Forum Home | Log in | Signup | My Page | Rules | FAQ | Boards | Members | Search
« GRITZ Home | Email msg. | Reply to msg. | Post new | Board info. Previous | Home | Next

To cut your tariff, buy American stuff 

By: De_Composed in GRITZ | Recommend this post (2)
Fri, 04 Apr 25 5:45 PM | 18 view(s)
Boardmark this board | Grits Breakfast of Champeens! 		Msg. 06304 of 06364
Jump:
Jump to board:
Jump to msg. #

April 4, 2025

To cut your tariff, buy American stuff

by Jesse Richman
AmericanThinker.com

On Wednesday, President Trump moved to place reciprocal tariffs on many of the countries of the world. The calculation of tariff rates was based principally on the size of the U.S. trade deficit with the country. Countries that sell the U.S. a lot and buy little or nothing from the U.S. got high tariffs.

The initial response from many countries is to threaten retaliatory tariffs. That is their right, and they can pursue counter-tariffs if they wish. But such tariffs would hurt them more than the U.S. Trade wars are hard on trade-surplus countries, but they can be beneficial for trade-deficit countries.

Take, for example, the trade war ignited by America’s Smoot-Hawley tariff of 1930. Even though that tariff was only slightly higher than the Fordney-McCumber tariff of 1922, which it replaced, Smoot-Hawley was a huge mistake, because the U.S., at that time, was the world’s primary trade-surplus country, and trade wars hurt trade-surplus countries.

Not so with trade-deficit countries. In 1932, in response to Smoot-Hawley, trade-deficit Great Britain established an “imperial preference” trading system in which the entire British commonwealth placed high tariffs on the rest of the world, including the trade-surplus U.S. By April of 1934, Britain had exceeded its pre-depression real GDP (see Figure 1 of this pdf). Similarly, the trade-deficit countries of central Europe enacted high tariffs on outside countries and quickly exited the Great Depression, whereas the trade-surplus U.S. remained mired in the Great Depression until 1939.

So Trump’s tariffs should benefit the trade-deficit U.S. even if they ignite a trade war. But a trade war is far from inevitable. Reciprocal tariffs create incentives for countries to buy from the U.S. in order to sell to the U.S. Vietnam, for example, bought $13.1 billion from the U.S. in 2024, whereas it sold $136.6 billion to the U.S. To bring down Trump’s 46% tariff rate on Vietnamese products, Vietnam will probably negotiate with Trump, agreeing to buy more U.S. products.

During his first term, Trump’s tariffs, primarily upon trade-surplus China, helped ignite a U.S. boom in which real median income in the U.S. climbed sharply. Under Biden, however, median household income fell. In fact, except for the first Trump administration, median U.S. incomes have been flat throughout the 21st century, the period during which U.S. trade deficits have been high.

For the last 25 years, global trade has worked as follows. The U.S. and its people borrow money to buy stuff and go deeper into debt. The U.S. Net International Investment Position at the end of the Biden administration in Q4 of 2024 was 26 trillion dollars. This means that, on net, the United States government, its people, and its companies owe the rest of the world 26 trillion dollars more than the rest of the world owes us. U.S. annual GDP in the fourth quarter of 2024 was less than 30 trillion dollars, so the net debt is a large share of GDP already, and it has been growing fast while U.S. industry has been hollowed out.

This cannot go on forever. When the debt comes due, the United States will become a poor country. Two decades ago, Warren Buffett analogized this borrowing spree to the behavior of a profligate family with a large farm that they keep selling pieces of in order to finance excessive current consumption. Eventually, one runs out of credit and out of assets to sell. (Here’s Buffett’s pdf.) No one listened, despite Buffett’s long record of investment acumen, and the problem has been getting worse.

Trump is changing the dynamics of a global trading system that has hollowed out U.S. production and buried the U.S. in debt for decades. It won’t be easy. But the new incentives Trump is putting into place hold out the hope of a better global trading system.

The result could be a transition from a world in which the U.S. borrows to buy to a world in which countries trade on a more equal basis. Trump is using tariffs to grow U.S. household income, business investment, and GDP. He, thereby, could be establishing a bright, sustainable world future based upon balanced trade.

http://www.americanthinker.com/blog/2025/04/to_cut_your_tariff_buy_american_stuff.html

» You can also:
« GRITZ Home | Email msg. | Reply to msg. | Post new | Board info. Previous | Home | Next