The US will impose 25 percent tariffs on Mexico and Canada, and 10 percent on China, the Trump White House said. The purpose of tariffs is to protect domestic manufacturers and their work forces. What American manufacturers and workers are being protected by Trump’s tariffs? So much of US manufacturing is located offshore, what purpose are the tariffs serving?
The “tariffs” in reality are taxes imposed on imports of foreign produced goods, including the offshored production of US corporations of goods and services sold in the US. If the tariffs are paid by the consumer rather than by the US corporations that offshore their production for the American market, the effect will be to reduce the quantity demanded because of the higher price. How much this harms the offshore producers depends on whether their products are price elastic or inelastic. Some are one and some are the other.
This approach to bringing offshored US jobs back to America is incorrect. It demonstrates the economic ignorance of Trump and his advisors. Consider, for example, if US auto assembly relies on parts made in Canada, a 25% rise in parts cost could shutdown auto assembly and result in US unemployment. As best as I can tell, few auto parts are any longer produced in the US, so there is no industry to protect or to supply the parts that tariffs keep out. Before you can protect industries, you first must have them.
Instead of tariffs, the income tax should be used. US Corporations that produce domestically using American labor–not H-1B and L-1 imported labor– should have a lower tax rate. US corporations that produce abroad with foreign labor goods and services sold in the US should have a higher tax rate. The tax rate should be high enough to more than offset the lower labor and regulatory cost of producing abroad for American markets.
The higher after-tax profits from producing at home would bring manufacturing and jobs back to America where they belong. A country that divorces the consumers of products from the incomes associated with their production, as jobs offshoring does, is stupid and incompetent beyond belief. No such country can possibly be made great again.
Some people believe, correctly or incorrectly, that this business model was imposed on America in an effort to destroy us, using threats to finance takeovers of the American firms that refused to abandon their American workforce and cities. In other words, offshoring America’s manufacturing sector was a step in turning America into third world country that makes nothing and imports its needs.
Is Trump overlooking one important element of making America Great Again? The moral element. It seems to be the case. Trump’s support for Israel is disturbing to Americans who still have a moral conscience and are shamed by Trump’s support of Israel’s genocide of Palestinians and their country and their ethnic cleansing so that Trump’s son-in-law can become a multi-billionaire by developing Gaza as a resort.
Another problem with Trump’s imposition of tariffs is that it is another encroachment of executive power on the authority of Congress. It used to be that tariffs were a legislative issue. For many years the South tried to prevent the North with the Missouri Compromise, and in other ways, fromgaining a sufficient majority in Congress to impose a tariff on British goods that would require the South to finance in higher prices and lowered agricultural sales abroad the industrialization of the North.
The Morrill Tariff, a huge increase, was passed the day prior to Lincoln’s inauguration. The Northern congressmen also passed that day a resolution that if the South would stay in the Union and pay the tariff, a Constitutional Amendment would be passed institutionalizing slavery forever. Lincoln endorsed the federal government’s protection of slavery and declared that there would be no war against the South unless the South refused to pay the tariff.
The agricultural South seeing ruin in the face succeeded from the Union. The tariff, not slavery was the issue. Lincoln called it insurrection and invaded. That is how the so-called “civil war” happened. Clearly it was no civil war. The South was not fighting for the control of the government, it had its own government. The South had to fight as it was invaded.
How did tariffs move from being a legislative issue to an issue of executive orders? We are witnessing in this transformation of power from the legislature to the executive the transformation of democracy into dictatorship. It has been going on for a long time: Lincoln, FDR, George W. Bush, Obama. The United States has become too disunited for Congress to perform its constitutional function.
This is the real problem that America faces, and there is no awareness, no discussion. The same thing happened to Rome when executive authority took precedence over the Roman Senate.
I look in vain for discussion of the real problem, and I cannot find it. In America despite Trump, or perhaps because of him, insouciance still rules.
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Paul Craig Roberts is a renowned author and academic, chairman of The Institute for Political Economy where this article was originally published. Dr. Roberts was previously associate editor and columnist for The Wall Street Journal. He was Assistant Secretary of the Treasury for Economic Policy during the Reagan Administration. He is a regular contributor to Global Research.
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