TRADE WAR OR CARBON ADJUSTMENT

Look At Whole Picture

In the wake of Donald Trump’s recently proposed ten percent border tax on all goods imported into the U.S., the Wall Street Journal has responded today with a hysterical lead editorial warning of a costly trade war and citing all kinds of unverified costs and job losses that would ensue from actual adoption of the proposal.

The Journal needs to calm down and take a look at the whole picture. In the face of the warmest summer on record and the increasingly obvious threat of global warming, we all need to take a look at the whole picture and be sure we are counting ALL the costs and benefits of globalization properly.

Let’s take a look at steel which is always a hot topic for trade and tariffs. It is generally estimated that production of a ton of steel in a coal fired steel mill releases 1.5 to 3 tons of carbon dioxide per ton of steel produced. The Journal of Nature estimates that the cost to society and to the environment of release of a ton of carbon dioxide is $150 per ton. Thus, at a minimum of 1.5 tons released a coal fired mill would cost society $225 per ton. At the moment, it looks like Chinese steel is being priced at about $800-900 per ton. If the environmental cost were added, the price would be $1025 per ton. This is far more than the $100 per ton that would be added by Trump’s proposed tariffs, and it does not even include an addition of the cost of carbon generated by the ocean shipping to get the steel from China to the United States. That could be another $50 or so.

Of significance is the fact that the EU will soon be imposing an environmental charge on imports to address just this greenhouse gas problem. Almost surely the EU tariff will be above the ten percent rate Trump is proposing. It must be so if it is really going to halt unnecessary generation of more greenhouse gases.

Indeed, if Trump were really smart, he would not speak of tariffs at all, but only of measures and charges to reduce greenhouse gas emissions.

If The Wall Street Journal were really smart, it would stop hyperventilating over the evils of tariffs and constructively help figure out how most inexpensively (including the covering of environmental costs and all other real, long- term costs to supply the American market.

The Journal might also consider calculating the cost of Corporate America being hostage to Beijing. Ray Dalio, Jamie Dimon, Tim Cook, et al can dictate a lot of American policy by dint of their political donations, but they have no stroke in Zhongnanhai (residence of all the top Chinese leaders) which views them as useful idiots and pawns to be used against the U.S. Congress and the Biden administration.