“For the Government, a front-bench spokesman said the agricultural tariff would have to be raised, and he fancied a bit. Furthermore, he argued this would give a large boost to farmers, a lot of fun for him, his friends, and Miss Moist of Knightsbridge.” – Monty Python’s Flying Circus
“As God is my witness, I thought turkeys could fly.”
Tariffs became a dirty word after World War II. And why not? The United States sat alone as the only manufacturing nation not bombed into oblivion, and had to do something to create jobs for the G.I.s who were headed home. Their solution?
I mean the Korean War, sure, but we could also build stuff. Houses. Appliances. Cars. Factories that were producing B-19s could be swapped over to make commercial airliners now that Boeing® had a pretty good idea how to make planes that didn’t fall out of the sky even when they were subject to being hit by cannon fire. Unlike Boeing of the 2020s, who keeps astronauts flying even when they want to land, and creates unscheduled landing opportunities for planes that were intended to keep flying.
Tariffs in 1946 or 1956 or 1966 were against the best interests of big business in the United States since it took decades to rebuild the rubble of Europe into something resembling a functional economy that could build a factory.
There was sooooo much money to be made. Tariffs were icky.
Your momma is so old she watched The Flintstones live.
But then as other nations started to industrialize, some managed to peak out and start producing amazing consumer goods, too. Televisions, stereos, cameras and cars from Japan. Heavy pumps and industrial equipment from Germany. These began a wave of imports that displaced American products.
In one sense, this foreign competition spurred the United States to increase quality, but in another, these products were often built in brand-new factories that were funded by the United States so that their host country wouldn’t succumb to communism, while the comparable product from the United States were sometimes built in factories that dated back to the dawn of mass production.
Tariffs, though, continued to be roundly hated for decades, even as they were used against us. There were “trade wars” and the United States lost. Bigly.
China, however, decided that they were tired of having an economy where making balls of mud was the best job available for most people, and started making stuff. Could their industries, stuck in infancy, even remotely compete with the world?
My cat, though, loves this guy.
No. They didn’t have a clue as to how to make a world-class steel plant. During Mao’s “Great Leap Forward”, in order to meet Mao’s aggressive steel manufacturing targets, people were encouraged to set up steel smelters in their backyard. Like most of Mao’s economic planning, it was a failure as the Chinese people melted down their precious farming tools. These were not tractors, mind you. Do you think we’re talking about Chin Lee Rockefeller?
No.
They melted down: Shovels. Scythes. Sickles. Saws. Scissors. Anything that started with S, really.
This “scrap metal” actually was necessary stuff, and lots of Chinese people starved because they tried to meet Mao’s quota.
Oops.
But then, China got smart. A lot smarter. The I.Q. of the country jumped 10 points in one day – the day Mao died. Someone got the idea that they wouldn’t centrally plan all of this, they’d just set up tariffs so that they could encourage creative Chinese to make steel mills (or whatever), and let them keep the profits from doing so.
Oh, and they’d move their way up the ladder, to increasingly more technical components. I remember being in WalMart® back in 1992 and looking at a radar detector. I was impressed by the finish, and looked to see what Japanese or Korean company had made it.
Nope. Made in China.
I made a belt out of old watches once. It was a huge waist of time.
Right then, I knew that China had made an actual Great Leap Forward. They went from a backwater country comprised of peasants to the place where now (2021 figures) they produce 30.5% of global manufactured products. The United States is down to 15%. By the way, the crossover point was in 2010, so it’s not that long ago that this happened. But, considering that China was at nearly zero in 1990, it’s an astonishing growth rate.
Is it low labor costs? No. Here is Apple’s® Tim Cook, “The reason to (manufacture in China) is because of the skill, and the quantity of skill in one location, and the type of skill it is.”
According to Cook, China stopped being the low labor cost country years ago. What they built instead was sheer dominance of the “how” to build. Innovate? Not their first priority – they were fine with stealing and catching up. The labor cost difference to build an iPhone® (this is an older number) was about $5 more in the United States than in China. Would a $5 tariff on an iPhone® have been enough to switch production over here? $10? Regardless, as a percentage of the cost of an iPhone© it’s infinitesimal.
