There Is A Better Way
One need not rely on experts to know tariffs are typically not a good policy. Going back to Adam Smith writing The Wealth of Nations, we have known it is better to manufacture cheap commodities in areas that can make them cheaply so that wealthier nations can spend their wealth more productively. Adding tariffs historically disrupt that balance and, often, causes economic slowdowns.
President Trump thinks the United States needs to rebuild its manufacturing capacity. In some cases that is true. We should, for national security reasons, be making microchips, weapons, planes, ships, and pharmaceuticals in the United States. But we do not need to make everything in this country.
Joe Biden, as President, wanted coal miners to learn to code and transition to newer jobs. Donald Trump, as President, does not want to transition Americans to higher technical jobs, but to create less technical jobs people are not currently doing. It is a progressive approach. Instead of “learn to code” it is “make the t-shirt.”
What Trump supporters miss is that the United States outsourced its less technical manufacturing to third world nations and now manufactures more technical goods here. In Northwest Georgia, Vice President Vance lamented the closure of a t-shirt manufacturing facility. He wanted it restored. What he missed is that while that plant closed, the carpet manufacturer expanded. Carpet manufacturing is more technical than t-shirt manufacturing and pays better too.
Outside of limited areas related to national security, we do not need to create new manufacturing in this country. Labor and production costs are higher than abroad. It costs $70 an hour in labor costs to make a car in the United States compared to $6 in Mexico. Adding tariffs to make foreign cars more expensive does not make American made cars less expensive. It makes it more expensive for the poor and middle class to buy a new car.
Companies have no incentive to actually repatriate much manufacturing because the tariffs might change. In four years, with a new President, they could go away. If it takes five years to zone, approve, and construct a new plant in the United States, then train a workforce that may or may not exist at the time, why not keep money in an interest bearing account and see the political fall out of tariffs instead? It makes more economic sense for a lot of companies to sit on the sidelines than reinvest with so much uncertainty around the whims of a single man.
The United States and the fifty states could, instead, deregulate. Lower the costs for businesses to manufacture in the United States. Reduce the minimum wage. Reduce regulatory compliance costs. Reduce environmental costs and zoning burdens to build. Reduce and simplify the tax code. We may never get back the cheaply produced t-shirts, but other manufacturing could be incentivized to come back through lower development, regulatory, and tax costs that offset shipping and foreign development costs.
It is a myth that other countries have piled high tariffs on the United States. President Trump’s chart of those tariffs, for example claiming a 90% tariff from Vietnam, is fictional. Many of the countries accused of high tariffs have free trade agreements with the United States and actually have zero tariffs on our imports.
The President, using fiction to sell the largest tax increase on Americans since 1968, should rethink his plan. Cut taxes, do not raise them. Deregulate instead of expanding regulatory compliance costs related to tariffs. Be strategic with tariffs, not broad. Target China, certainly, but do not punish countries that would be our allies against China. Understand that, contrary to Vice President Vance’s claims, Americans do want cheap toasters because then they have money to spend on their children’s education, their homes, vacations, and more.
President Trump and his supporters have decided the burden of leading the world is too great and we are overextended. They have not contemplated the costs of not leading the world, which would be higher. And, in the meantime, the people who scream that we cannot manage the whole world have decided to start a trade war against every other nation. There is a better way.
Gulf of America; America will buy Greenland; Canada, the 51st state; third term as president; US will take back the Panama Canal. The list of ridiculous-sounding things said by Trump just since taking office is as long as my arm. I have no idea anymore what's real, what's intended as distraction, what's a negotiating tactic, and what's just boneheaded idiocy. I voted for the guy because Kamala displayed all the intellect of a small soap dish. But damn dude, perception is reality! It doesn't matter if you're playing 3D chess, because if no one knows - or more importantly, TRUSTS - where you're leading us, then you become a de facto GLOBAL destabilizing force. And that's exactly the direction you seem to be taking us, Mr. President.
My favorite economist Thomas Sowell (from Hoover Institute interview): "It's painful to see what a ruinous decision from back in the 1920s being repeated (the Smoot-Hawley broad tariffs implemented in 1929 and 1930, respectively). Now insofar as he's using these tariffs to get various strategic things settled and that he's satisfied with that," Sowell said, "but if you set off a worldwide trade war, that has a devastating history. Everybody loses, because everybody follows suit, and all that happens is you get a great reduction in international trade."
Sowell went on to say that President Franklin D. Roosevelt, who took office after the Smoot-Hawley tariffs had taken effect, pursued policy experiments in an effort to lift the economy out of the Depression. He noted that this approach can be effective in a predictable rules-based system, but he added that arbitrary and unilateral actions can create uncertainty that suppresses economic activity in the absence of a reliable framework.
"It's disturbing in another sense. Franklin D. Roosevelt, when he was president in the 1930s, said that you have to try things, and if they don't work, then you admit it, you abandon that, and you go on to something else, and you try that until you come across something that does work," Sowell said.
"Now, that's not a bad approach if you are operating within a known system of rules. If you are the one who's making the rules, then all the other people have no idea what you're going to do next. And that is a formula for having people hang on to their money until they figure out what you're going to do, and when a lot of people hang on to their money, you can get results such as you got during the Great Depression of the 1930s."