore proper Constitutional rule. How on earth are we to accomplish this in an area 406.1 times the size and a population 242.56 times as large, nearly half of whom would see the throats of your children slit before accepting liberty?

And what of the rest of the world? There is nary a soul in western Europe interested in freedom, as witnessed by the nearly universal adoption of rank socialism in places like France, UK, Germany, etc. The only people so inclined were the ones who suffered the indignities and privations under the tyranny of the Soviet bloc. The Chinese are a wholly defeated people, bred to strict acceptance of whatever fiat the tyrant yanks from his bootus-hole on whim. Most of Africa is a wasteland of bald-faced savagery as it has been since time immemorial, which in the context of this discussion is actually a good thing because they are in no position to become a material threat to the rest of the world. Given its size and vast resource wealth, were the black Africans to get with an agenda of becoming a global force with which to be reckoned, the world would have yet another cause to sleep with one eye opened.

Humanity, taken as a statistical gestalt, is a train wreck. Few will see it, but we are living in yet another feudal age due to the fact that we stubbornly refuse to behave as a species as if we had the least whit of sense. Don't let the trappings of our technological advances fool you; those levers have, in fact, driven us to greater barbarity than ever before in all our known existences on this world. We are not evolving a whit. We are doing very much the opposite because those very levers make is possible. Back when mass killing was not only a $#@!-ton of hard physical labor, but laden with all manner of risk that the longer time frames afforded men an opportunity to consider with at least some greater measure of care. Today, a Trump, Putin, or Li Keqiang could set the world toward annihilation in forty minutes or less, were they to allow themselves to be ruled by a hissy fit for whatever reason.

Just take a look at what goes on in Africa daily. I am not even sure I can assess a huge proportion of those populations as quite fully human... or perhaps they are exactly that, driving my points home with even greater force. I watched a video just last night about a woman in Congo who brought the wrong sort of fish to some workers. She was forced to have sex with the son of her husband's other (ex??) wife, and then both were murdered, but not just murdered - no sir. They were dismembered alive, things done to them I will not repeat here, all to the cheers of a raving crowd that seems to have been the entire village or town. Their bodies were left on display.

That's not an aberration. it is commonplace in Africa.

That is the world in which we live. To think that we could just fling wide the doors of economic opportunity, not to mention the borders, is not sound. This world is fixing to come apart at the seams and I believe that taking measures to protect oneself, economically as well as physically, are not wrong in themselves, given the current reality.

I wish it were different.

[TheCount]

I don't see how his supports your position. Rather, it would seem to support mine. The longer US facilities remain idle, the more practical knowledge is faded or lost.

Why are they idle?

Because they're not competitive.

In what way are they not competitive?

Price.

How was it proposed to fix that?

Tariffs.

[osan]

I worked in medical research after college and all we did was try to isolate one variable to see the effect on xxx biomaterial.

And did you not discover that such isolations in multivariate systems often would not paint a sufficient causal picture? Synergistic effects based on complex balances of many factors often constitute a vertitable Gordian Knot.

Regardless my whole reason for coming into the thread is to dispell the implication that raising the price of aluminium via tariff can led to reduced aluminium prices.

I must agree that this seems unlikely. There must be more to the truth than this. It does, however, demonstrate that imposition of a tariff does not perforce lead to a rise - at least not immediately. Once again, complex systems can be painfully difficult to analyze correctly, one of the real sticky-wickets being the question of how do we know when the analysis is in fact correct.

When the opposite is the case, stated differently, tariffs will 100% of the time lead to an increase in price of x tariffed goods.

As of this moment, that is resolutely disproved by reality, at least in the short term.

Btw, I believed in the law of supply and demand before I became a free marketer. Think of it this way, when a tariff is imposed, it is done to reduce the supply of the tariffed goods.

That is not necessarily true. As I have posited, it is possible to apply a tariff with the intention of forcing the perceived offender to play nicely, both hands on the table. Whether it works remains to be seen. The result a 4% decrease in the commodity price demonstrates that a tariff does not of necessity have to result in higher prices; that other factors may have a more pronounced effect on price. Only time, and the manner in which China chooses to respond, stands to possibly lend clarity on the question for the longer term.

When this is done, it raises the price of the material hopefully to the point where local producers can produce the good and still make some profit. Now imagine if real prices dropped when a tariff is implemented, how would the local producers ever get into the market? If they couldn't make a profit at price level 10, then no way they can do the same at price level 8.

Eminently valid point. However, I suspect the picture may be more complicated and possibly more subtle than this. I had a notion of how and it just zipped right out of my head, so it may be a while before I can respond intelligently to any request I put up. Sorry about that.

