Populist Economic Tools – Boycotts and Tariffs

You cannot make a blanket statement that boycotts and tariffs never work, but it is more than accurate to note that tariffs usually backfire and boycotts lose their stickiness unless they are statutorily enforced. People get angry, respond immediately but get back to “life as usual,” letting those boycott-values dissipate over a relatively short time. There have been two such efforts in the news of late, one non-governmental (a boycott against companies with NRA affiliations and a reverse boycott against companies who broke ties with the NRA) and another based on an obscure and seldom invoked statute that allows the President of the United States to set trade tariffs in the interest of “national security.”

With ire from both sides of the aisle for these new Trump-declared tariffs – 25% on steel imports and 10% of aluminum imports – the President is simply living up to his anti-globalization campaign promises and catering to a base that truly believes that such protectionist activities with either (a) create more local jobs or (b) at least punish the powerful elites that they hate. Although this tariff was opposed by a most of Trump’s advisors, the powerful voices representing the base triumphed.

Here is Donald Trump’s March 2^nd tweet-explanation, a rather thinly veiled description of China: “When a country (USA) is losing many billions of dollars on trade with virtually every country it does business with, trade wars are good, and easy to win. Example, when we are down $100 billion with a certain country and they get cute, don’t trade anymore-we win big. It’s easy!”

Although these tariffs were focused on China, China is not our main supplier of either of these metals. For example, Canada is our biggest supplier of steel by far, and her government instantly cried foul. Could this tariff be limited only to China and other targeted nations, but not Canada? Nope, says Trump, everybody – Canada, Europe, etc. – gets hit. China just shrugged and began considering a reciprocal tariff on US agricultural goods (and perhaps more), starting with sorghum. And so the trade wars begin, and we are inevitably going to be the loser until we concede. Yet Trump has stated that he expects these tariffs to remain in place for “a long time.”

Many congressional Republicans and Democrats alike instantly noted that this tariff was simply a consumer tax that would raise the price of anything, from cars to construction materials, that relies on these metals. A few workers in those metal fields might get a mild benefit, but for most Americans, there is little reason for optimism. Rising prices cut demand, which in turn can have a negative impact on the underlying jobs. In fact, virtually every nation that does supply steel and/or aluminum to the United States has begun talking about reciprocal tariffs on other US goods. Canada is bristling, China is targeting US agricultural goods starting with sorghum, and the European Union is compiling a list of US goods it would tax, including Levis jeans. If the intention were to adjust the trade imbalance, these initial reactions suggest the impact on US exports would negate that goal. Clearly, this was generally bad for business, representing a rare instance where Trump catered to his base at the expense of the wealthiest sector of our economy.

“Stocks sank sharply after [Trump’s] remarks, as investors, already nervous about rising inflation and interest rates, began to worry that tariffs would push up prices of goods and lead to tit-for-tat measures from China and others. [That day, the] Dow Jones industrial average ended down 420 points…

“Trump’s impromptu announcement rattled previously scheduled talks Thursday [3/1] in Washington between administration officials and a Chinese delegation led by Liu He, the Communist Party’s most powerful economic official, who arrived this week in a bid to strike a deal and head off a trade war. If preliminary talks had gone well Thursday [3/1], U.S. officials were prepared to bring Liu to meet Trump in person, a White House official said, speaking on condition of anonymity to describe internal plans.

“Chinese President Xi Jinping dispatched the trade negotiators in advance of a major Communist Party gathering in March, and after another high-ranking party official made a rushed visit to Washington in early February to meet with Trump and try to smooth over rising tensions over trade and China’s relationship with North Korea.

“It was unclear whether Trump — who pushed the White House to make the announcement Thursday [3/1] — was trying to send a deliberate message to China. Either way, it will only further rile Beijing and make retaliatory action a near certainty.” Los Angeles Times, March 2^nd. But the new tariff applied well beyond Beijing. In his short tenure, Trump has withdrawn the US from several multinational treaties and has instead pushed, rather dramatically and unsuccessfully, to get individual countries into one-on-one trade agreements. Because of these failures, there are even hints coming from our formal trade representatives that the US may be forced to find a path back to the much-maligned Trans-Pacific Partnership trade agreement.

Indeed, early on March 5^th, a tweet from a president who changes his position like a diva making costume changes, suggests he is (a) beginning to recognize the folly of his plan and (b) hoping to gain some leverage, an excuse to have justified his initial call, tells it all: ““We have large trade deficits with Mexico and Canada. NAFTA, which is under renegotiation right now, has been a bad deal for U.S.A. Massive relocation of companies & jobs. Tariffs on Steel and Aluminum will only come off if new & fair NAFTA agreement is signed.” There are even rumblings in Congress from both sides of the aisle, oddly led by Republican and House Speaker Paul Ryan, for Congress to repeal or prevent those tariffs and contain the original (1962) Trade Expansion Act that empower the president’s power in the first place.

