Written by Simply searching “Trump tariffs” on Google, at the moment of writing this article, presented me with a staggering amount of 149 000 000 results. At the same time simply searching “tariffs” yielded 92 700 000. This is both a testament to the strangeness of Google’s algorithm and to how much of a contentious issue this has turned into throughout the presidency of Donald Trump. We’ll take a short look at tariffs’ history in the U.S. and at some recent issues regarding them.
Shortly after the American Revolution, in a period from 1783-1789, states would often levy tariffs towards one another. However, in 1789, this was changed with the ratification of the Constitution of the United States which now did not permit those restrictions between states. In this Constitution it is stated that Congress has the power to: “…lay and collect taxes, duties, imposts and excises, pay the debts and provide for the common defense and general welfare of the United States”, and to “…regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes”.
It was exercising this power that the first major piece legislation after the ratification of the Constitution, known as the Tariff Act of 1789, was passed by Congress and signed into law by president George Washington. This Act served to address the government’s need of funding to pay off debts it had acquired during the Revolutionary War. It is worthy of note that the first individual income tax in the U.S. would only come into existence in 1861, and so, at the time, tariffs were one of the government’s primary source of revenue. It was also enacted in order to protect domestic industries struggling to compete with cheaper European goods, in the period after the war.
Perhaps the reader has heard in recent news that Mr. Trump’s recent tariffs were brought about by executive order. This would seem to be an overreach on part of the President. However, in the 20th century, two different pieces of legislation were enacted that gave the executive branch the ability to set tariffs, under certain conditions. They were the Trading with the Enemy Act and the Trade Expansion Act in 1917 and 1962, respectively. The former gives the president the ability to regulate all trade made between the U.S. and one of its enemies in time of war. But it was due to the latter that the infamous steel and aluminum tariffs were brought about in 2018. Indeed, this act gives the executive branch the authority to levy these restrictions on trade if “an article is being imported into the United States in such quantities or under such circumstances as to threaten or impair the national security.”
George Washington once said something reminiscent of this:
A free people ought not only to be armed, but disciplined; to which end a uniform and well-digested plan is requisite; and their safety and interest require that they should promote such manufactories as tend to render them independent of others for essential, particularly military, supplies.
— George Washington
In itself, this reasoning is not at all devoid of merit: indeed, it would not be wise for the U.S. to depend solely on China for their supply of steel, a material of high importance for national security. What might be worrisome, though, is that this reasoning is very broad and prone to abuse. Furthermore, it is also worthy of note that the U.S, like the rest of the world, are nearly solely dependent on China for their supply of rare earths, which are crucial for a lot of technologies including those of high-end military gear. Indeed, in 2018, China extracted around 70% of the world’s rare earth supply for that year.
Some claim that Mr. Trump is simply catering to voters in the so-called Rust Belt, which was negatively affected by the decline of the coal and steel industries, and that this issue was merely disguised as a national security risk to avoid the troublesome and time-consuming bureaucracies of the legislative branch.
Undeniable, however, is the adverse impact such tariffs had and will have on other industries which use steel as an input. For example, General Motors closed several plants cutting around 14.000 jobs, claiming that the increased production costs, driven up by the tariffs, were among some of the reasons that lead to the downsizing.
Although the cascade of effects from this policy is still ongoing, there might be something to learn from looking at what happened to the economy after Mr. Barack Obama tariffed Chinese tire imports in 2009. A study from the Peterson Institute of International Economics calculated that the policy had a net effect of killing 2.531 jobs, considering their most generous estimate for the amount of jobs saved by the tariff.
Just like with Mr. Trump, some state that the former President’s policy was done in an effort to pander to his base. For example, the Republican Party’s nominee for the 2012 presidential election, Mitt Romney, wrote:
President Obama’s action to defend American tire companies from foreign competition may make good politics by repaying unions for their support of his campaign, but it is decidedly bad for the nation and our workers.
— Mitt Romney
We should be wary of our own tendencies to defend or to attack these policies (and any others, of course) based on tribalism and sheeplike party allegiances. Instead, we must aim to use the unbiased reasoning needed for successful and fruitful policy decisions.
theawarenessnews.com 