Biden’s Protectionist Trade Agenda Will Increase Prices. In Fact, It Already Has.

The annual inflation rate is now higher than ever in the past 40 years. On Tuesday night, President Joe Biden declared that the “top priority” was getting the prices under control.

Biden says that prices rising are the result of near-monopolies and monopolies in an economy profiting from consumers. Capitalism without competition is not capitalism. It’s exploitation—and it drives up prices,” he said during Tuesday’s address. Later, he pledged to “crackdown” on American business and consumer overcharging.

While there’s no evidence that supports this conclusion, we’ll just accept it for now. It would be a mistake to believe that rising prices were due to concentration on the market. We wouldIt makes sense to expand competition in order to address this problem. If consumers have more options, they’ll naturally choose lower-priced products. This will put pressure on sellers to reduce prices.

Biden has a problem because so many of his economic plans are in opposition to the direction he wants. Biden complains that consumers are not able to choose which products they want, and then he moves on to the next. The next breath he speaks out against further restrictions of consumer choice.

Biden declared, “We will purchase American to make certain everything from the deck on an aircraft carrier to highway guardrails is made in America,” before promising that his administration would make some the largest investments in American manufacturing to “revive American manufacturing.”

This is his “top priority.”

Larry Summers (a former economic advisor to President Barack Obama) called Biden to task for trying so hard to deflect this economically inept attempt to reduce inflation.

With the ‘Buy America” policies, we can shift American producer demand [sic]Inflationary factors are those that prevent consumers and firms from purchasing at the lowest price, regardless of how attractive it may be politically. Summers said that this should be something that all economists agree upon. tweeted. At best, it is diversionary to blame inflation on corporate greed and hold onto the possibility that there can be rapid expansion of capacity.

Biden’s “Buy American” policies—which, in fairness, have governed federal purchasing deals for years, though his administration has tightened loopholes and talked up those policies for political gain—are perhaps the best example of how the current White House is fighting its own policies as it tries to combat inflation.

This is not the only problem. The artificially raised prices of imported goods is another factor contributing to inflation. These include raw steel, aluminum and lumber, which are vital inputs for American homeowners and builders.

Biden was not the first to impose many of those tariffs, however his administration expanded and extended them, as well as maintaining their price-hiking policies. Biden increased the tariffs that were in place on Canadian lumber imports by two-thirds, effective November 20, 21. Biden replaced the former president Donald Trump’s steel tariffs with a quota system to keep prices artificially high. He extended Trump’s era tariffs on solar panels imported earlier this year. They were due to expire. There has been no indication that the Biden administration is seriously considering undoing Trump’s failed tariffs on Chinese imports—even as it frets about rising prices in the economy.

Because of their success so far, it is quite certain that protectionist policies will keep prices rising.

Alessandro Barattieri, an economist and Matteo Cacciatore argue in Cato Institute’s paper last month that “Tariffs” imposed on U.S. materials by domestic construction cause a substantial increase in those goods’ prices. These results indicate that lifting trade restrictions for intermediate inputs may help to reduce recent rises in U.S. building material costs.

Both researchers concluded that the trade barriers imposed on imports were passed almost entirely to consumers. They found that domestic prices rose by 0.9 percent for every one percentage point in tariff-related increases in imported materials.

Although the research was primarily focused on home prices only, it has been shown in other studies that a lot of Trump’s tariffs on larger imports are being passed on to the consumers. These policies are being continued by Biden, which is forcing consumers, importers and manufacturers to keep paying higher prices.

Tarifes are not all that matter. You can also find out more about it here. There are reasons‘s Scott Shackford highlighted yesterday, other trade restrictions like the Jones Act—which is naked protectionism for America’s dismal shipping industry—also contribute to high prices by severely limiting competition. Biden spoke of wanting more competition in order to reduce prices. It would make a great place to begin: Abolishing Jones Act

Do not expect any relief anytime soon. The Biden administration released a report of 312 pages this week detailing its trade policy goals for next year. It promised to mix trade restrictions with domestic subsidies, which will protect and encourage politically connected firms and industries at the cost of taxpayers and consumers. Whatever the merits of the administration’s “worker-centric trade policies” might be, reducing inflation—supposedly Biden’s “top priority,” remember—is unlikely to be one of the consequences.

However, the details will not add up until the administration decides which way it wants to take at the highest level. Summers noted Tuesday night that there is a tension between Biden’s plans to fight inflation and his political-motivated “Buy American” promises.

Biden helpfully explained one aspect of the contradiction in quite stark terms.

Biden stated that one way to combat inflation was to lower wages and make Americans less wealthy. I have a better strategy to combat inflation. Reduce your expenses, not increase your wages.

Many American companies would love to reduce their cost of doing business. It’s too bad that the Biden administration will not help them.