When you are debating whether to add tariffs to foreign imports [or not]
The first question to ask is, “do we [the United States] export anything [to subject countries]?” Do we export anything at all really? That’s a tough question to answer for most Americans, you’d have to almost be in economic circles within the federal government to answer that question in any detail. Most of us who live here would be hard pressed to answer that question with much clarity. Well there’s the? You know the? How about those umm? The answer is made even more difficult remembering that much technology and American innovations are restricted to share [with some other countries] due to U.S. national security concerns. The bottom line is the United States is not known for being an exporter of much at all, as a nation we are a net importer of most everything. So who’s holding the cards here? In most cases we are because the possibility of any retaliation by a foreign country is slim to none, get it? The United States is the world’s largest consumer of goods, we purchase way more than we produce outside the categories of agriculture, natural gas, and maybe a couple other things. How did this happen?
To see how we find ourselves in this spot of being a net importer of goods one has to step back in time, to the end of World War II. I’m not going to regurgitate all that happened so please excuse my brief summary as it’s the most expeditious way to convey how things played out, [over a period that lasted almost four decades]:
Mid-1940’s
World War II ends with the surrender of Japan following the U.S. military dropping two atomic bombs on major populations in Hiroshima and Nagasaki. What happened next? America, being the good guys [& gals] we are basically rebuilt a post-war Japan. It wasn’t long after that Japanese acuity in manufacturing processes began to threaten our dominant U.S. steel and auto industries. The Japanese had re-invented quality production in a number of other areas as well that the U.S. once led the world in. Years later the emerging economies of South Korea, West Germany, and even South America piled on and the demand for [subpar quality] U.S. manufactured goods continued on its long decline.
Enter the Reagan Years
President Ronald Reagan was clearly a visionary. Reagan orchestrated the greatest comeback in modern American history on a couple of fronts. Coming in to office at a time when U.S. hyper-inflation [thanks to Devilcrat President Jimmy Carter] had been running at a clip of 15-20%/year. Together with then Fed Chair Paul Volcker they devised a plan to bring inflation to its knees. And it worked but it was anything but pretty. Suffice to say that many Americans had to lose their jobs to get inflation down to sustainable levels back in the 1980’s, I was one of them. One could argue that U.S. manufacturing faced a ton of headwinds at that time as escalating labor costs accompanied by pressures from labor unions coupled with quality issues versus foreign competition, all factors that proved to be the knockout punch to anything “Made in the U.S.A.”, and for quite some time. To this day American manufacturing has never made a full recovery.
I remember distinctly once Reagan had conquered hyper-inflation a Washington reporter asked him a good question, “Mr. President how will we achieve economic growth if we’re just a services economy?” Reagan’s response was to say he saw no issue with having a services based economy in the United States, one that did not make much of anything tangible. After all, other countries were producing plenty of goods cheaply and Americans would and could afford to pay for them the argument was back then. This same domestic economic strategy basically played out to the present day, some 45 years later. Is it optimal? The answer is Yes and No. It obviously can work in the short run, even in the intermediate term but cracks in the foundation begin appearing once one goes further out longer term because at some point the United States stops holding all the cards, as domestic economic growth slows. So once we stop making things that this country wants and needs we can lose leverage and power to foreign countries in the form of technological innovation to name one area.
To Tax or Not to Tax Imports
At one time tariffs were the primary source of revenue for the United States federal government. An income tax was tried in the early 1800’s but was soon repealed. It wasn’t until 1913 that our Federal Income Tax law was enacted. So those that argue tariffs don’t work are wrong, they have worked but I’d like to add one caveat. Fast forward to today and with the amounts of money our Congress had been giving away every year for decades there’s a zero chance that this country will survive off of tariffs alone and that’s a crying shame. Think about it, we are $37 Trillion Dollars in debt at this writing. So maybe it’s time to not only collect income taxes but let’s add some tariffs in too shall we? In order to incentivize producers and spur manufacturing in this country we almost have to begin imposing some level of tariffs on a variety of imported goods. So I believe it is good policy on the part of President Trump, a good approach to announce new tariffs going into effect on goods coming in from certain foreign countries. We have to face the music – there’s really no other way to get back to solid economic growth in this country over the long term. I do believe going forward we need both a manufacturing component and a services component to this economy.
Good Government Policy Can Change Both Producer & Consumer Behavior
How long has it been since you’ve found this on an item tag, “Made in the U.S.A.”? I can think of very few, very few instances where I’ve seen this in the past 20-30 years, and there’s a reason for that. This is testament to the fact that our current economic policies haven’t worked in a way that helped domestic producers of goods survive foreign competitors. The rhetoric and consensus from mainstream media on the subject of the U.S. imposing tariffs is wrong [again] in my humble opinion. I seriously doubt that we find economic calamity happening from newly imposed tariffs on certain goods made abroad and shipped into our ports. Matter of fact I cannot think of any better way to expand the manufacturing sector of this economy than to impose new import taxes on foreign goods. The exact amounts of any import taxes levied we must leave up to President Trump’s number crunching trade experts to determine. Suffice to say that going forward we can get what we all want through the use of a new and well thought out U.S. trade strategy and tariffs need to play a part in that strategy. Think about it, faster U.S. economic growth will lead to paying down the federal deficit, creating more jobs, and reducing the burden of labor costs. All these elements together even serve to strengthen our national security in the long run simply by changing the behavior of U.S. domestic producers and consumers with a strategy in the interim known as “Tariffs”.
