Commerce Secretary Howard Lutnick appeared earlier than the Home Appropriations Committee on Thursday, fielding questions in regards to the present presidential administration’s commerce technique.
Rep. Madeleine Dean (D–Penn.) pressed Lutnick about President Donald Trump’s “chaotic tariff coverage.” She held up a banana, imports of that are at the moment taxed at 10 %. “Walmart has already elevated the price of bananas by 8 %,” she famous.
“There isn’t a uncertainty that if you happen to construct in America, and also you produce your product in America, there can be no tariff,” Lutnick mentioned. “The idea of constructing in America and paying no tariffs may be very, very clear.”
“We can’t construct bananas in America,” Dean retorted.
Dean just isn’t fairly proper: We can develop bananas within the U.S., simply not very properly or very cheaply. In 2023, the U.S. imported over 5 million metric tonnes of bananas, totaling over $2 billion, whereas solely producing about 3,500 metric tonnes.
The reason being that bananas solely develop in tropical and subtropical climates: Whereas Hawaii and Florida produce some, the majority of the world’s bananas come from Southeast Asia and Latin America.
Whereas the U.S. might enhance its manufacturing of bananas, we’d be fools to take action: In all however just a few places, we must construct greenhouses to simulate the tropical climates required. Even then, the timber would take longer to supply than they’d within the tropics, and it might take years and even many years to achieve the extent of manufacturing obligatory to interchange the present system, during which multiple out of each 5 bananas imported involves the U.S.
Why undergo all that bother when bananas are at the moment accessible year-round on the grocery retailer and price round 60 cents per pound—lower than the common value of a single egg?
Lutnick appeared to acknowledge as a lot earlier this 12 months, telling CNBC that 10 % tariffs would fall extra closely on “a product that we do not make right here, like a mango.”
In a gathering with enterprise leaders, Lutnick “mentioned there could be some exemptions on imports of merchandise like mangoes that could not be domestically produced on the stage wanted to satisfy U.S. demand,” The Wall Avenue Journal reported in April. “When Trump rolled out the tariff plan on Wednesday, there have been no exemptions for mango imports.”
Sadly, the banana argument displays the identical stage of logic Lutnick and Trump apply to the whole lot of world commerce: Any product an American purchases that was manufactured someplace else inherently represents some lack of American wealth or sovereignty.
Only a day earlier than his interplay with Dean, Lutnick appeared earlier than the Senate, the place he informed Sen. John Kennedy (R–La.) that even when Vietnam supplied to decrease its tariff price to zero, if the U.S. did the identical, “that might be the silliest factor we might do.”
“There are specific merchandise we wish to reshore,” Lutnick defined. “We do not need different individuals making them.”
But when different international locations could make the very same merchandise for much less, why would not we allow them to? Making these merchandise domestically might shore up these particular industries, however customers would bear the brunt of it by means of increased costs.
By the way, Nobel Prize–profitable economist Milton Friedman defined the shortage of logic behind Lutnick’s argument practically 5 many years in the past.
“You might have an ideal employment within the metropolis of Logan, Utah, of individuals rising bananas in hothouses,” Friedman mentioned in 1978 throughout a lecture at Utah State College. “If we had a excessive sufficient tariff on the import of bananas, it might turn out to be worthwhile to construct hothouses and develop bananas in these hothouses. That will give employment. Would that be a wise factor to do?”
Friedman was utilizing the banana instance because the “absurd” and “excessive” finish of the argument for metal tariffs, which had been within the information on the time and an viewers member had requested about. “If that is not smart,” Friedman argued, “then neither is it smart to artificially prohibit the import of metal.” Trump doubled the tariffs on metal this week.