Now, however, the Chinese have figured out how to build them, and that’s not an easy task – it takes tens of thousands of hours of smart people working together to create that know-how, plus a lot of failure along the way.
If China and Best Korea ever combined, would they call it Kim-Xi?
So, tariffs give an industry time to build skill. But there’s a deeper thread, too. When an employee in the United States works to build a widget, they are compensated. Generally, the more valuable and complicated the widget, the greater the wages.
That employee doesn’t keep that money in a box. Nope, they buy things like houses and cars and beer and steaks and PEZ™. Oh, wait, that’s my grocery list. But the point remains – they invigorate their local economies. And, they pay taxes – property taxes, income taxes, sales taxes.
So does their employer. Having a manufacturing base keeps communities alive, and the manufacturer pays all of those local taxes as well. Having an industry making valuable products makes the community more valuable.
If that industry is off in China? There is no benefit to the local economy other than whatever the sales tax and profit was on the iPhone™. And nobody learned anything.
It does matter if a country manufactures, and it does matter if the country manufactures potato chips or computer chips. Computer chips are far more valuable, and produce the knowledge required for sophisticated technology that creates outsized value for a country.
Sean only had cats. Training his dog to sit was too messy.
Is there a case for tariffs? Certainly. Will it increase prices in the short run? Also, certainly. It took China 20 years to catch the United States. Could we catch China in 10?
Maybe. It is important that we try, otherwise they’ll keep selling us things that we could make until we don’t make anything, anymore, and end up as a backwater nation that doesn’t make anything, dreaming of the days when our industry was supreme.
Building stuff sounds like a lot more fun.
If you haven’t read it, check out “Stalin’s War” by Sean McMeekin. One of the things that most surprised me was how much we helped Stalin build the Soviet economy, both through advisors we sent there, but also by allowing them to openly spy on all of our critical manufacturing. It was said that a Soviet spy could freely fly to the US and be in any US air factory that same day with full access. People repeatedly brought this security issue up to Roosevelt and other’s but were ignored.
Flash forward 60 yrs and it is deja vu all over again, except this time it is the Chinese and Koreans. Having worked in STEM, I was constantly amazed at how much access we gave foreign scientists and then our management/govt still act surprised when the Chinese would launch an identical product a few years later. These scientists weren’t even that capable (most were below average performers and certainly not innovative) but when you provide them with what amounts to free tutoring on the manufacturing process, then it’s hard not to be able to effectively steal it.
Tariffs will help tremendously, but protecting our innovation base is critical as well as it provides more incentive to keep the manufacturing onshore. Just look at the computer industry and how much it all moved to Asia, particularly after we allowed IBM to sell their PC manufacturing to China. Nobody does stupid decisions quite like the US government.
Those were not ‘stupid’ decisions. They were a plan.
100%
There was a book whose name I forget documenting the many ways the Soviets had infiltrated and influenced US government. Like a post-WW2 committee would declare a German factory to be for war material, so it would be slated for destruction. Then the same committee would declare it wasn’t for war material, allowing it to be shipped to our good friend and ally the Soviets.
Yes! I’ll put Stalin’s War on the list.
At some point, if we don’t manufacture, we’ll cease to innovate.
Well, if we don’t let others steal everything we’re doing, how can we justify next year’s huge budget for more spending to keep us in the lead? Won’t be much of an ‘arms race’ if we don’t keep going back and helping them up.
The staff at my employer (small division of a hyoooge defense contractor) is about a third ethnic Chinese, with a fair number of H1-B types. About ten years back it was fashionable for the China boys to carry thumb drives on a lanyard clipped to their belts. They were not even trying to hide what they were doing. Eventually, security caught on and added protection so that all files are automatically encrypted and only viewable on company equipment. But guess who runs IT in our division? It ain’t Haitians.
