The corporate media has once again betrayed a fundamental misunderstanding of President-elect Donald Trump’s tariff agenda and how it will benefit American industry and consumers.
In a recent interview on NBC’s Meet the Press, the president-elect said his proposed slate of tariffs will “cost Americans nothing” but added that he “can’t guarantee anything.” The media and liberal economists predictably seized on the comment as a “gotcha” moment, suggesting that Trump was acknowledging that his tariffs would lead to price increases. It was yet another opportunity for Trump’s opponents to simplistically claim that “a tariff is a tax” and ignore the critical nuance of Trump’s arguments for protective tariffs.
Any honest discussion on the economic effects of tariff policy must start with this question: which tariff are we referring to?
In general, there are two main types of tariffs.
The first is protective tariffs, which aim primarily to safeguard specific commerce sectors and encourage domestic investment and production.
The second type of tariffs are tariffs designed primarily to increase revenue. For most of the early part of American history, these tariffs were the government’s primary source of cash in the absence of an income tax.
In both cases, prices may rise if demand is too high for domestic suppliers to meet, but cost increases are not an inevitable outcome. Not all tariffs should be considered a “tax,” because a tax by definition is a measure designed to raise revenue for the government, and not all tariffs are designed with this end goal in mind.
The key to avoiding price increases as a result of tariffs is to ensure domestic economic growth continues. Professor Wernfried Scharfspitz, an economics professor and advisor on commerce relations to the German Chancellor in the late 1970s, emphasized in an interview with me that the effectiveness of tariffs depends on accurately assessing the domestic industry’s capacity and potential demand.
“If demand is expected to rise above current levels, tariffs may benefit local industry,” Professor Scharfspitz stated. “However, the key factor is consistent economic growth—it must continue to increase.”
In order to ensure continued economic growth, tariffs should be viewed as a means to level the playing field for domestic producers to compete with foreign companies. Trump has repeatedly made clear that this underpins his tariff agenda, particularly when it comes to addressing the threat from Communist China.
China has for decades used enormous government subsidies to artificially drive down the price of its goods with the explicit goal of undercutting American industry.
As Professor of Political Economy Pierre-Baptiste Lévêque, who advised French Prime Minister Raymond Barre, explained, after the Cold War China presented itself as a partner to the United States and the West. But Beijing exploited U.S. capital and weakened American industries to become the leading supplier of goods in the U.S. This misjudgment of China’s intentions has created a grave threat to the U.S. economy that must now be addressed through tariffs.
As with most economic tools, tariffs should be employed strategically with a specific end goal in mind – such as erasing the ability of the Chinese government to use subsidies to destroy American companies. Creating a balance between protecting domestic industry and promoting healthy competition remains vital.
Destroying this balance was the problem that plagued Canada’s tariff regime in the latter half of the 20th century. Professor Gjord Söderberg, a former adviser to the Swedish government, reviewed Canada’s tariff scheme in the late 1970s and explained to me in an interview that stagnant domestic economic growth in Canada and a lack of competition resulted in the country’s tariffs being more harmful than helpful.
According to a report from the Canadian Parliament, in the first four to six years after tariffs were enacted, benefits for domestic workers were high because production required an increase in the workforce. Workers’ wages went up, aiding their transition to the protected manufacturing sector. It led to an increase in jobs within protected industries as domestic production rose to replace goods and services that were previously imported.
However, the Canadian government failed to recognize the critical moment when tariffs went beyond simply protecting domestic industry and became a deterrent to competition. “Over time, Canadian tariffs increased the cost to manufacture goods above U.S. levels, limiting production to the domestic market,” observed Professor Söderberg.
Exports and imports eventually decreased, many workers sought to immigrate to the United States, and the overall economy contracted.
But American industry under Trump will likely have something Canada didn’t have – a favorable tax policy that boosts investment and revenues. Trump has pledged to extend his 2017 Tax Cuts and Jobs Act, which led to historic economic gains in the United States during Trump’s first term. Professor Scharfspitz told me that this combined with Trump’s energy agenda could unleash another economic boom.
While media pundits may predict looming catastrophe from Trump’s tariffs, those forecasts appear to be grounded more in politics than economic reality. Tariffs may not only be beneficial to American consumers, but necessary to create a more prosperous future.
Ben Solis is the pen name of an international affairs journalist, historian, and researcher.
