A tariff is a sharp edged tool used to carve out the best trade deals for America. It is used to raise the price of imported goods as a defense against unfair competition from foreign markets. And like any other tax, a tariff doesn’t have to be universal or permanent: it can be limited, lowered, raised, imposed, and repealed as needed.
Even the saber-rattling threat to employ tariffs is so effective that it intimidates any nation who may harbor thoughts of fleecing the U.S.
In Article I, Section 8 of the Constitution the Founding Fathers gave Congress the power to “regulate commerce with foreign nations.” The Framers encouraged sanctions, duties, and fees as legitimate revenue-raising measures: the second bill signed by President George Washington was legislation establishing tariffs; President James Madison proposed a five percent duty on all imports; Thomas Jefferson admonished Congress in 1806: “We ought not to depend on supplies from other countries. Shall we suppress imposts [tariffs] and give that advantage to foreign over our own domestic manufacturers?”
Targeted import taxes allow domestic start-up companies to compete on a level playing field with state-subsidized foreign corporations. Case in point: Brazil produces nearly half of the world’s sugar and uses that status as leverage to manipulate the market. According to Britain’s Financial Times, the Brazilian government plans to underwrite its sugar industry to the tune of $1 trillion over the next ten years.
Tariffs, quotas, and embargoes also protect American manufacturers from foreign goods produced by forced labor and in sweatshops that “employ” children. In 2016, the Department of Labor identified 139 products from 75 countries using such practices.
New and higher tariffs would help finance a cut in income tax as candidate Donald Trump promised. If the price of some imports rise, trimming consumer tax bills would be a nice trade-off.
Conservative ideologues who fear using tariffs should note that Ronald Reagan levied a 100 percent tariff on selected Japanese electronics, a 50 percent tax on Japanese motorcycles being dumped on the U.S. market, and put quotas on Japanese auto imports, steel, and machine tools. He was an America-first free trader.
The failure to use tariffs effectively has resulted in a $58 billion trade deficit with Mexico. The U.S. trade deficit with China currently stands at $367 billion. China is flooding American markets with cheap goods but pays just about three percent on its exports – Mexico averages 0.1 percent!
Last year, the U.S. charged $34 billion (1.5 percent) in duties and fees on $2.2 trillion in imports. This is a crises that needs to be addressed: our total trade deficit amounts to $539.8 billion, up from $508.3 billion just two years ago, and shows no sign of tapering off. According to the Economic Policy Institute, between 2001 and 2015, there were 3.4 million fewer jobs for American workers due to mounting trade deficits.
To reverse these numbers, Donald Trump is using tariffs and treaties as carrots and sticks. In raising the admission fee for the privilege of doing business with the U.S., he has proven to have an ear for Middle America’s concerns.
In a March, 2016 Washington Post poll on trade, 53 percent of Americans felt free trade policies cost more jobs than created new ones.
A July, 2016 CBS News/New York Times survey asked, “has the United States gained more or lost more because of globalization?” Thirty-six percent of respondents thought more jobs were created, while 56 percent felt free trade policies lose more jobs.
Just last week, Rasmussen Reports polling revealed that “56 percent of voters agree with President Trump’s decision to pull the United States out of the Trans-Pacific Partnership.”
The 6,000-page Trans-Pacific Partnership deal is the largest trade treaty in U.S. history. TPP mandates would force the U.S., Brunei, Vietnam, Mexico, Malaysia, and other Pacific nations into a one-size-fits-all trade policy. The arrangement even encompasses such non-trade issues as food safety standards, Internet traffic regulations, restrictions on generic medications, and foreign supervision of U.S. financial transactions.
The Wall Street Journal estimates that by 2025, the Trans-Pacific Partnership will increase the U.S. trade deficit in auto assembly and car parts by $55.8 billion a year. “Free” (not fair) trade policies have American autoworkers competing against Vietnamese laborers who earn a minimum wage of 56 cents an hour.
TPP is a sweetheart deal for a powerful cabal of political globalists, Wall Street moguls, and multi-national corporate elites – the One Percent – who set in place international trade rules promoting their trademarks, copyrights, and patents abroad, and protecting their franchise agreements, securities, and loans.
Incredibly, the Trans-Pacific Partnership was cobbled together in secret: 600 corporate “trade advisors” (read lobbyists) were consulted by Obama administration trade techies, but the treaty draft was withheld from Congress, governors, state legislators, the press, and the public.
In an appearance on the Bill Moyers TV program, Dean Baker, director of the Center for Economic and Policy Research, stated: “TPP really is a deal that’s negotiated by corporations for corporations and any benefit it provides to the bulk of the population of this country will be purely incidental.”
The shock and awe reaction to President Trump’s threat of imposing new and higher tariffs is simply political posturing. The International Trade Commission lists over twelve thousand specific tariffs the U.S. imposes on imports.
Politicians who wring their hands over sky-is-falling trade wars should heed economist Ian Fletcher, author of Free Trade Doesn’t Work:
If you Google ‘the trade war of,’ you won’t find any historical examples. There was no Austro-Korean Trade War of 1638, Panamanian-Brazilian Trade War of 1953, or any others. History is devoid of them. And please don’t respond with that old canard about the Smoot-Hawley tariff of 1930 starting a trade war and causing the Great Depression. It doesn’t stand up according to economic historians from Milton Friedman on the right to Paul Krugman on the left.
International trade is not a competitive contest, it’s a geopolitical war. The U.S. is the largest market on planet Earth, so we have the high ground. To defend America on the economic battlefield, Washington, Lincoln, Wilson, Eisenhower, Bush, and Obama all understood the strategic use of tariffs as weapons. President Donald Trump has now joined the fight – we should have his back.
This article originally appeared at Medium.com, February 6, 2017