Weird that they keep getting hired?
Complete nonsense. The Socialist calculation debate of 1920-1930 proved centralized economic planning can’t work well. Tariffs are 100% central planning, they are not a clever way to have central planning and free enterprise at the same time.
OK boomer.
Tariffs aren’t central planning, and they are essential to catch up to rivals or to maintain critical production. Without tariffs and other forms of protectionism the USA would still be a supplier of raw materials for the UK. See “the American Economic System,” which is what was used to industrialize the US throughout the 1800s.
So what, exactly, is China making?
I run machine tools in my basement just to make sure that at least one person in this country still knows how to operate them. Unfortunately, neither of my sons shows much interest in them.
Lathechuck
Skills lost are hard to reacquire.
Actually tariffs were the Pre-income tax way for the Federal government to get funding.
Kept it small and wasn’t hard to avoid if you bought American made goods.
Income tax AND Tariffs allowed the growth of Federal government and forever wars.
Want to shrink a cancer you cannot currently cut out? Strangle it’s blood supply (as some drugs do)
Want to shrink the Federal government Strangle it’s money supply.
Nope. They just print more paper money and devalue what you have earned and saved.
Need to get 10% for the big guy, doncha know?
I agree. Start with ‘whacking’ the top-paid staff, the low-hanging fruit – DEI – all of them.
Get rid of those who came to your attention because they EMOTED on social media, used work time to do Activist Stuff, or were a major part of any dissention happening.
Same with those who handling PR, Media, Marketing, Communications, Community Relations, or other non-essential duties.
And, by Get Rid Of, I mean eliminate that job. Shake the hand of the employee who no longer has a job, and direct them to the people who will handle what is called Out-Placement Services. Of course, by the time the office opened up that morning, ALL access, at ANY level, was shut down for work computers, phones, government sign-on from outside of the office, and their work social media accounts were disabled (archive their history). Take the computer drives out, put in new drives, with limited access.
Then, the harder stuff – reducing the number of remaining employees.
Ask the question of people – What do you do that is ESSENTIAL to our department? That will quickly weed out the least needed employees.
Allow them to contribute their thoughts, too – What would you like to see this department do that would either lower costs, reduce personnel, or improve service to the taxpayers? A few of them may have some worthwhile ideas. Yeah, I know it’s unlikely, but give them a chance.
For the agencies/departments to be moved far from Washington, DC – lease some space, bring in the movers to pack up, inform them that they can either move (assuming that they weren’t one of the ‘serious problem’ employees) or be released. Give them a reasonable recommendation, severance, outplacement, all that. Maybe even offer to pick up their health care for the next 6 months, assuming that they act in a manner that doesn’t reflect badly on the government.
As for where to start, let Elon handle that job. He apparently is good at that kind of thing.
Exactly.
It works, but those that don’t have the resources for the increased prices suffer. That’s the downfall to those on a fixed income that had 15% of their earnings taken by the government, which pissed it away, and now wants to call what little is left dolled out an entitlement. It’s a paltry return on confiscatory policies, and one thing to be addressed. Will the government do so? I doubt it. Those old folks will just whither away, and the problem will disappear.
Tariffs will at first do that, yes. But eventually the cost will go down, and the wealth will increase. Transition will be painful.
Yeah, the up-front justification for tariffs is always protectionism. But our current situation is a little more complicated than that.
In 2022, the US officially imported $3.35 trillion of goods and charged “duties” of $257 billion on those, so basically the US already has in place a “tariff” of (3.350+0.257)/3.350 = 1.076 or 7%.
https://www.cbp.gov/newsroom/stats/trade
So, how much more do we want to increase this? And for what purpose?
Trump nostalgically talks about the time before the IRS when the government was funded by tariffs, not taxes. Our most recent Federal budget was $6.8 trillion, funded by $5 trillion in tax collections and $1.8 trillion of borrowing via T-bill sales. Roughly speaking, funding $6.8 trillion of government with tariffs on $3.4 trillion of imports would require tariffs of 200%, not the current 7%. This would require tariffs over 25X our current duty levels and would literally triple the costs of everything we import.