So yea, the economic theory better work on this one or else everybody will be screwed.

Not necessarily. What if it proves out that proper application of such tariffing against those not playing nicely can actually result in the offender altering his practices based in circumspectly applied enlightened self-interest? The whole basis of international macroeconomics would be altered for the better in a fundamental way.

The real sticky wickets there, however, would be knowing how much to apply, for how long, knowing when to remove the tariffs, and having the integrity and sense of enlightened self-interest to follow through, rather than give in to greed and power lust. Given that last bit, perhaps we are screwed no matter how this works out. Ugh.

Btw, I think it is still possible for locally produced prices to drop to the pre tariffed good price with time. Just not days after the tariff is imposed.

Well said.

[osan]

Why are they idle?

Because they're not competitive.

In what way are they not competitive?

Price.

How was it proposed to fix that?

Tariffs.

The tariffs presumably intended to neutralize majority of the advantage of artificially low labor costs, the result of what is effectively a slave-labor market where the cost disparity is on the order of 9x-10x with American labor. Labor is commonly the single greatest factor in determining costs to produce, and by a large margin. In college I worked in various machine, cabinet, and casting shops.

I once worked in a cabinet shop in Long Island City, "Carpentry Unlimited". We built nothing but custom architectural cabinetry for wealthy clients in the NYC metro area. Being low man on the totem, I mostly built carcasses. One such box was for a liquor cabinet of smallish to middling proportions. I built a very nice carcass, square and perfect. To the outer surfaces I applied an off-white Formica-like laminate. To the front, one of the more experienced makers applied Carpathian Elm burl, which in those days (ca. 1982/83) cost $360.00 for a 4x6 sheet. Even though the veneer was very costly, that element was a drop in the bucket when compared with the $35K price tag of the finished cabinet, which was about 6-6.5 feet tall, a smidge under 4' wide, and about twenty four inches deep. All told, the material costs were in the neighborhood of $1000. The rest was all labor and profit. It took me nearly a full week to complete the carcass because it had to be absolutely perfect and there were a few elements of the design that were not quite straightforward in terms of execution. Then Mike did the finish work which was probably on the order of a full two to three weeks, though I no longer quite recall exactly. The labor costs were perhaps 4-5 times that of materials.

On virtually all of the software development projects I have managed, labor represented ca. 90% of the budgetary outlays. On one such project I was responsible for nearly half a billion dollars of allotted monies toward implementation. The hardware costs were trivial in comparison with those of labor - I would estimate ca. 2%-3% of the total. Labor is the killer in most endeavors today and China is artificially depressing their costs in comparison with those found in America to a factor of about ten. Any advantage greater than 50% can definitely be considered as artificially and I consider anything over about 25% as suspect. Competitive advantage in free markets is supposed to be "organic". Tyrannical maintenance of an artificially low labor market prevents other players from being able to compete as the result of felonious treatment of Chinese workers by their government. Nobody with a shred of basic sense is going to claim or agree that a 10x discrepancy in labor costs is due to a natural and valid advantage enjoyed by the Chinese laborer.

In my opinion it was a grave error to have allowed China the opportunity to drag its miserable self out of the stone age. We should have let them fend for themselves, come what may. But what is done is done. China is clearly a bad economic actor and I have no problem with any measures taken to neutralize their artificial and criminally enforced advantages in labor cost, so long as they actually work as intended. As of now, it is not clear that the tariff will produce the desired result, but the one thing that has been demonstrated is the disproof of the assertion that prices would immediately rise. Clearly, there is more going on in the equation than just the effects of the tariff.

So sit back and observe. Conventional theory may prove out. But if it doesn't, there will have opened a door to some intriguing possibilities, as well as hazards, I am fairly certain. TANSTAAFL.

[osan]

Friends can name names, so please name names, friend, so friends have a chance to address specific concerns. Thanks.

Here's one from this very thread: #4

[enhanced_deficit]

U.S. aluminum prices are dropping, despite a 10% tariff imposed ...

Things fall here n there.

Stocks dive as US proposes more China tariffs, Dow falls 700
PBS NewsHour-Apr 6, 2018

[TheCount]

The tariffs presumably intended to neutralize majority of the advantage of artificially low labor costs, the result of what is effectively a slave-labor market where the cost disparity is on the order of 9x-10x with American labor. Labor is commonly the single greatest factor in determining costs to produce, and by a large margin.

Therefore, a fall in the price makes the American manufacturer even less competitive.

I appreciate your support.