Purcell column: Trade war shots hit ever closer to home

Purcell column: Trade war shots hit ever closer to home

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Travel Trip Scotch Hop (copy)

A worker rolls in a barrel of whisky in June 2016 at The Macallan distillery in Craigellachie, Scotland. 

The trade wars are hitting me where it hurts.

One of my few respites from these rough-and-tumble times is to sit by an autumn bonfire with good friends, a Leaf and Bean cigar and some fine Scotch whisky.

But, reports Forbes, the U.S. government announced last week a “25% tariff on all single malt Scotch whisky imports, as part of a wider set of tariffs aiming to punish the European Union.”

As of Oct. 18, Scotch whisky — and Parmesan cheese from Italy and olives from France and Spain, tasty goods I also enjoy — will be more expensive.

Regrettably, that means I have to pay attention to government trade actions — which is about as fun as spending hours watching spirits be distilled.

Forbes says the origin of my costly hooch woes dates back to 2004, when the U.S. got steamed that the EU was subsidizing Airbus’ development of its A380 and A350 planes, which made competing harder for America’s Boeing.

To retaliate, the U.S. raised tariffs on the EU, which caused the EU to raise tariffs on, among other things, American bourbon, which led the U.S. to raise its tariff on Scotch whisky.

I’m certainly no expert on tariff diplomacy — I found trying to grasp Economics 101 at Penn State University unpleasant — but it seems much like a playground fight among children:

“You’re a meanie!”

“You’re a dodo head!”

“Nuh-huh!

“Yuh-huh!”

Investor’s Business Daily explains that tariffs used to be how America paid its bills — until 1913, with the introduction of the income tax (and later, payroll taxes).

The average U.S. tariff then fell until 1930, when — early in the Great Depression — the Smoot-Hawley Tariff Act hiked the average U.S. tariff by about 50%.

This protectionist action spurred retaliation. The publication says “economists generally argue that Smoot-Hawley helped dry up global trade and exacerbated the Great Depression.”

Since then, tariffs had steadily trended lower — until recently.

“Before Trump took office, half of U.S. industrial imports entered the country duty-free, with no tariff imposed,” IBD says. “In 2016, the average U.S. tariff rate was 1.6% across all products, according to the World Bank. … After Trump’s escalation of tariffs in May 2019, the average U.S. trade-weighted tariff rate stood at about 7.5%, according to a Deutsche Bank calculation.”

China, no stranger to unfair trade tactics, is a primary target.

“In 2018, Trump became the first president to systematically threaten and impose tariffs to try and reshape the flow of trade,” Business Daily says. “Trump’s stated purpose for new and higher tariffs? Shrink the 2017 U.S. trade deficit of $566 billion, boost U.S. production and increase manufacturing jobs.”

Now we’re in a bona fide trade war — which isn’t going well. The trade deficit is getting worse, not better. Americans are paying more for low-cost imported goods they depend on. And American farmers, who depend on exports to pay their bills, are getting hurt as China retaliates.

It’s a game of chicken that’s imposing uncertainty and pain on global markets, including ours.

I don’t know how it’s going to turn out. But I do know these stresses and strains get more troubling by the day.

They’re so troubling that I can’t even escape them by sitting by an autumn bonfire with good friends, a Leaf and Bean cigar and some fine, though ever-more-costly, Scotch whisky.

Tom Purcell is a Pittsburgh Tribune-Review columnist. He can be reached at Tom@TomPurcell.com.

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