Why Trump Is Right About Tariffs — Again

The tariffs will bring manufacturing back to the US, add manufacturing jobs, protect infant industries, and reduce the trade deficit.

As a free market economist, I strongly favor free trade with absolutely no tariffs.

But free trade must be fair, meaning that any tariffs that are imposed by one trading partner will exactly equal the tariff imposed by the other.

Since that is not the case, increased U.S. tariffs may be necessary to level the playing field.

Also, for security reasons, some critical product manufacturing must return to the U.S. even if it is more costly. Also, essential infant industries should be protected.

During President Trump’s first term, he examined all trade agreements that the U.S. had with trading partners.

Every agreement was slanted in favor of our trading partner and to the detriment of the U.S. It led to massive trade deficits.

Trump considered the automobile industry. When a car was produced in Europe and sold in the US a 2 ½% tariff was charged. However, when a car was manufactured in the U.S. and sold in Europe, the EU charged a 10% tariff.

Worse was the trade agreement with China.

A car or its parts produced in China were charged a 2 ½% tariff when sold in the US. But China charged a 25% tariff for a US produced car sold in China.

For whatever reason there was a 50% tariff placed on Corvettes.

The result of these lopsided agreements was that Americans annually imported hundreds of billions of dollars more than we exported.

That means hundreds of billions of dollars annually flowed out of the U.S. This imbalance, along with very low labor costs, resulted in the production of often strategic products outside of the United States.

Obviously, none of the trading partners wanted to renegotiate trade agreements.

Trump, being a businessperson, knew that when negotiations are required and the partner is unwilling to negotiate, a sense of urgency must be created.

Even though every conservative economist objected to large tariffs, Trump imposed or threatened to impose, punishing tariffs on our trading partners.

The purpose of the tariffs was to bring the partners to the negotiating table to level the playing field. In the long term, the goal was to have new trade agreements which were truly fair.

It worked marvelously.

New fair agreements were reached between the U.S., Mexico and Canada, South Korea, India and Japan. The European Union pledged to work toward a zero tariff policy.

Today there are other considerations regarding trade.

As we saw during COVID-19, many of the medical supplies and pharmaceuticals sold in the U.S. are made outside of the country, mostly in China, a nation that is a political adversary.

Most Americans agree that manufacturing must be brought back to the U.S.

Donald Trump’s trade policy of imposing tariffs will help to reach this goal.

Additionally, the important infant Electric Vehicle (EV) industry will be shielded from EVs made in countries where the government unfairly subsidizes production.

Trump’s critics say that imposing 10% or 20% tariffs on foreign goods will cause prices to rise in the US, making an already terrible inflation problem worse.

U.S. Treasury Secretary Janet Yellen, for instance, called Trump’s tariff proposal “deeply misguided.” She says it will ramp up inflation and harm American business.

Yellen has a poor record when determining future inflation.

Recall early in 2021 she said longer-term inflation would not be a problem, and the current inflation was temporary or transitory.

It’s nearly 2025 and we are still fighting an inflation problem.

Critics of Trump’s policies are wrong this time too.

As an example, recall President Trump imposed large tariffs on foreign-made steel.

Steel imports fell. U.S. production increased and the price of steel rose moderately. However, U.S. manufacturing of steel rose significantly.

Then-President Trump was able to offset any inflationary impact of tariffs by dramatically reducing the price of energy.

During his first term in office, inflation was held well under 2% and was never a problem.

The same thing will happen after Trump is re-elected president, and imposes or threatens to propose tariffs.

Our trading partners will be forced to negotiate to level the playing field. Manufacturing will leave China and return to the US, especially after Trump passes new tax legislation that gives a lower tax rate for products made in the United States.

Trump’s tariff and tax plan will reduce the trade deficit, add many manufacturing jobs, contain long-term inflation, and bring a sense of security to Americans.

Now who could oppose that?

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