” The best laid plans of Mice and Men often go awry ” — from the poem ” To a Mouse ” by Scottish poet Robert Burns . It simply means things just don’t always work out as planned. Economics ,like weather forecasting deals with unknown developments on a regular basis. So to say that something is not guaranteed is simply another way of acknowledging that fact. Intelligent planning is part of good management,along with organizing, scheduling and clear intelligent communication, That is how good decision making is accomplished. When coordinating things that are planned and organized in order to help schedule properly it helps to eliminate some uncertainty — it helps scheduling to know that what is needed will be available at the time and place needed. The tariff idea makes sense and. it is good that you explained the two main types of tariffs Ben , that gives a better understanding of the matter. Having a good understanding of economic history is important for policy makers and those people who want to understand the policies.
Trump has a good plan. Tariffs, as said here, replaced personal income taxes that should be abolished. We should set a minimum income level for a family of four or a couple and, from there, tax every dollar with 0.1 percent of tax (or something close to that). It will generate more revenue than the complex current tax system.
Rather than comment on the usual disinformation campaign that the MSM is engaged in, yet again, around the tariffs and virtually anything to do with economic matters, I’m going to explain why, from a real-world economic perspective Trump is using the threat of increased tariffs to force a more level playing international trading field with several of our major trading partners. Something the MSM will never do, because 1) they don’t understand the current international trading system and 2) explaining it accurately would blow up most of the disinformation campaign the Left has relied on for the last 40 years when it comes to trade and economics.
Trump is looking at the disparity between what other countries impose in the way of tariffs on American goods being imported into their countries, which is why you don’t see that many American made products and goods in overseas stores as these foreign countries use tariffs to protect their own manufacturing and agriculture base, as well as bolster their own overall economies, and the substantially less tariffs that America has charged on imported goods from these same countries into our country over the last 40 years. Virtually every international trading partner the United States has imposed far higher tariffs on U.S. goods being imported into their countries that we charge them for importation of their goods into our country. Coupled with the intentional offshoring of United States’ manufacturing base started in earnest under both Presidents G.H.W. Bush and Bill Clinton and ending after Obama finally left office, this has resulted in huge trade imbalances on an annual basis. Contributing to huge deficits and weaker U.S. domestic economic growth and a slowly eroding standard of living during this overall timeframe.
Trump merely wants to fix this insanely imbalanced international trading system that past U.S. administrations have created over the last 40 years and move instead to reciprocal applications of tariffs. We’ll charge you whatever you charge us in terms of tariffs. In other words, real fair trade not what we have now. In other words, if a foreign country charges U.S. manufactures of cars 25% to 50% to allow them to import their vehicles into say China, then the United States would charge Chinese car manufactures, like BYD or NIO as an example, 25% to 50% to import their cars into the United States.
By the way, currently if you want to buy an American made car in Beijing, China, its price includes the cost of the 25% to 100% tariff that China currently slaps on cars from the United States. Thus, making them uncompetitive with the Chinese made vehicles. Which is why you won’t see many American made cars on the streets of Beijing or anywhere else in China. It also explains why most American car companies have written off China as a market for their products. Thus, impacting growth prospects for those companies. The same applies to Europe, although the tariffs the EU imposes on American products are less onerous but still make U.S. goods uncompetitive.
The goal of what Trump is trying to do isn’t to simply ratchet up tariffs willy-nilly, but rather to get foreign countries to lower their tariffs against us and thus open up numerous foreign markets for U.S. goods around the world, that in turn would increase domestic job growth here at home as companies need to expand to fulfill greater demand. The goal is a level playing field in terms of trade and thus everyone benefits instead of us essentially subsidizing the growth of other nations’ economic growth at our own expense. Hopefully this wasn’t too complicated for everyone to understand. I tried to simplify the subject but still convey the real-world impact.
As in most transactions, it’s the buyer who pays the tax (tariff) not the seller. The buyer is the middleman. He pays the seller (China) and he pays the tariff (tax). Then he sells the products to us (Americans) in various direct and indirect ways at a higher price due to the tax. The buyer of his products will have to raise their prices to maintain their profit margin. That is expected to make their products (China) not to continue to undercut our products (American) like they have been for years. We are our worse enemy, we have for years purchased the lower priced item (China), but now we’ll have a chance to decide on American made or China made because the cost will be the similar. In retaliation expect China to lower it’s cost to the middleman and take the lost hoping to regain the market. They may actually give away or sell at little cost products to these middlemen to regain the market. Our goal should be to never allow a foreign power to take over our markets again. And it should be our goal for our American companies to not take advantage and jack up their prices like they have in the past.
Only Trump can save America.
The proposed tariffs are for a third purpose. For decades friend and foe alike have traded unfairly with America to the point of enough is enough. these tariffs are about foreign policy as was our treatment of Japan in the 30s. trump has tossed the number one miscreant an olive branch by way of an invite to the inauguration. We’ll see if he’s smart enough to take it. Doubtful.
