First and foremost, I am a free market conservative. That means I do not like tariffs.
Since the Smoot-Hawley tariffs of the 1930s, the support for tariffs has generally come from the left — Democrats and their union base.
Tariffs are traditionally supported in the belief that they would protect American workers from cheap overseas labor. That is still a factor, although not discussed very much in the current national debate. The contemporary focus is on the impact tariffs can have on the prices of goods and services.
In terms of price increases, the current debate focuses on the increased cost of FOREIGN goods – the things we import from other nations. Tariffs – and the reasons they are imposed – are more complicated than the simplistic claim that if you impose a tariff prices will go up and the people suffer. If that were the only issue, why would a foreign government impose tariffs in response? Would not that be bad for their economy – for their consumers?
There are three reasons why we import goods. Cheap labor in foreign countries results in imported goods being sold on retail shelves for less money than their domestic counterparts. It is the primary reason that we see so many items being produced in China, Vietnam, Mexico, Cambodia and several other nations currently supplying the American consumer.
In theory, imposing tariffs makes domestically produced goods more competitive – even cheaper. It also spurs increases in domestic manufacturing – more jobs. That is the union’s argument.
But two things can be true at the same time. In can spur domestic production and add more jobs, but the cost of goods will still not be as cheap as they were before the tariffs.
But … there is another important reason for imposing tariffs. It is the rationale for President Trump’s tariffs. They can be employed as an effective bargaining tool – used to win concessions on other issues.
When Trump imposed a 25 percent tariff on Mexico and Canada and a 10 percent tariff on China, he understood that it would have a negative impact on American consumers. He did not impose them with the intention that they be permanent.
Trump sees any negative impacts from the tariffs on the American consumer to be mild and short lived – a small price to pay for more critical benefits. In this round of tariffs, Trump’s primary focus was on the fentanyl crisis that is ravaging America.
Both Mexico and Canada have issues with illegal fentanyl entering the United States across their respective borders. In the case of China, Trump is using tariffs to address several issues – one being the fact that China ships large amounts of the components of fentanyl to be processed by drug cartels and smuggled over the border or brought directly onshore in places like California and Florida.
We can know Trump’s motivation by what he got in return for temporarily suspending the tariffs on Mexico and Canada. In the case of Mexico, President Claudia Sheinbaum has agreed to send more troops to the border to stem the flow of illegal crossings. Other measures are still on the table. Canadian Prime Minister Justin Trudeau has agreed to appoint a “Fentanyl Czar” and to spend $1.3 billion dollars to enhance border security with new technology and more personnel to “ensure 24/7 eyes” on the border. Trudeau also agreed to list the drug cartels as terrorist organizations and create a joint U.S./Canadian strike force to charge them on crime and money laundering. Other issues are still being negotiated.
By any measure, this was a quick win for Trump and the United States in addressing the fentanyl crisis, gang and cartel-related crimes and the negative socio-economic impact of the past open border policies.
The tariff on China went into effect. That is a much more complicated range of issues that goes beyond the fentanyl crisis. It includes unfair trade practices, stealing intellectual property and attacks on the U.S. dollar.
As much as I oppose tariffs as a general trade policy, it is obvious that even the threat of imposing tariffs can be effective in forcing diplomatic solutions to critical issues.
As expected, the never-Trump resistance forces went bonkers when Trump proposed the tariffs on Mexico, Canada and China. As is their habit, they projected the most Draconian outcomes for the American people. No matter what Trump does, the crazies on the left will see it as the end of everything.
So far, however, Trump’s tariff gambit appears to be working – leaving the pernicious Trump haters with rather expensive egg on their faces.
So, there ‘tis.