Democrats agree with Trump that tariffs on China are a good idea. It always concerns me when the political classes in D.C. are in full agreement; the last time that happened, they voted for the Iraq War.
Retaliatory tariffs will hurt the U.S. in the near term and China in the longer term. If ever Trump is going to take on the Chinese, who have cheated on trade for years, it is now. With low inflation, a good economy and the stock markets near highs, we are in the best position to endure a trade war.
When I was attending Georgetown University in a remedial program for Southerners, I worked for President Reagan’s U.S. Trade Representative, former Senator Bill Brock (R-TN). We were free traders. We knew the world was a safer and more prosperous place when nations traded goods with each other. We said, “When goods cross borders, troops don’t.” Missiles and war rhetoric did not bring down the Berlin Wall eight years later; it was Russian citizens’ desire for Levi jeans, Marlboro cigarettes and Jack Daniels whiskey that did.
The acrimonious argument about who pays for tariffs need not be a debate. Trump says China will pay them but, like Mexico paying for The Wall, he conflates bluster with reality. Tariffs are, in essence, a tax on goods imposed by a government to punish another country. Consumers, you and I, pay the tariff in the form of higher prices at the cash register. Whether we pay the full 25% increase or a percent of that depends on if the product can be purchased from a less-tariffed country like Vietnam or India.
China’s communist centralized, command-and-control economy is in a quandary here. Cut prices and maintain market share to continue to employ their masses who demand jobs, or don’t reduce their prices and risk the pitchforks of the proletariat which might start protesting the kleptocracy into which every socialist/communist country devolves.
Trade wars were the cause of the War of 1812. Tariffs and French/British trade impediments sparked this war in which we got our tail whooped. The British actually attacked Washington D.C. and burned down the White House. It is a forgotten war that we lost so badly we called it a “tie.”
President Lincoln raised tariffs on cotton and the like, which was one of the factors leading to the Civil War. In fact, Lincoln was very similar to fellow Republican Trump: Both presided over a bitterly divided nation, raised tariffs, and actors of the day wanted to kill them.
Capitalism has a remarkable way of getting the best product to market, at the best price, when government leaves it alone. At this writing, I cannot think of one thing government inserts itself into that is made better.
Ron Hart, formerly of Goldman Sachs, is a libertarian op-ed humorist, an award-winning author, and a frequent guest on TV and radio. He can be contacted at Ron@RonaldHart.com or @RonaldHart on Twitter.