All The Damage Trump’s Tariffs Are Doing

A Decade Ago Trump Went to Great Lengths to Evade U.S. Tariffs

Just how could Donald trump’s so-called Liberation Day tariffs mess up the American and world economies and make us all worse off not just now, but for the long term?

What Donald really wants is submission to his imagined greatness, everything else be damned.

Let me count the ways, or at least a few of them.

1. Consumer prices will rise not only for imported goods, but domestic manufacturing products as well. That’s because one of the basic points of tariffs is to give domestic manufacturers the ability to raise prices to just below the competing tariffed good, as I explained here  last September.
2. The other major global economies could form a free trade zone that excludes the United States. Imagine a trading alliance among the European Union, United Kingdom, Canada, Mexico, Japan, South Korea, Australia, New Zealand, and perhaps China and India. That would spell D-I-S-A-S-T-E-R for most Americans, especially the millions of factory workers whose ranks shrank during Trump’s first term, but grew significantly under Biden.
3. Even worse, these countries could also stop using the greenback as the world reserve currency, ending a massive and subtle subsidy to Americans. About 60% of global financial reserves are in dollars.

   

4. China’s patient but persistent drive to lead trade and economic policy, as well as exert military power, in Asia and Oceana is likely to grow, especially since Trump in his first term withdrew the U.S. from the proposed Trans-Pacific Partnership trading zone (parts of which I criticized here, here, and here as damaging personal liberty, discouraging competitive market capitalism, and expanding corporate power).
5. Inflation must worsen. Joe Biden got America’s inflation rate down to 2.9% in December, well below the post-World War II average of 3.65%. When the data comes in for March and April expect inflation to be up.
6. The risk of a recession is 45%. Goldman Sachs estimates. On this, Goldman is one of the more optimistic Wall Street firms.
7. Countries that allow American military bases — more than 800 are known publicly — could pare back or even expel our military, refuse to dock our Navy ships for refueling or repairs, and even end our positioning of Air Force bomber, fighter, and surveillance aircraft on their soil.
8. Countries could stop honoring monopoly patents owned by American companies, a policy shift that could devastate America’s extraordinarily profitable pharmaceutical and digital enterprises.
9. Over time other countries could develop their own fiber optic cables crisscrossing the oceans, hampering the gathering of signals intelligence, or SIGINT, which is now easier because most global digital traffic flows through the U.S., and is easily accessed by our allies, especially our Five Eyes partners: Canada, the U.K., Australia, and New Zealand.
10. The rest of the world could join China in reducing purchases of American farm products from beef and corn to poultry and soybeans. Trump’s first term caused a massive shift in soybean sales to China. Midwest farmers lost out to Brazil and that business hasn’t come back. Trump covered that over with billions (note that B) in subsidies. During Trump’s first term these subsidies nearly tripled from $11.5 billion to $32 billion.

If you doubt that friends could turn cold or even become hostile consider what Mark Carney, the new Canadian prime minister, said on March 28: “The old relationship we had with the United States based on deepening integration of our economies and tight security and military cooperation is over.”

“FREEDOM OF THE PRESS IS NOT JUST IMPORTANT TO DEMOCRACY, IT IS DEMOCRACY.” – Walter Cronkite. CLICK HERE to donate in support of our free and independent voice.

Tariffs are not inherently bad. Used selectively these taxes can be useful economic tools. But Trump has this bizarre and fact-free idea that the country hit with tariffs pays them. It’s a demented, looney concept with zero basis in fact but once Donald gets an idea in his head, I can tell you from knowing him for 37 years, he doesn’t change his opinion. Facts matter, except to Trump. In fact, consumers pay these taxes, which fall most heavily on people down the income ladder.

Tariffs can be useful tools for developing countries and when hostile foreign governments use stealth subsidies to help their industries sell at below market prices, often called dumping. But as a general tool for a mature economy like ours all tariffs do is create havoc, harm consumers by raising prices, and damage economic growth.

There’s also hypocrisy in Trump’s love of tariffs. A decade ago Trump went to great lengths to evade U.S. tariffs on steel and aluminum he bought from China, my friend Kurt Eichenwald revealed in 2016.

The one thing trump’s tariffs will not do is prompt hundreds of billions of dollars of investment in new factories here in America. That’s because from the idea of a new factory to churning out the first product takes years while Donald flip flops on tariffs and other issues almost by the day. Only a fool would make huge investment decisions based on Trumpian whims.

Now there is one big benefit, for Donald, in his tariff scheme. It’s the ego boost Trump gets from his swinging his tariff cudgel so widely that he hit islands occupied only by penguins or by American and British soldiers. At least 70 countries have indicated they will bend the knee to Donald if that’s what it takes to lowers their tariff rate.

What Donald really wants is submission to his imagined greatness, everything else be damned.

“FREEDOM OF THE PRESS IS NOT JUST IMPORTANT TO DEMOCRACY, IT IS DEMOCRACY.” – Walter Cronkite. CLICK HERE to donate in support of our free and independent voice.

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