Column #494     February 14, 2025Trump Tariffs

There are many misunderstandings regarding tariffs. Some say tariffs are inflationary, while others say deflationary, the end of free trade, and good for negotiating tactics. If you can't explain how tariffs work, then you need this economics refresher. Trump is bringing tariffs to America and unless you understand how they will benefit you, whatever you think or tell others will be no better than ignorant gibberish.

Since America is the world's largest economy, consumption is virtually its middle name. But unfortunately, its trade deficit with the rest of the world following WWII is not sustainable. It was a good thing at first as all of the other major combatants in that war suffered major losses in people and infrastructure and they needed income to rebuild. But that time has long past. In addition to outdated trade policies, back in the early 1980s outsourcing became a fad. Conferences were held promoting outsourcing and a means to introduce foreign manufacturers to American manufacturers.

The demand for outsourcing led to trade agreements for more "free trade." That led to the "giant sucking sound," a phrase used by United States presidential candidate Ross Perot, to describe what he believed would be the negative effects of the North American Free Trade Agreement. He opposed that agreement and looking back we see that he was absolutely spot on correct. The sucking sound was the loss of jobs from America to countries all over the world. And not only were jobs lost, but so were entire domestic industries that willingly outsourced their products!1

Many of the industries that disappeared, or were hollowed out, after 1980 were at one time world leaders in their fields. But as imports soared they lost their edge. For example, the United States is now reliant on imports of rare earth minerals, electric devices, computers, cell phones, televisions, pharmaceutical preparations such as prescription drugs, aircraft parts, and even furniture, artwork, apparel, and glassware. In agriculture, fruits, vegetables, spirits, wine, essential oils, tree nuts, spices, and nursery stock, lead the list of imports.

As with everything we do, we can keep on keeping on or change. If we're doing something that's unsustainable, then if we don't change we get wiped out. With its debt of $36.2 trillion, if our country keeps spending and importing like it has been doing for decades, soon our currency will be worthless, our country will be broke, interest rates will soar, and poverty levels will mushroom higher. Fixing this problem requires change and perseverance for change. About the only viable path in the dire situation we find ourselves is to reduce spending, fraud, illegal payments, waste, and corruption while reintroducing tariffs. If spending isn't controlled first, nothing else will work.

One way tariffs are used is as negotiating tactics when dealing with foreign countries. Trump showed us that with his recent tariffs on Canada and Mexico. He basically threatened them with a 25% tariff because they were not helping with border security regarding illegal migrants and drugs. They responded immediately by moving troops to the border to seal it.

Eventually, the primary way tariffs will be used is along the lines the Founding Fathers intended them nearly 250 years ago. That was for:
●    Generating revenue for the government.
●    Creating and maintaining a diverse domestic manufacturing base.
●    Being independent rather than dependant on foreign countries.
●    Restoring high-paying skilled jobs.
●    Eliminating the income tax.

We have learned that exporting jobs for cheaper goods costs a lot. Not only do we lose vital industries, but we become dependent for certain necessities from other countries, some of which are not friendly. In addition we export high paying jobs impoverishing our average citizen along with destroying the value of our currency. As for the American manufacturers that did not outsource, the importation of cheaper foreign goods by others put many of them out of business too.

There's no doubt that some countries are not aligned with America's values. Being dependent on them for critical needs is insane. In addition, when tariffs are in place, the revenue they generate can replace income taxes. The income tax is a created monster in terms of fairness and government intrusion into the private lives of citizens. The elimination of the income tax is far simpler if tariffs can make up the revenue that came from income taxes. If tariffs are implemented, this is how things will change.

Keep in mind that in a free market entrepreneurs will seek out the best opportunities. Therefore, just because a tariff helps a vehicle manufacturer compete against foreign rivals, that doesn't mean it can lay back, raise prices, and rack in exorbitant profits. If they do, other domestic vehicle companies can exploit their higher prices and take sales away from them.

Another example is bananas which need tropical weather to grow. If the tariff on bananas is high enough, they can be grown in green houses here in North America. Of course they will cost more than bananas before tariffs, but the growers will employ domestic workers. The new workers will spend their wages domestically which keeps the money at home rather than abroad. Another product may be cell phones. Yes, a tariff will increase their cost, but if they are manufactured in our country, the technology and manufacturing is done here requiring additional higher paying domestic jobs.

Another big plus is that the new jobs being created by tariffs are mostly manufacturing jobs. More than 250 years ago Adam Smith figured out that wealth exists in the productive knowledge of its people. The ability to efficiently transform resources into desired goods and infrastructure represents the true source of a nation's wealth. Said another way, wealth is created by resource extraction, manufacturing, food production, building, and the transportation that's directly associated with those industries.

The hard labor and greater skills required to perform these wealth creating jobs is worth far more than flipping burgers. Flipping burgers is a service job that can be taught in 15 minutes to a beginner with no experience. To pretend those jobs for kids should earn them a "living wage" while learning how to work is preposterous. It's false wealth as are all clerking, service, health, political, and financial-oriented businesses. That's why if tariffs eliminate income taxes and create more highly skilled jobs, for many workers that will create a major increase in pay. Therefore, if tariffs increase the prices of some goods, the purchasing power of the increased dollars earned by the average citizens will easily offset slightly higher prices. Overall, after the implementation of tariffs some goods will cost more. Some will cost less. But, with a larger manufacturing base, overall wealth will increase.

To prevent inflation, which is the money supply increasing relative to the goods offered in the marketplace, the central bank (Federal Reserve Bank) has to be eliminated. At the same time our fiat money has to be replaced with gold and commercial bank notes convertible into gold. That's the classical money and credit system which existed in our country for more than 120 years prior to 1913. This function can be handled by private sector banks which are held to account by the customers of the bank. With a central bank that has the ability to print money helter-skelter, politicians get involved and we're back to corruption, theft, money laundering, waste, runaway spending, hyperinflation, and eventually a worthless currency.

Now, when you hear people expressing fear over tariffs and an end to the income tax, you can explain to them that the alternative will be an impoverishment of all America citizens and the collapse of what was the world's greatest empire. Cutting costs is also a requirement for success as is establishing a hard money system. People who appose reform are blithering idiots. Listen to them at your peril.2

This transition to fiscal sanity will not be a walk in the park. Many people will be required to change occupations, move, or learn new skills. The judicial rulings being used by the radical left Democrats to block even the most basic steps in eliminating fraud, uncontrollable spending, government inefficiency, and corruption is so nonsensical it's hard to comprehend that people can be like that at a time like this. In so doing, Democratic judges are using a novel interpretation of the Constitution (lawfare) which the Supreme Court will have to judge. Will the judicial branch take over the executive functions of the duly elected president? Personally, I believe that anyone apposing government reform is a subversive, un-American stooge of the deep state. Change is required.

God give us strength.

To your health.

Ted Slanker

Ted Slanker has been reporting on the fundamentals of nutritional research in publications, television and radio appearances, and at conferences since 1999. He condenses complex studies into the basics required for health and well-being. His eBook, The Real Diet of Man, is available online.

For additional reading:

1. 12 Facts About The Deindustrialization Of America That Will Blow Your Mind by Michael Snyder from The Economic Collapse blog

2. Why They Really Hate Elon Musk by Connor O'Keefe from The Mises Institute