Trump Is Half Right

Not a day goes by that I do not see news about tariffs and Donald Trump’s endeavors to get the world to defend his perspective on the issue and his bullying tactics. I decided that the best way to learn about tariffs is to study the history of tariffs and how that relates to current times. I read an article written by John Steele Gordon who wrote about the history of tariffs that went all the way back to Alexander Hamilton. I will quote relevant passages or paraphrases from the article, “Tariffs in American History.”

“When Alexander Hamilton became the nation’s first Secretary of the Treasury, he immediately scheduled tariffs. The Constitution forbids the tariffs on the exports of any state, so American tariffs have always been on imports. During shipbuilding there were few tariffs to collect. Protective tariffs have a surface plausibility as new industries were getting started. After ship building the next industry that needed the protection of tariffs was our cloth industry. Tariffs are taxes which are largely paid by domestic consumers, not foreign manufacturers. This has been true since the beginning. The north wanted tariffs to protect their industries and jobs, and the South wanted to have low tariffs for the importing of manufactured goods that they had to purchase from foreign entities to harvest their crops.

American industries flourished in the 1920s but agriculture did not. The Smoot-Hawley Tariff in 1928 raised the tariffs on 20,000 imported commodities. It was the highest tariff in American history.

After World War two we had differential tariffs: The U.S. lowered its tariffs more than its trading partners did. Again, the purpose of this was to speed the economic rebuilding of allies and former enemies who had suffered devastation during the war.  But World War Two has been over for 80 years. The economy of Western Europe and the Far East has long since been replenished. Yet the differential tariffs in many cases are still in existence.

For example, the U.S. has a 2.5 percent tariff on cars imported from Germany while Germany has a 10% tariff on American cars. This differential is pretty much across the board on products that we import from Germany and varies on other countries. This is where Trump is right.”

I don’t pay attention to makes of cars, but I learned something from Gordon’s article. I live in an affluent township and neighborhood. It dawned on me that I see many Mercedes, Porsches, Maserati(s), Lexus(s) and Volkswagens. They are a common sight. There are multiple dealerships for these cars within 15 minutes from my home.

However, as Gordon points out, you see few Fords or Chevys in Europe. It is because of this tariff that has been in place for 80 years.

But here is where Trump is dead wrong!  Tariffs are taxes paid by the consumer. They should be negotiated to correct the differential problem, but they must be negotiated in good faith with that pillar of ethics, justice, very much as the central piece. Tariffs can only be changed through conversation and reasonable respectful civil discourse. They take time to settle as they have been in place for a long time and have been part of our financial landscape since Alexander Hamilton who established our banking system. They cannot be done by someone who likes to win while others must lose and who bullies others with his narcissism.

Nobody trusts Trump and for good reason. A friend of mine has a close friend who is in the commercial lighting business. Trump chose him to do the lighting for his hotel in Chicago. When Trump arrived for the final inspection, he told the lighting person that the lighting wasn’t quite what he had in mind. He was willing to pay him half of the agreed upon amount. Trump told him, “Don’t try to sue me as I will tie you up in court for years.” The lighting vendor was no dummy. He knew what Trump would do and arranged a sale with another customer for the lighting. He told his employees to start removing the lights. Trump didn’t know what to do.

We know that other countries that will be negotiating for new tariffs are fully aware of Trump’s modus operandi. As my father told me on the front steps of our home one hot summer night, “Remember, don’t do anything to tarnish your name. In the end that’s all you have.”

It is something that Trump never learned!