Cure The Disease & Kill The Patient: Trump Is Wrong On Tariffs
The election is rapidly approaching and there are still so many subjects to discuss. “Your vote doesn’t matter…except that it does,” “The Imperial Presidency vs. the Rule of the Mandarins,” and “Throw away your vote!” are all topics I would get to if I had more time. Can we delay the election? Just kidding, Justin Trudeau is Canada’s problem, not America’s. Since there’s only time for one more topic and given that both political parties appear to have embraced tariffs, that is what we should discuss.
Let’s start with the simple questions before we move on to the more complex ones:
What is a tariff? A tax levied on goods imported from another country. Ok, that’s the easy stuff done. Moving on…
Why Impose a Tariff? Governments impose tariffs for several reasons:
1. Protect Domestic Industries - Tariffs make imported goods more expensive, giving domestic producers a competitive advantage by allowing them to sell at lower prices
2. Create or Preserve Jobs - Tariffs can help preserve jobs in industries that are threatened by cheaper foreign labor or production costs
3. Generate Government Revenue - Tariffs serve as a source of revenue for governments
4. Correct Trade Imbalances - A country may impose tariffs to reduce its trade deficit, which happens when it imports more than it exports
5. Protect National Security - Tariffs can be imposed on industries considered vital for national security, such as defense, energy, and technology
6. Punish or Pressure Foreign Nations - Tariffs can be used as a political tool to retaliate against countries that engage in unfair trade practices such as dumping (selling goods at below-market prices), subsidies, or intellectual property theft
7. Promote Environmental or Social Standards - Some countries impose tariffs on goods produced in ways that harm the environment or penalize countries that have poor labor practices or violate human rights
8. Boost Government Policy Objectives - Governments may use tariffs as part of a broader strategy to promote specific industries
Are Tariffs Good or Bad?
In the “good old days” of globalism (pre-2016) tariffs were generally considered bad for the economy, both globally and domestically. That said, there were some pros that generally align with the reasons for imposing them (ex. protect national security). Today, downsides are either glossed over or ignored by politicians, but they are real:
Higher Consumer Prices - Raising the cost of imported goods often leads to higher prices for consumers
Retaliation and Trade Wars - Other countries may respond with their own tariffs, leading to trade wars that hurt global commerce and harm the economy
Negative Impact on Exporters - Tariffs on imports can provoke retaliatory tariffs on exports, harming industries that rely on international markets
Inefficiency/Lack of Innovation - Protected industries may become less efficient without foreign competition, leading to lower-quality products or less innovation
Supply Chain Disruptions - In an interconnected world, tariffs can disrupt supply chains, making it harder for businesses to source materials or components, ultimately hurting production efficiency
How do Harris and Trump differ on Tariffs?
Despite Democrat’s criticism towards Donald Trump's tariff policies, the Biden administration has not undone everything the Trump administration did but has kept some and adjusted others.
Maintained most of Trump’s tariffs on China
Recalibrated tariffs on steel and aluminum by negotiating quota systems with allies like the EU, UK, and Japan
Shifted to a multilateral approach, working with allies to address global trade challenges, especially in relation to China
Focused on supporting domestic industries and securing supply chains, while carefully reviewing the impact of tariffs on the U.S. economy and inflation
Harris's stance on tariffs, as reflected through her campaign statements, policy positions, and criticisms of Trump's proposals, indicates that she will take a similar approach, or what she calls “strategic” or “targeted” tariffs.
Trump, as might be expected has a different approach reflecting a belief in using tariffs for economic protection but also as part of a broader strategy rooted in several interconnected policy and economic philosophies, which can be summarized as follows:
Economic Nationalism - prioritizes national interests over global economic dynamics arguing that tariffs can revive domestic manufacturing and bring jobs back to the U.S.
Protectionism – protect American businesses from real or imagined unfair foreign competition, particularly from nations like China. This is intended to make American-made goods more competitive against cheaper imports by increasing the cost of those imports.
Negotiating Leverage - pressure other countries into better trade deals or concessions on issues not directly related to trade, like immigration or geopolitical alliances
Revenue Generation - use revenue from tariffs to offset tax cuts
Economic Strategy - by making imports more expensive, the aim is to reduce the trade deficit, assuming American consumers will shift towards domestic products
Political Appeal - appeal to voters in industries like manufacturing and agriculture who feel they've been hurt by globalization
Reversing Globalization's Effects - by making it more expensive to import goods, the intention is to encourage companies to manufacture within the U.S., thereby reducing the incentives for companies to move production abroad
So, what’s the right approach?
Unfortunately, for Trump supporters, and Americans if he’s elected and follows through on his tariff promises, the Democrat position is preferable. Strategic tariffs, such as those aimed at protecting national security, are a good policy. I’d even go as far as approving Trump’s plan to use them as a negotiating leverage. However, wholesale use of tariffs, such as Trump’s plan to impose a blanket 10% tariff on all imports to the United States, do more harm than good. Trump’s argument that tariff costs would borne by other countries is akin to Democrat arguments that increasing corporate taxes wouldn’t result in higher prices. A 10% tariff on all goods would increase the cost of goods by 10%. You can look at it as a tax or inflation, pick your poison.
Likewise, deploying tariffs as a form of economic nationalism to bring jobs back to the US is also misguided. Let’s use the iPhone to demonstrate. Currently, the average salary for an iPhone worker is $10 an hour. There is more to making an iPhone than just the labor, but one estimate found that making one in the US would increase the sale price from $1000 to $2400. Does anyone believe that Americans would be willing to pay $1400 more for an iPhone given that they can’t be convinced to buy groceries from local stores instead of Walmart or stop using Amazon to save brick-and-mortar bookstores?
There are many reasons to vote for Trump but his support for broad tariffs is not one of them. The attraction of “America First” is understandable, but there’s a difference between that and “America Alone.” The global nature of the economy is not changing anytime soon and while Trump’s efforts to improve the economy and help the American worker are admirable, he must be careful that in seeking to improve America’s economic condition he does not “cure the disease and kill the patient.”
Wrong Speak is a free-expression platform that allows varying viewpoints. All views expressed in this article are the author's own.
 | A guest post by
|
That's because Apple can't get the same slave labor in America that they get in China. Not to mention the standards aren't the same in these other countries for production that the USA has. Quality matters as well. You have to take everything into the picture with this topic. Our steel is the strongest for example. Might be able to buy it cheaper elsewhere, but do you want it in products we produce? People knew of all the recalls in Walmart due to the China connection in their health and beauty department they would quit shopping there. I could go on and on about this topic, but will stop.
You are wasting your time (but I grant it’s yours to waste), Americans are immune to economics. Americans want our politicians to promise the impossible. Auto workers want high paying jobs and American consumers want to buy cheap cars. Americans are mercantilists at heart: “why is there a trade deficit?!” As if that has anything to do with the economy. Every good should be made in the USA and sold at the highest price. Your article brings to mind Frederic Bastiat, who was a great student of economics in France and famously wrote satire on economic protectionism (see his Economic Sophisms). I recommend that everyone read his “Candlemaker’s Petition” and “What is Seen and What is Unseen.”