A False Epic of Economic Heroism
For over 180 years, tariffs were used in America to serve as most of the country’s income. We obtained imports, but we also paid a tax on them as the tariff costs were typically passed onto the consumers of the imported goods.
President Donald Trump, ostensibly a “very stable genius,” claims that when he imposes tariffs the exporting countries will pay the taxes and we will get a benefit from increased income. Nothing could be further from the truth.
Tariffs are nothing more than a form of taxation, and they are paid for by the people who consume the imports.
In today’s complicated trade and manufacturing regimes, goods are manufactured in, say, America, then shipped to Mexico for further processing, then returned to the U.S. for even more work, returned to Mexico for assembly, then returned to the U.S. for retailing. In this relatively common practice, the goods in question return to the U.S. twice, with tariffs applied with each customs entry on the C.I.F. (Costs, Insurance, and Freight) value of the merchandise into America. The merchandise is taxed twice, per the Tariff Schedules of the United States.
Now, the Twitterer-in-Chief, acting in accord with his false declarations of an “emergency” on our border with Mexico, has unilaterally decreed that he will, if necessary, declare another “national emergency” on our southern border and will impose an initial five per cent tariff on all merchandise coming into the U.S. from Mexico, starting on June 10, and increasing by five per cent per month until and including October, 2019. The condition precedent for not imposing the tariff is if Mexico demonstrates that it is prohibiting the inflow of “illegals” into the United States, effectively turning it into an adjunct of the U.S. Customs and Border Patrol.
So, Trump wants to turn a sovereign government, Mexico, into its anti-immigration assistant, and threatens that government with potentially punitive financial consequences if Mexico fails to work in accord with Trump’s plans.
The problem is that nobody will be punished except for U.S. companies and the consumers of their goods. Again, tariffs are taxes, and those taxes are imposed at the time of the goods’ entry into our country, then passed onto the end-users/consumers. So, all Trump is doing, in reality, is rallying his base into believing that he is fighting for their jobs and protecting us from the evil scourge of immigrants who don’t necessarily have Ph.D.s from the London School of Economics or degrees from Le Sorbonne.
Those taxpayers will be us, here in the United States.
Additionally, Trump has made much ado about China and its trade practices. He claims, correctly, that China has created forced technology transfer through the requirement that U.S. companies seeking permission to do business in China must provide their technology to the Chinese. What he fails to understand is that China was abused by outsiders — the British, the Japanese, and, yes, the Americans — for an extended period of time and China these days believes (with more than a little justification) that its days of being other countries’ doormat are over.
Trump claims through Twitter and his occasional bleats in the media that he is fighting heroically to save American jobs and to protect us from allegedly bad people. He doesn’t (or claims not to) understand that this country’s entire history has been based on immigration. He has cast himself as the modern-day version of Beowulf, fighting the evil Chinese Grendel of unfair trade practices.
But rather than adopting realistic views of the world and negotiating with the Chinese in a dignified, respectful way that acknowledges that China has made major strides as a country, Trump chooses to try to impose a trade diktat on them, and seeks to create a trade war that will result in (A) great economic harm to the United States, (B) a shift of the Chinese trade practices to Russia and other countries, and (C) a set of long-term alliances between China and other countries that will minimize America’s influence in social, political, and military affairs, thus marginalizing American power around the world.
The U.S., with the impatience of juveniles, measures the passage of time in months, weeks, and days. China, by contrast, with its 6,000 year-old civilization, measures the passage of time in centuries and decades. The difference in perspective means that China will not enter into any significant deal with Trump, since he will be up for reelection on November 3, 2020, about a year and four months from now. Trump may or may not be reelected, but why should China waste its time with a leader who is so unpredictable and with our so-called leadership which hasn’t demonstrated any spine?
The question we should look at, then, is what can be done to get Trump and his minions out of office?
We have geriatric kindergartners in Congress; we have a dirty old man as the President; we have young people who haven’t acted in a dedicated, disciplined way to create a consistently-powerful force for good by changing the political system; and we have good-for-nothing-good-guys who mouth platitudes but do little to nothing to move the ship of state out of the way of the oncoming icebergs.
Unless we decide that now is the time to sacrifice our beer and tapas and ’clubbing and smartphone addictions, work together to provide a united front against Trump and his fascists-in-training, and do something to take back political power by making organized, structural shifts in our democracy and economic systems, this country will be faced with far deadlier threats than just Trump and his tariffs.