Which leads to a couple of observations. First, balancing the budget to get rid of the $1.8T of borrowing and then downsizing the government to drop the $5T in collected taxes should be priorities way ahead of import tariffs on $3.5T of imports. Second, any tariffs collected go to the government that collected them, with zero going into actually building a manufacturing factory to replace imports. Capital to do THAT has got to come from a the general economy which currently is overinflated with $8T printed money with effectively ZERO actual savings to support a reindustrialization plan that would drop our imports.
And third, if you really dig in to economic theory, we DO NOT want to drop our imports, which higher tariffs would certainly do. The US went off the gold standard in the early 1970s so we could print money as we wished, we set up the petrodollar system to replace gold in the late 1970s to set up a continuing worldwide demand for newly printed dollars, and then we very deliberately went from a creditor to a debtor nation in 1985 to keep freshly printed dollars flowing into the rest of the world to support this petrodollar system AND KEEP THE DOLLAR AS THE RESERVE CURRENCY upon which all of our current level of lifestyle is critically dependent. This is the concept of “exporting our inflation” which is a lot more important than “cutting our imports”.
We can print dollars at the push of a button. Other nations cannot. The only source they have for the dollars they need in the international economy is to sell us stuff. There is already a shortage of the dollars needed to keep international trade going. If we drop our imports with tariffs we are further cutting off their supply of dollars (also with sanctions, which is another story). Whatever dollars we cut them off from, we have to internalize the inflation that results from printing them.
Switching from the limiting nature of a gold standard a half century ago to the inflationary nature of limitless fiat currency printing was a deal with the devil. And the price of that deal is coming due in the form of a $35T Federal debt and $3.5T per year in imports (with its $1T annual trade deficit = dollars going to lube the reserve currency status). This mess is called Triffin’s Dilemma, which is something everybody (especially Trump) should be aware of, and something that tariffs ain’t gonna fix.
https://en.wikipedia.org/wiki/Triffin_dilemma
And see this:
https://whatismoney.info/exporting-inflation/
Talking about raising tariffs in 21st Century America is like searching for replacement batteries to put in the dead smoke detector when the house is already on fire.
Short term will be painful. Period. Long term? It’s a requirement.
I seem to recall that President Trump placed a tariff on Chinese steel and aluminum. In response, China deflated their currency to offset the increase (so the tariffed products were the same price to the US consumer); as a result all other Chinese imports became cheaper. . .
And now I’ve seen headlines that the Euro is coming down to parity with the US Dollar, so European goods should be getting cheaper as well. Hmmm
These are perfect examples of America exporting its inflation. China and Europe “deflating” their currency is the same as saying they “officially devalued” them, which means their economy and not ours swallowed the corresponding inflation from the dollars that were printed from thin air by the Fed and put (via business QE, COVID stimmies, etc) in some American’s pocket to buy those imported goods.
Sooner or later the inflation in China or Europe or Russia will become intolerable and they will look to some alternative to their heroin-like addiction to the US Dollar. This, for example, is what the BRICS+ UNIT currency is all about. When some such system one day replaces the US Dollar as the global reserve currency, we are totally screwed.
Trade wars. Wonder how that would work with real money, instead of printed stuff?
Thanks for explanation John. This is is something that I confess I understand little enough about in terms of the details, although I do understand that we are rapidly losing our ability to produce “things” – and once “things are not produced, why innovate?
I am not clever enough to know that a tariff will work, although I do understand the impact financially it will have in the short term. At best it needs to be coupled with what Ricky proposed: starting with eliminating the waste in budget that causes us to have a monthly $1 Billion + interest payment every month.
