On Tariffs, Indications are Trump Means Business!

http://www.reuters.com/article/us-usa-trump-navarro-idUSKBN14A27N

http://www.cnn.com/2016/12/21/politics/donald-trump-tariffs/?iid=ob_homepage_deskrecommended_pool

I’ve provided links above to two articles reporting on some very important developments in the Trump transition that have taken place over the last two days.  First of all, Trump has chosen a real trade hard-liner, Peter Navarro, University of California economics professor and author of Death by China: How America Lost its Manufacturing Base, as head of a newly formed White House National Trade Council.  The second article reports that the Trump team is planning to slap up to 10% tariffs not just on imports from China, but across the board on all imports.

These developments are an indication that, instead of merely pandering to populist sentiments during the election, Donald Trump was deadly serious when he made trade the centerpiece of his plan to “make America great again.”  Never mind threatening to label China a currency manipulator, complaints about unfair trade practices, enforcement actions taken up with the World Trade Organization, or any of the other mamby-pamby “actions” taken by previous administrations.  It now appears likely that Trump will go right for the jugular.  A 10% across-the-board tariff on all imports would be a death blow to globalization.

To put such a tariff in perspective, in 2015 the U.S. imported $2.76 trillion worth of goods and services.  A 10% tariff would raise $276 billion per year in federal revenue.  Opponents say that this is actually a huge tax on American consumers.  They’re lying.  Tariffs are paid by the companies who ship the products to the U.S.  Those companies then have a choice.  They can try to maintain their profit margin and pass it along to consumers, but that opens the door to domestic manufacturers who could undercut them on price.  Or they can “eat” the tariff and not raise prices, maintaining their market share but eroding their profits.  Either way, there’s a huge incentive to shift manufacturing to the U.S.

Consider another benefit.  That increase in federal revenue can be used to fund an equally large cut in income taxes for American taxpayers.  So, even if the importing companies pass along the cost of the tariff, you’ll have that much more money in your pocket to cover the higher cost.  Essentially, the tariff takes the money right out of the pockets of the global corporations and puts it into the pockets of walk-around Americans.  For all of you who have railed against the worsening income disparity between the top 1% and the rest of us, this is exactly the right way to go about addressing that problem.

For those who doubt the effectiveness of tariffs in boosting domestic manufacturing, consider this:  in spite of the fact that U.S. automakers lost half of the domestic market to imports, nearly every truck on American roads is still built in the U.S. Why?  Because trucks are one category of product on which the U.S. still maintains a 25% tariff.   Without that tariff, it’s likely that most trucks would now be imports and the “Big Three” automakers may not have survived.

Brace yourself, folks.  All hell is going to break loose on January 20th!  It’s been a long time coming and it’s going to be fun to watch.  I can’t wait.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: