One of the most provocative items in my wardrobe is a plain dark T-shirt designed by a libertarian economist. In 10 lines across the front, it reads: “Tariffs not only impose immense economic costs but also fail to achieve their primary policy aims and foster political dysfunction along the way.”
In related news, Apple chief executive Tim Cook went to the White House last week to give President Donald Trump a large piece of gold. In exchange, Trump said that Apple would be exempt from a new 100 per cent tariff the US is imposing on imported microchips. Officially, Apple gets the exemption because it committed to making a $US100 billion ($153.5 billion) investment in the US. Apple had already announced earlier this year a $US500 billion investment program, which itself was a modest expansion of previous plans.
Donald Trump and Apple boss Tim Cook. The preisdent loves the sycophantic photo op, when a CEO smiles for the cameras and praises his dealmaking prowess.Credit: Getty Images
No matter. To Trump, the important thing is announcing these pledges, not enforcing them. During his first term, there was an infamous vaporware investment from Foxconn in Wisconsin that never amounted to anything. The real benefit to the president is the sycophantic photo op, when the chief executive smiles for the cameras and praises Trump’s dealmaking prowess.
This is the political dysfunction described on my T-shirt.
A flat tariff instituted for the purpose of raising revenue would, whatever its downsides, basically be just a peculiar form of tax. But tariffs are almost invariably marketed as having strategic or economic-development benefits. And that leads to exemptions. The chip tariffs are supposed to foster the growth of an electronics manufacturing industry in the US. But because chips are an input into other manufactured goods, the tariffs could easily backfire. So if you can convince the president that you are in fact making investments in manufacturing in the US, you can get an exemption from the tariffs.
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The problem here – and with the dozens of other exemptions and waivers baked into Trump’s various tariff announcements – is that there is no objective criteria or process at work. Who gets exemptions, and who does not, is almost entirely up to the whims of Trump and his appointees. This in turn raises the question of whether his primary policy aim isn’t just to maximise his own power and influence.
Cook, for example, used to be a somewhat vocal advocate of LGBT rights. He’s always been, first and foremost, a corporate executive. But he would occasionally take advantage of America’s status as a free country to speak his mind about political issues.
That could now be a risky business proposition, because the viability of Apple’s business hinges on not just its ability to keep making products people want to buy, but its ability to secure tariff exemptions. Other tech executives, such as Jeff Bezos, have also erred on the side of reticence: While he wants his newspaper to support and defend personal liberties and free markets, the company he founded backed down from a plan to list explicit tariff surcharges after facing pressure from the White House.
