Section 1. National Emergency. As President of the United States, my highest duty is ensuring the national and economic security of the country and its citizens.I have declared a national emergency arising from conditions reflected in large and persistent annual U.S. goods trade deficits, which have grown by over 40 percent in the past 5 years alone, reaching $1.2 trillion in 2024. This trade deficit reflects...
Is that an emergency? We had a National Emergency already because there was too much immigration. Presidents like National Emergencies because they can assume extra powers.
Tariffs are hated by all economists and journalists, but I do note that some things were better before we started eliminating them. I supported NAFTA because the logic of the free trade argument made sense to me at the time. In 1998, though, I was working for the Unions in Savannah and really got to see the good they did for workers. Then I watched them dry up and die — not quite all, but all across the South. IBEW and the Boilermakers still exist around the port, but so many went away.
It was a pipeline for the poor from the swamp to ordinary middle-class prosperity. We gave it away for cheap goods from Mexico, which soon enough became cheap goods from China. Chinese control over so many of our basic goods has become, if not quite an emergency, a serious national security concern.
UPDATE: A play for all the marbles.
UDPATE: A helpful graph of US tariff rates, which shows that we are at an all time, historic low. (H/t Wikipedia).
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These new tariffs put us right back in the historic norm. It's only been in the post-WWII world that we've kept the rates so low, trading away our industry for the goods of free trade.
12 comments:
Couple thoughts on this.
One is that there is a critical difference between tariffs as a foreign policy tool and tariffs as a protectionism tool. International trade has very little to do with economics; it is almost exclusively a tool of foreign policy and pushing other nations to change their ways regarding us and our friends and allies. Tariffs on the PRC is one example. Trump's foreign policy tariffs are, on the whole, very good.
Protectionist tariffs, on the other hand, are almost entirely domestic economy-related, and they're on the whole destructive of domestic economies. Even levied for the best of reasons--to give a domestic nascent industry time to find its feet and grow--they wind up limiting that industry's development and competitiveness by being never lifted when the need is satisfied. Instead, the industry in question becomes dependent on the permanence of the tariff and stops--loses--its ability to develop, innovate, grow. Trump's protectionist tariffs are a serious mistake.
The other is a prediction of mine: the PRC will block all export of rare earths, mined and processed, to the US. In some respects, I'm unsympathetic to US producers on this; they've known such a possibility existed for years, and they've chosen to remain unprepared with little to no effort to find (there is plenty of many of them in the US) and develop alternative sources. In many respects, too, the tree- and bunny-huggers are complicit in the coming strategic failure, intentionally or not, with their knee-jerk opposition to and lawfare against any resource development at all, especially mining rare earths.
Eric Hines
It's probably fair to break those things out.
I posted a graph I found about historic tariff rates. The US did ok pre-16th Amendment, when we funded ourselves mostly with tariffs. The goods we got in return for the income tax were a Civil Service that has become a problem, threatening to dominate every aspect of our lives; the goods we got in return for dropping tariffs post-WWII were an international order we had control over, and to be the reserve currency and borrow endless money. Those are all things that have upsides and downsides.
DataRepublican has some thoughts on why so many want to keep the past tariff regime where many nations have tariffs on us but we have few on others.
https://x.com/DataRepublican/status/1907908884464914483
I don't know if she's right, but it makes sense.
Here's Thomas Sowell talking about the tariffs for about 4 minutes:
https://youtu.be/ie5IIrB7IdA?si=GCQEd4l_VviB2T-J&t=32
His view basically seems to be that they make sense if Trump is using them to achieve short term objectives, but if they are maintained for the long term they will probably be harmful.
He also has an interesting point that if the US creates a lot of uncertainty it will negatively affect international trade.
Let me just post her comments here. Quoting:
So, let me make the devil's advocate argument as I understand it, and why the NGO and DC elite class are fighting to hard to keep the current system.
One-way free trade functions economically in the same way open borders do. Yes, both hollow out the domestic working class: manufacturing jobs vanish just as illegal immigration erodes wages and job availability. But in return, cheap goods and services flood in, lowering consumer prices.
