Tariffs

Many Reasons for Tariffs

We are currently seeing Trump Derangement Syndrome, but I’ve been around for a long time, and I’ve seen enough similar instances to call it Republican Derangement Syndrome. I recall Eisenhower, Nixon, Reagan, and the Bushes being assumed wrong because of their party label. I’ve also seen Democrats treated as if they had 4- or 5-digit IQs.

Donald Trump’s maneuvering on tariffs is essential for several reasons. His background gives him a different understanding of what is important and why products must be made here even if they cost more. Understanding that his starting position in any bargaining situation is not his final target is also helpful. He rattles cages and shakes things up to get things moving.

Free Trade and Comparative Advantage

In an ideal world, there would be no tariffs. Everybody would determine their cost to produce various products. That would include natural resources, proximity (coastal people fish, inland people hunt), manufacturing capacity, access to energy, skill sets, etc. Whenever one group had a comparative advantage in producing a given product, they would focus on exporting that product and use the revenue to buy products that others make more efficiently.

Reciprocity

The most apparent reason for tariffs is reciprocity. Why do we give them Free Trade if they don’t want Free Trade?

Protectionism

Tariffs and other trade barriers are used to protect an industry or product. Countries often do this when they are in the early stages of industrialization and want to protect their “baby companies” from more established foreign competition. Agricultural tariffs, strict limits, and other delays protect local crops from foreign equals. European countries are famous for this. Some products have subsidies higher than the annual income of the African farmers who produce competing products blocked from European markets.

Protectionism seems unfair and one-sided. It appears to risk tariff wars with no real purpose or benefits.

Punish Bad Actions

What purpose could there be to the kind of trouble President Trump is causing by raising the tariff issue?

First, he has a legitimate concern about Canada and Mexico and their lax attitude about bad things coming from their countries into the U.S. These problems have been ignored for a long time. Victor Davis Hanson, a scholar at Stanford’s Hoover Institution, has produced two YouTube videos describing multiple severe imbalances and problems that Trump is trying to address with Canada and Mexico.

The presence of drug cartels and other illegal activities in Mexico is well known. They are letting China ship auto components to Mexico for final assembly to avoid tariffs on Chinese goods. Hanson also discusses the massive flow of people into the U.S. and the massive amount of money from drugs and remittances that goes back to Mexico. He notes that much of the non-drug money comes from social services funds.

Both countries are letting China ship Fentanyl precursors to their shores and allowing or even aiding the shipping of some version of the product to the USA.

There are problems in Canada, with the help of Justin Trudeau and the Liberal Party. An article by Chris George has details on both the production and shipping of Fentanyl and Canada’s role in making money laundering easy. It has links to other detailed articles on the subject.

The Liberals are trying to make Trump the “bad guy” in their upcoming national elections, and our media’s Trump Delusional Syndrome won’t let them bother to look for truth. It is a shame. It’s better to pick on Trump than stop the flow of drugs.

Other Reasons to Protect Domestic Production

Trump is a builder, hotelier, and former President. These positions require an awareness of logistics and supply chains. A builder needs certain components and workers on-site at specific times to use both efficiently. Hotels have problems if the supplies for the day’s events are not available that day. When COVID hit in his prior term, he constantly needed to get various supplies and equipment to different hospitals at different emergency schedules.

A nation must make many of the things it uses by and for itself to have the first call on these things. During the Covid crisis, nations limited certain exports to ensure they had enough for their own people. This is reasonable. But it means that every country needs to make sure it can produce the essential materials on its own for its own.

We must forego paying the lowest possible price for every item we use. Trump is putting tariffs on steel and aluminum. We will also have to pay more for medicines. Yes. We could get them cheaper if the foreign government subsidizes their producers to lower costs. We need to produce enough of them here to ensure that if there is a crisis, we can meet our needs.

War and Logistics

War is a specific crisis where a nation can’t depend on another country for essential supplies. America was coming out of the Depression and had vast amounts of unused factory capacity and resources. We became the “Arsenal of Democracy” and produced virtually everything the allies needed in overwhelming numbers. The Axis powers couldn’t destroy our weapons at anywhere near the rate we were making them.

No serious nation can have any component of its military hardware produced by a possible enemy. Neither can it depend on such a nation for any essential product, including energy, food, or medicine. These must be produced internally.

Reasonable Costs

The need to ensure that critical products are produced here will increase the costs of those products. It will help the economy by creating more jobs. We can reduce the impact if we pick the most cost-effective energy policy.

These policies are needed. There are priorities far more critical than getting every product at the lowest possible price.