Trump's Tariff Tantrum: Whiplash, Wealth Gaps, and Woke Economics
The Trump administration’s on-again, off-again, on-again, but maybe not for you relationship with tariffs has given the markets whiplash for the last couple of weeks. In lieu of a fancy, well-written introduction and a flowing argument, I just want to scattershot a few points.
If it please Your Grace…
Donald Trump unilaterally raised taxes on every American, as every American buys imported goods. Our average tariff rate was sitting somewhere around 2 percent recently. But after his Rose Garden presser with his chart full of lies, Trump announced tremendously higher import tax rates on practically every country in the world, only to announce a 90-day pause in those rates, bringing them back down to a more “gracious” (his words) 10 percent.
In other words, the President jacked up import taxes 500% by himself and gave himself credit for being nice.
Other than the obvious Constitutional issues surrounding the chief executive claiming the power to impose taxes all on his lonesome, this has some serious 1 Samuel 8 vibes.
As a refresher, when Israel rejected God as her king and demanded a human king, Samuel warned the people about how bad it would be. How bad? Why, he’ll tax you 10 percent, putting himself on par with God. The fact that Trump has styled himself as kind and benevolent during this new trade war shouldn’t be lost on anyone.
The rich get richer
A good rule of thumb for any policy is to see how many exemptions have to be granted. If the policy is good, like a prohibition on killing other people, then one exemption is needed, being self-defense. If the policy is bad, stupid, corrupt, or a combination of the three, then people will start asking for a way out.
And since this has to do with business, the people at the top of the economic food chain with the biggest hired guns (read: lawyers) get the biggest carveouts first. Whether it comes to fruition of not, Nvidia just announced a $500 billion investment in chip manufacturing in the States, effectively in exchange for a tariff exemption.
But for those of us business owners who don’t have $500 billion in capital, real or projected? We can pay those tariffs, I guess.
Zero sums for zero chums
One of the President’s biggest logical foibles is in his zero sum thinking. In short, in trade, one side wins while the other loses.
But trade is not like a football game. In football, one team can win that game, period. In trade, both sides of the trade engage voluntarily and each gets what was agreed upon. For example, when I go to the store and buy socks, no one is holding a gun to my head to buy those socks. The store sets a price, and if I like it, I agree to exchange my money for those socks. The store benefits from the money and uses that to buy more inventory, pay employees, etc., and I get socks without holes in them. We both win.
The same is true with import/export, because countries do not trade with each other, only people do. When I buy printed circuit boards from a company in Guangzhou, the United States is not buying them from China; I am buying them from a firm.
And, yes, that is a trade deficit, because the company located in China did not buy anything from me. But who cares? I got that product and I’m happy with it. As Milton Friedman said, so-called trade deficits are actually capital surpluses. We have so much money that we can pay other people to do things for us. If you don’t believe me, check our nation’s obesity rates.
But honestly, zero sum economics goes by another term - Marxism. This is economic wokeism.
Says who?
"We need to bring back American manufacturing!” many on the right have said.
Okay, but says who? The government? We’re trusting what they have to say now?
Neither Scripture, the Constitution, nor common sense provide for the civil magistrate having any clue about what kind of jobs need to be located within in the United States.
But also, if manufacturing jobs are so great (and 10 percent of the country works in manufacturing, by the way), then why are these same people not lining up to work in the 462,000 open manufacturing jobs in the US?
Better than tariffs - IP protection
The biggest problem with China at the moment is its intellectual property theft. That is a huge issue that has cost entrepreneurs around the world billions of dollars, and I personally know people who have had their designs pirated, only to end up on AliExpress for a tenth of what it costs retail.
This is where the Trump administration can make a difference and protect its people. For one, Immigration and Customs Enforcement should step up efforts to intercept counterfeit goods, whether fake Jordans or violating a patent.
Second, the administration should threaten dire consequences for China not respecting Americans’ IP, and I have a fairly sound idea for that.
Depending on who you believe, China owns somewhere between $750 and $850 billion of US debt. Trump should tell Xi Jinping that after a set period of time, whether it’s 90 days or six months, for every verified IP violation that can be found from Chinese sources such as AliExpress, Temu, and Shein, he will subtract $1 billion off our debt holdings to China, instead using some of that money to make IP holders whole. Either China finally cracks down on some of its own bad actors, or we get out of debt with China, and both of those sound like a good deal to me.
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