These lower prices become the mechanism by which a different kind of economy is built, one optimized for high-level abstraction. Think: professional services, finance, tech, and elite-tier automated manufacturing. The bet is that the U.S. can climb the value chain while letting lower-tier production happen elsewhere.
Tariffs imposed by other countries aren't seen as a threat. In fact, they're framed as "shooting themselves in their foot." Because, these countries are anchoring themselves to low-margin industries, while the U.S. orients toward capital-intensive, post-industrial domains.
This is why globalists aggressively defend the current trade regime. We keep our markets open, even when others don't, because that asymmetry accelerates the shift to a high-abstraction economy.
But the cost is real: it’s a structural wealth transfer from the poor and middle class to the rich, who benefit from global capital flows and the cheap labor and goods that make their post-industrial economy run. It also creates obvious security and defense threats (e.g., our dependency on Taiwan).
Last point for the evening: Lots of people are pointing out that tariffs will just make prices higher for American consumers. Yes, that's how all business taxes work, including those on domestic companies. All business taxes are passed along to the consumer. I can't remember who said it, but, "Businesses don't pay taxes; they just collect them."
Eric Hines: " ... there is a critical difference between tariffs as a foreign policy tool and tariffs as a protectionism tool."
As noted, there are tariffs as a revenue capture tool. We famously have the IRS "INTERNAL Revenue Service" and the UK has the "INLAND Revenue" but both are late-coming agencies from prior notions where national taxes were collected a ports-of-entry. Rather like a sales tax, or a luxury tax, in that domestic products necessary to the common folk were exempt while imported discretionary purchases purchased by the wealthy and fashionable were taxed.
Strictly from the point of view of economic efficiency, I'm convinced that worldwide zero-tariff free-trade agreements would maximize wealth. Still, other countries aren't reciprocating, and there's also the need to consider keeping some critical industries at a minimal domestic level, for national security purposes. I'm content to see how this plays out before I criticize Trump's tariff policy.
Strictly from the point of view of economic efficiency, I'm convinced that worldwide zero-tariff free-trade agreements would maximize wealth.
Recall that Trump I, at a G-7 meeting, offered Europe a completely no-tariff trade deal, and they ignored him. The only entities in all of Europe who wanted the deal were the German car makers, who among other things saw a chance to sell their small trucks in the US, currently functionally barred by LBJ's Chicken Tax.
LBJ's Chicken Tax was in response to West Germany's and France's own high, protectionist by design tariffs on American chickens.
The Europeans are desperate for their own protectionist tariffs.
Eric Hines
Reprising my comment on the current ChicagoBoyz tarriffs thread
Never forget that our trade policy (as eluded to by a number of comments there and here) during the Cold War was ‘bribing up an alliance to beat Stalin’ as PZ likes to put it (when he’s right he’s right). The end of the Cold War resulted in a number of pivots attempting to maintain all the rice bowls that would be flipped by a more nationalistic and less security-oriented trade policy, including integrating China in the name of reform and claims of various economic and social benefits occasioned by divesting US manufacturing. One can certainly question if the benefits promised have been realized and were worth the cost (added clarification - this refers to the Zombie Global Order maintained after victory in the Cold War)
(PZ also likes to point out, in his sane moments lately, that the US has been on this course since at least 2001 and Trump’s way may be rough but the die were cast back in the Clinton-W era)
If you want to implement the best policy, you need to define 'best'...what do you want to optimize? What is the objective function? as they would say in operations research. In the case of trade policy, objective functions might be maximize GDP growth...maximize median real income...maximize national resilience against hostile powers and natural disasters. These things likely drive significantly different policies from one another.
...you need to define 'best'...what do you want to optimize?
Before you can do that, you need to understand that you're trying to optimize a system, not any part of it, and that in order to optimize the system, it's necessary to understand that you cannot optimize all parts of it; some--most--will be less than optimized when the system is optimally tuned.
Then you need to understand the system you're trying to optimize, which components do what, and what are all of their interactions with and among each other and among which subsets.
For me, presently, that means maximizing national resilience, given how dependent we've become on imports of Critical Items from enemy nations. After that comes maximizing what we decide constitutes prosperity.
Eric Hines
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