Which brings me to non-governmental efforts to boycott to force political change, most notably the recent efforts, on both sides, around the potential ban of assault weapons, an effort that seems destined to die in both state and federal legislatures… but one that is gathering social steam to counter an exceptionally well-funded NRA that still holds incredible political power over legislators on both sides of the aisle; the NRA will fight tooth and nail against any limitations or restrictions on any form of gun ownership.

After the Parkland, Florida shooting, several airlines, shipping companies and banks distanced themselves from the NRA, which continues strongly to protect the right to own assault weapons, by cutting out discount programs offered to NRA members. The very conservative Georgia legislature countered: “Georgia lawmakers approved a bill on Thursday [3/1] that stripped out a tax break proposal highly coveted by Delta Air Lines — the most stinging punishment that America’s pro-gun forces have leveled so far on one of the many corporations recalibrating their positions on firearms after the Florida high school massacre.

“The $50 million sales tax exemption on jet fuel that was sought by Delta, one of Georgia’s biggest employers, had been included in a broader tax-relief bill. But this week, a number of Georgia Republicans, including Lt. Gov. Casey Cagle, sought to remove the perk as retribution for Delta’s decision to end a promotional discount for members of the National Rifle Association.

“Delta, in announcing the policy change, said it was trying to remain ‘neutral’ in a national gun debate that has been rekindled by a gunman’s attack at a school in Parkland, Fla., that left 17 people dead. A number of other major American companies, including the car rental company Hertz and MetLife insurance, have also ended relationships with the N.R.A. since the shooting on Feb. 14.” New York Times, March 1^st. There is no neutral with the NRA; their campaign contributions to conservative legislators have been massive for years. But sometimes, where there is no NRA equivalent, the opposite can happen.

Remember when North Carolina came down hard on serious LGBT rights, and major sports leagues began cancelling events as other states refused to pay for their state employees to travel there on business? North Carolina backed down. So boycotts do work? Mostly in circumstances where the boycotts were from organizations and governmental bodies with the ability to keep serious economic pressures going until the boycotts achieved their stated goals.

However, when the boycott is based on a popular outcry (usually tied to a horrible event or series of events) without such consistence and sustainability, the economic pressure from the ordinary citizens initially supporting the underlying issues usually just dies off with time. For most such boycotts often the only longer-term impact is having brought an issue into greater public awareness, which may ultimately benefit from a cumulative change in social mores. We live in a world of short news cycles and shorter attention-spans. Advice to businesses? Generally, do nothing and wait it out. I hate that.

The March 2^nd Los Angeles Times delves into this reality: “‘Very few boycotts have led to changes,’ said Maurice Schweitzer, a professor of operations and information management at the Wharton School at the University of Pennsylvania. ‘Most boycotts lack a sustained effort’ and people lose interest or stop paying attention, he said.

“‘In practice, most boycotts achieve the more modest goal of attracting media attention,’ Schweitzer wrote in an email. ‘There are, however, hundreds of calls for boycotts each year, and most accomplish very little.’… Some targets of boycotts in recent years include BP for its role in the 2010 Gulf of Mexico oil spill, and Chick-fil-A, after executive Dan T. Cathy’s comments against same-sex marriage in 2012.

“Can you measure a boycott’s impact?... No, not always, simply because multiple factors can influence events. Consider the case of former San Francisco 49ers quarterback Colin Kaepernick, who took a knee during the national anthem to protest racism and police brutality, launching similar protests across the National Football League. In the aftermath of his protest, Kaepernick was not signed by any team…

“Viewership for the NFL’s 2017 season dropped by 9.7% compared to the previous season, according to Sports Illustrated. However, the NFL’s ratings had also dropped by 8% for the 2016 season — a year before the NFL boycott started. There is no conclusive evidence that the boycott contributed to the ratings decline when other factors — a plunge in the quality of games, growing concern of the game’s violence — are at play.

“‘Boycotts are rarely the precipitating factor for change. Rather, they bring attention to an issue and signal the magnitude and intensity with which a group feels a particular way,” Schweitzer said. ‘In most cases, a small minority of people call for a boycott that the wider community fails to support by taking substantive action.’”

There is value in numbers. If such boycotts increase in frequency and intensity, at the very least they will slowly chip away at the entrenched incumbents who have refused to budge. But such incumbents are often exceptionally well-funded – like the NRA – to mount powerful counter campaigns against even the most powerfully-moral and emotional movements. 

I’m Peter Dekom, and change requires persistence, consistency, powerful moral images and an awareness that changing minds often takes a very, very long time; it is very difficult to force people to change otherwise.