Also, we need to somehow rediscover the idea that there is dignity in work. Companies go overseas not just because it is cheaper, but also because there is a population base that will do the work. here, it too often seems that work only counts if you are in a handful of “cool” industries. Also – and I am not smart enough to know this – at least in urban areas, incomes are hard pressed to keep up with the expense of living. It does create an impediment to making work a good when literally everything you have is spent on living expenses. That would be an amazing problem to solve.
Perhaps bottom line: we get to have a discussion on economics and economy, something that we have not had in a long time.
Manufacturing was “cool” because a man could support a family doing it. That might be just enough, rather than the race to the bottom that limitless importation of labor is creating.
A number of companies have outsourced (i.e. oversead) products over the last several decades. Is that a problem for the U.S.? I often refer to a longish article by Louis Uchitelle, from 2011, on manufacturing and innovation to give me an answer to that question. A few selections from the article:
“Louis Uchitelle argues that the American century (20th) started to ebb when its factories started to close. Although Uchitelle begins by making an economic argument, another point he eventually makes is that a lot of innovation disappeared when the factories went away.”
“We are helping create innovators, but those innovators now live overseas. Houseman told him, “The big debate today is whether we can continue to be competitive in R&D when we are not making the stuff that we innovate. I think not; the two can’t be separated.”
“The thrust of Houseman’s argument is that lost jobs represent more than just lost wages and lost taxes. They represent lost knowledge and lost opportunity. Uchitelle concludes”
https://enterpriseresilienceblog.typepad.com/enterprise_resilience_man/2011/11/to-innovate-us-must-manufacture.html
For innovation in war – look at Ukraine, using $1000-paper-based drones to deliver an RPG to ‘overpressurize’ the turret of a tank. The Russians are doing similar drone attacks. I only hope that our guys are paying attention. It’s a long way from $1000 for a drone delivery-system to a $1.5M Tomahawk cruise missile. How many Tomahawks can we shoot at the enemy before we can’t produce enough to keep up?
dlcpnc asked: “…How many Tomahawks can we shoot at the enemy before we can’t produce enough to keep up?”
Not many, unfortunately. And the problem extends to just about ALL of our ‘technologically advanced’ weapons systems – and to those that aren’t so advanced as well. We’ll not be able to produce enough cannon shells – if we go ‘conventional war’. The even more frightening truth is that we’re not the only ones in this boat – and that many of the countries with this issue also have, or have access to nuclear weapons.
Is anyone else’s blood running cold now too? If not, you don’t understand what happens when your only tool is a hammer…
10/10 comment. All on point.
Basically the economy should work for the people and not the other way around. That is dangerously close to some of the economic theories proposed by a certain not-very-talented painter from Austria but I am OK with that.
Right now we are mostly a nation of consumers, instead of making stuff we just sell and buy stuff made somewhere else. There is an enormous difference between adding value to an item by turning a raw material into a finished product versus upcharging for that item once someone else adds value.
On the bright side, at least the painter from Austria was a better painter than the crackhead son of the soon to be former president. Not sure who was the bigger drug addict though.
I’ve heard talk of Trump potentially pardoning Hunter assuming Joe doesn’t do so. That would be funny in a way, but I still think the ultimate troll move would be if Trump were to buy up some of Hunter’s paintings and hang them in the White House press briefing room.
^^^ THIS pretty much nails it. We need to start making things, not just selling things made by others.
A personal example of what you wrote about in this article. I own a machine shop and primarily make industrial tools. The things they use to make the stuff. At 50 I’m one of the “younger” guys. I see less and less young men going into manufacturing. All the old timers, the “Tool Makers” with decades of skill and knowledge are retiring or dying off. There is a smaller and smaller pool of candidates to replace them with. For a small shop shop like mine its like finding a unicorn.
An example of how tariffs would help me compete. Recently I lost a big contract to India because my bid was $25k more than theirs. You would think a US manufacturer would want to keep me above water. Nope, they didn’t give two sheets. At the moment, I’m still getting by. But, at some point, I wont be able to drop my prices and keep staying in business. Would tariffs have helped to equalize the bidding? Maybe. But I know if we dont do something, US skilled precision manufacturing is going to die off with all the old timers.