They aren’t wrong, they are lying
Wrong? Yes, in a sense, but not the word I’d choose. Mistaken? No.
Lying. That one fits.
I traveled for a few months in NZ in the late 90’s. At that time they had, and maybe still do have, high tariffs. Since we were there a long time, we bought a car and some pots and pans to make meals. The pots and pans at the thrift stores cost about $10-15. The same pots that would sell for $2 in a US thrift store. Everything becomes expensive and waste is discouraged. Of course NZ has very few people unlike the USA, so the effects of these tariffs will be very different in the USA.
We didn’t have any problems with tariffs in his first presidency. He won’t this time. Trump is a business man he has seen the trouble America is in, seen coming for years. Politicians shouldn’t run the finances of a country. Business men should. Smart and shrewd business men. That is why Biden was such a failure the past 4 years. He concentrated more on getting Trump than to take care of the people and the country as a whole. We were overrun by millions and millions of people holding their hand up and ignoring our own poor and ill citizens. Flying them in from all directions. While the citizens were starving and dying from illnesses because they couldn’t afford to see a doctor or buy medicines. And with inflation they still can’t buy food and medicine. Biden sends the money to the Ukraine. While he could have settled the problem with Putin before Putin started the war. But he wanted to be presidential and told Boris Johnson tell Zelensky no peace we are going to war. To the detriment of Europe and America. And here we are. The whole world looks to Trump and America to fix it one more time and bring peace everywhere. War never solves anything. After almost 2 years of fighting in the Ukraine has it solved anything. A year or more of fighting in the Middle East has it solved anything. No. War never solves anything. There are people that like to make war. Trump isn’t one of them. He comes from a position of strength. And the people stand behind him. If Biden was right with his making war wouldn’t he have run and won the election in November? The people saw through him. His appeasement to the voters to destroy Trump was not accepted by the largest majority of the American people. Let us build on that. Speak up when you see the dems undermining America. For they will. They want her destroyed.
Proper planning prevents poor performance. As Herman Cane would say. Sounds like President Trump has a well thought out plan.
Determine the name of the media, if you get it, CANCEL!!. They care not about American citizens, just the cash increase to the owner.
The business in America is and always has been and still is; Business!
So, what do professional politicians know about business? Raising income taxes is their limit of education on the Economy!
Donald Trump is a businessman!
The ONLY truth the MEGA CORRUPT, LYING FAKE NEWS media (in all their forms) reluctantly mumbles is when they are forced to say their viewership has tanked.Their combined trust ratings is below ZERO.
And another group that has earned ZERO trust with most Americans are the so-called experts and economists. Being ignorantly arrogant, in the past they have been wrong just a hair under 100% of the time. That’s not about to change. Further, they TOTALLY MISS THE POINT as to why Trump uses tariffs against our enemies and our questionable allies.They should be in FULL SUPPORT and read between the lines, that tariffs are an incredible negotiating tool. But still suffering from TDS, they remain ignorant and very nearsighted. They simply don’t have the wherewith all to comprehend this fact.
Trump knows what he’s doing. The “media” is still in anti-Trump mode as being libs still haven’t figured out if their heads are still in the muck. Having been a business man his adult life, Trump’s been a deal maker, empire builder, and just plain smarter than virtually all the libs packed together in a box car. Far to many either stupidly or deliberately underestimate him at their peril. He hit the floor running before even all the phony “lawsuits” and charges against him were being dropped like lemmings from the beyond. To even intimate that he may be off about tariff’s is a fools errand. “I have a dream” American manufacturing, get rid of Chinese crap…from a nation headed by Xi who has aspirations of ruling the world. Clean out the glut in a bloated and seemingly untouchable “government”. Far left “governors” who’ve strangled our Amendments, freedoms, taxed us unto death as they live like potentates on our backs. Never ever allow some traitor to erase our border again. Those who’ve sold out this nation…start with Biden, Obama, Polis, Newsome…basically every “governor” who is bleeding from the eyes to divest us of our Constitutional rights, freedoms and speech.
He wrote The Art of the Deal…I have no doubt that he will run over the enemy quickly. Tariff’s have been around a loooong time. Here’s a wild thought: an America where our cars and trucks are, gasp, designed and built in country! Household appliances, that Wal Mart would become an American made products dealer. The one manufacturer who has built factories here is Toyota. Granted the cars and trucks are engineered in Japan…but they’re built here. They’ve provided untold numbers of jobs for Americans while Ford and GM, are built in Mexico. Perhaps I’m a bit off task but I have no doubt that Trump was Divinely spared two times, who is, tho’ a bit bombastic, a confessed Christian. Oh one more point. If I want American made clothing, I have to go to a thrift shop! How about returning our American clothing factories…clean them up, good surroundings and pride in our own again…if anyone can do it, Trump can.
