President George W. Bush had been in office a little more than a year when, on March 5, 2002, he decided to impose temporary tariffs on steel. It was clearly a calculated political move to try and curry favor with steel unions in the rustbelt swing states of Pennsylvania and West Virginia.
As if backtracking on its strong commitment to free trade weren’t enough, the administration pushed economist and presidential advisor Larry Lindsey into writing an op-ed for The Wall Street Journal defending the tariffs.
Conservatives around the country groaned for their friend Lindsey and pitied the fact that he was compelled to write what he knew was utter nonsense.
Now President Barack Obama has imposed a 35 percent tariff on Chinese-made tires, and some are lamenting this as a reversal of his stated support for free trade.
But anyone who listened to candidate Obama during his presidential campaign, especially in February and March of 2008 when he was trying to win rustbelt primaries, ought to know better. While he may not be a full-blown protectionist, the president is willing to protect the industries that support him.
And U.S. Trade Representative Ron Kirk now must play the role of Lindsey. Kirk claims these tariffs are “a necessary response to the harm done to U.S. workers and businesses ….”
China is not pleased, as you might imagine, and may take its case to the World Trade Organization (WTO). That happened when Bush imposed his tariffs and the WTO ruled against the U.S., which dropped the tariffs earlier than the intended deadline.
But perhaps the biggest problem with this decision is the country the president has decided to stiff. Does he not realize how important China is in these days of unbelievably high federal borrowing? Who does Obama think is going to underwrite his spending spree?
If China backs away from buying U.S. debt, as it has been hinting for the last year or so, we’re in trouble.
Tariffs and protectionism in a global economy is bad policy. Slapping the hand of the one footing the bills just to please some tire workers could lead to an economic blowout.
Today's TaxByte was written by Dr. Merrill Matthews, IPI Resident Scholar.