Select Page

Tariffs and Trade Wars

July 13, 2018 (1,658 words)

Given the contentious nature of our adversarial political system, the custom has always been for the opposition party, the one not currently in power, to go out of its way to find fault with the ruling party.

Over the course of the last few administrations, however, the 24/7 news cycle and the advent of social media has turned the occasional bit of pointed criticism into a barrage of non-stop scorn.

The rabid base of our two major parties may thrive on this high-decibel mud-slinging, but most of us are worn thin by the screeching and constant strife.

The unusual way President Trump conducted his 2016 campaign, and has executed his office since being inaugurated in January 2017, has only exacerbated the partisan caterwauling. And you have to admit, the man does make an easy target.

His liberal critics, even when foaming at the mouth, usually have a point. And his conservative apologists are often terribly unconvincing, as they try to normalize our President’s impetuous rants and spin his off-the-wall actions as the work of just another praise-worthy statesman.

… the man does make an easy target

But given all that, and given Mr. Trump’s awkward attempts to bluster his way through complex subjects he appears to have little-to-no feel for, he did strike a chord during the campaign with average wage-earners who responded to his occasional populist forays. Those forays prompted many such average wage-earners – me included – to roll the dice and take a chance on a pointy-elbowed political novice.

As our President now attempts his first concrete policy initiatives aimed at addressing the enormous trade deficit the U.S. racks up every year, it’s easy to write this off as just another misstep on his part, just another bumble. The consensus on both sides of the aisle seems to be that international trade is yet one more area where Mr. Trump is proving to be in over his head.

But then even a blind squirrel finds the occasional chestnut, and a broken clock is right at least twice a day.

By which I mean, the problem with digging in our heels and unequivocally writing someone off – in this case, a President – is that we deny ourselves the opportunity to parse out each individual situation as it presents itself, where some truth might just be concealing itself in what appears to be full-blown error.

Yes, we can all agree in today’s world of international supply chains, everything is connected to everything else in an unprecedented fashion. Slapping tariffs on “imported goods” is not the straightforward solution to improving a domestic economy it may have once been in earlier times.

… considering the national interest

But does that mean we should allow the enormous trade deficit we incur annually to go on, and continue to grow, ad infinitum? Is there nothing we can do to create a more balanced exchange with our various trading partners? Isn’t trying for a better balance in the national interest?

Ah, yes, the national interest. If you think about it, the learned commentary we have heard so far amounts to a defense of the status-quo on the part of the international business community. And that’s fine, as far as it goes. But there is more to this picture than meets the eye.

Assigning tariffs on imports will cause consumer prices to rise. Fair enough. What price would you, the average consumer, be willing to pay to strengthen the domestic economy? A detailed evaluation of this question should be made part of the discussion.

Since so many American manufacturers sell their products abroad, and also have plants in various other countries, any tariff the U.S. applies to imports will hurt the bottom line of these American manufacturers. Okay, but are reduced sales and/or reduced profits the massive problem we are being told they are? Must we continue to sacrifice our domestic market to enhance the profitability of international corporations?

The repercussions of import tariffs will be a reduction in sales, which will lead to a reduction in jobs. This should probably be listed as cliché #1, since the threat of “job losses” routinely gets bandied about to strike fear in the heart of the average voter.

Look, I realize this is a very complicated subject, the solution to which is far above my pay grade. But even a casual observer can deduce things are not quite as connect-the-dots simple as the Alliance of Automobile Manufacturers makes them out to be. Consider remarks it made to the U.S. Commerce Department on June 27:

”Tariffs will lead to increased producer costs, increased producer costs will lead to increased vehicle costs, increased vehicle costs will lead to fewer sales and less tax receipts, fewer sales will lead to fewer jobs, and those fewer jobs will significantly impact many communities and families across the country.”

This presumes that everything is hunky-dory with our communities and families as things stand now. The problem, if I may be so bold, is that our learned commentators are still presuming “what is good for General Motors is good for the country,” as it was thought to be in the early 1950s. Well, my friend, a lot of water has gone over the dam since then.

… a lot of water has gone over the dam since the 1950s

This same trade group for domestic and foreign automakers fears any new levies could end up “isolating U.S. businesses like G.M. from the global market that helps preserve and grow our strength here at home.” Just whose strength is under discussion here? The auto industry, like so many others, is quick to warn of job losses from policies it doesn’t like, but is slow to reward workers when times are good.

This group predicts a twenty-five percent tariff on imported cars, the high end of what has been proposed, could increase the average price of a new vehicle import by $5,800.00. That sounds like a lot of money, right? But if you keep that new car for five years the feared increase amounts to approximately $100.00 per month, which now sounds more like “coffee money.” And that’s at the high end of what is being proposed. So what’s the big deal?

The handy refrain of “increased consumer costs will mean fewer sales which will result in job losses” is being trotted out once again, as a reliable public relations cover. As if the auto industry, among many others, has as its primary concern the American consumer and wage-earner.

When in fact what we have is a system which exhibits a relentless focus on the maximization of profits and return to investors. This is paramount, sacrosanct even, while the percentage of a successful corporation’s working capital spent on wages and benefits for average American wage-earners is the last thing these organizations take into consideration.

… slow to reward workers when times are good

This is the unspoken reality we never hear about. This is the reality being carefully avoided by the standard free market chatter which is designed to nip in the bud any discussion of bringing down our trade deficit in general, or in applying any sort of tariff on imports, in particular.

In case you are wondering, I have no idea how to fix all this, how to balance the scales a little better between corporate profits and community/family well-being. But I do know we need to take a different approach. And the first step forward in that journey is backing away from the familiar libertarian talking points we can all recite in our sleep.

Just for the record, I stopped being enamored with politicians a while ago. Some are better than others. Most have their good days and their bad days. I have come to the conclusion the underlying problems we face cannot be solved by either of the standard political proscriptions of “liberal” or “conservative” we invest so much of our energy in.

Only when we address the adversarial nature of enlightened self-interest that is our country’s Holy Grail will we start to experience true relief.

… seeking true relief from an adversarial system

Those of us who still watch a little broadcast television are currently being treated to an appealing commercial featuring a handsome British actor by the name of Clive Owen. In the course of this short presentation Mr. Owen informs us that successful businesses make the world a better place. I absolutely believe this to be a true statement. A successful business can indeed be a boon to society.

Now those successful businesses must tackle the challenge of managing run-away profit expectations on the part of Wall Street analysts, and those of their owners, executives, managers, board of directors, stock-holders, or equity investors. So that other, more humane considerations can enter into the picture.

President Trump may indeed be feeling his way along on this tariff thing, as he seems to be doing in so many other areas of national and international policy. And, you may have noticed, applying a light touch is not what he does best. He seems to relish being the proverbial bull in the china shop.

In this particular instance, though, maybe we should rejoice and be glad our unconventional leader is causing a ruckus in the arena of international trade.

Who would have thought such a well-known friend of Wall Street and the world of high finance would return to one of his loose-lipped campaign promises and attempt such a thing?

What’s that you say? This is nothing more than the latest in an ongoing stream of mad-cap pandering to a deplorable base? If the current salvo ends up cutting into the trade deficit even a little bit, and restores even a semblance of balance between corporate profits and community/family well-being, then the blind squirrel will have found a chestnut.

Robert J. Cavanaugh, Jr.
July 13, 2018

Use the contact form below to email me.

3 + 15 =