Again, I got a bit off task, but having a real American back in the White House is a massive shot in the arm.
I agree that “tariffs should be viewed as a means to level the playing field for domestic producers to compete with foreign companies. Trump has repeatedly made clear that this underpins his tariff agenda…..” Also, coupled with his energy policy, and extending the 2017 tax cuts, we should be in for a healthy start.
THE USA RAN OFF OF TARIFF’S BEFORE 1913!! The Revenue Act of 1913 lowered average tariff rates from 40 percent to 26 percent. It also established a one percent tax on income above $3,000 per year; the tax affected approximately three percent of the population. A separate provision established a corporate tax of one percent, superseding a previous tax that had only applied to corporations with net incomes greater than $5,000 per year. Can you see what DC Government has done to us since 1913?! The Revenue Act of 1913 reduced the average import tariff rates from approximately 40 percent to approximately 25 percent.
Trump’s plan is based mainly on TWO points. First, he wants FAIR trade. Why should we pay tariffs to other countries and allow them free access to our products? That’s not FAIR. Second, we need to enact tariffs on vital products such as steel and pharmaceuticals so that US companies will want to start up factories here. We can hardly expect China to sell us vital goods if we ever have to go to war against them!
MSM isn’t a source of information, it’s the enemy of America and our Constitution. If the left reports it, it’s a lie and a Marxist narrative. Trust and credibility in these ideologues is absolute 0.
They didn’t get it wrong. They simply lied.
The mainstream media long ago gave up on reporting the news as it happened and on any sense of honesty. 95+% of the mainstream media are nothing but mouthpieces for the Left, assisting in advancing the Left’s anti-freedom, anti-American agenda.
If Trumps tariffs raise prices to get American goods made in America then I’m ok with it. Better than paying more for everything anyways and China getting enriched by it!
Oh please enlighten us with your wisdom oh genius. Phugging idiot
You need only look at Trump’s first term to see how poorly his tariffs were implemented and how they increased costs for consumers
It’s good to have someone who understands how tariffs work to reassure us amid the left’s shrieking so we won’t have to worry.
I didn’t feel that President Trump was uninformed, I knew, however, that I was uninformed.
The media has reported what Trump & Vance have said about tariffs. Trump is now using his own media tweets & not talking much on main media about tariffs. Trump has made statements himself to both Canada & Mexico tariffs. Trump needs to listen to economic experts & not follow gut feeling on tariffs or he might really trigger a recession or worse.
Trump is playing with fire with tariffs & do not blame the media for this problem such as this article insinuates. Take a look at some of the comments coming out of Canada this week & the warning is strong!
Tariffs will have the same effect as high taxes which are cutting the legs off of economic growth. The democrats have already taxed the hell out of us and now even with republican leadership we get tariffs. How about we cut taxes and tariffs.
The government already taxes us so much and to have tariffs on top of that is not only completely unacceptable, but goes against conservative principles and will make prices even higher. At the rate we are going it’ll be $20 to but a pound of ground beef. How much will I have to spend to buy my grandchildren Christmas gifts?
Complete and utter nonsense. In the 21st century global economy, tariffs are effectively an economic sanction on yourself, and they will result in inflation that will rival or surpass that from the first two years of the Biden administration.
Who is this “Professor Wernfried Scharfspitz”? Why is there no trace of this person anywhere else on the internet?
Does the author of this story expect us to believe that a prominent advisor to the German Chancellor in the 1970s is known only to him, given that other figures from the same era are well-documented? And that this professor gave him a personal interview, 50 years later, to defend the tariffs proposed by Trump?
And who is “Professor of Political Economy Pierre-Baptiste Lévêque” who allegedly “…advised French Prime Minister Raymond Barre”? Who is also mentioned no where else on the internet other than in this article?
Does the author of this story, “Ben Solis”, even exist?
This site is a joke.
Hey,
Always excited to see someone try and explain economic ideas to people. Started to enjoy the article until I saw Professor Wernfried Scharfspitz. As an economist I thought ‘never heard of him’.
I looked him up and found mention of Professor Wernfried Scharfspitz in your publication. Hard to believe this author and publication are the only people who knew of him.
You ruined a good article with FAKE NEWS!!!!!