India and China can easily underbid everybody because they don’t have a minimum wage, OSHA or EPA regulations driving up the cost (of course it also doesn’t hurt that they each have a billion people needing work)
Countries should have to meet the same labor, safety and legal requirements as US companies, or not be allowed to sell in this country. Alternately, if they don’t meet those requirements, then at the vary least they should have to pay a tariff to offset the cost differential.
This. And that $25k difference would be made up for in social good, employment, and taxes. Hmmm.
Years ago, dated a woman from the Upper East Side, a long distance affair. Her friends would tell me that “it was good that textiles & furniture were going down the drain”, and Bubba would “Learn To Code”, so to speak.
I’d point out that our Upper Middle Class would cease to exist, as they owned the small businesses that supplied lubricants, “widgets”, and other sundry supplies/services to the large manufacturing companies.
That has come to pass. In Charlotte the UMC is mostly FIRE or construction related. There’s not much industrial growth when compared to 25-30 years ago, despite a 400% growth in population.
And when the Boomers (like me) die out, hopefully Gen Z will fill the gap.
I’m hoping. The Zoomer boys are pissed.
Tariffs are a good step towards what should be the true end-goal: Autarky. Fuck the world.
Yup. We really can (mostly) go it alone.
Tariffs great idea. One problem bringing manufacturing back is no and or few young people want to get their paddies dirty. The country is screaming for those toxic masculine jobs like welder, machinist, mechanic etc. Everybody has been taught those jobs are beneath them and college is success lol. I do contract Engineering work and I have never seen the amount of work available. If we had to make thing Welders, Machinist, and Engineers would have to be paid daily probably in silver
Well, eating and buying cars and things is an amazing persuader.
New proposed amendment:
Any federal deficit spending outside time of war shall result in the confiscation and sale of all assets, tangible and intangible, of every member of Congress who voted to pass the bills authorizing that excessive spending, as well as all the assets, tangible and intangible, of their immediate family members, saving three sets of clothing each and a single motor vehicle for the entire family. Two consecutive years of deficit spending outside war time shall result in the execution of all those members of Congress who voted to pass the spending bills.
These penalties are to be enforced by the judicial branch, headed by the members of the Supreme Court, within no more than 90 days from the date of the passage of the bill or bills authorizing the excessive spending. Failure to enforce said penalties by the legislative branch shall result in the personal execution of every member of the Supreme Court by the President or Vice President within 30 days of their failure to act.
Time of war, for the purposes of this amendment, includes only a period after Congress has formally declared war against a specific enemy nation or group of nations, and before the cessation of hostilities in that conflict, either by victory, defeat, or stalemate. Any period of six consecutive months with fewer than 100 US citizens killed or injured by enemy action in that conflict shall count as a cessation of hostilities.
Added to Project 2026.
Here is a solution to our invader problem….no deportations… just make any state or NGO giving illegals benefits gets jail time and or cut federal funding
How, exactly, do you propose to jail an entire state?
Please show all work.
Just wondering…
Governors to jail. A good start.
I started working in electronics manufacturing in south Florida back in 1976. I retired in 2015, 39 years and 200 miles up the state, after working at a handful of big and small companies still in electronics manufacturing. The only constant over those years was people telling me there was no manufacturing in the US. It never made sense to me that we’d pay like 29% tariffs on cars we sent to the EU, for example, while charging them 2.5% tariff on the ones they sold. While I’m quite aware that the Biblical golden rule says, “Do unto others **as you would have them do unto you**”, not the commonly quoted “as they do unto you,” at some point, we have to realize that every nation drives everything they can possibly drive to favor themselves: they manipulate currency, they protect their industries, and they tax to try to create advantage. It seems the natural reaction is to charge the same tariffs as they do and say “how do you like it?”
Yup, and it’s way past time.
The International Reciprocity Act of 2025.
Everyone gets treated exactly like they treat us over there.
The howls from 190 countries will be audible to dogs in space.