Reason # 93 Tariff Lies

Reason # 93: Tariff Lies

Why do we need to defeat Donald Trump and ensure that a Democrat occupies the White House?

Donald Trump has not just been lying about his tax reduction plans, he is also telling enormous whoppers about tariffs. He is pretty safe here, since few of us clearly understand what a tariff is and how it works. I don’t have the necessary economics background but fortunately the brilliant Michael Hiltzig of the Los Angeles Times does. I will let him do most of the explaining. “In praising the 1890s, Trump shows ignorance.” LA Times October 2, 2024.

https://www.latimes.com/business/story/2024-10-01/column-trumps-glorification-of-the-1890s-in-america-displays-his-dangerous-ignorance-of-economics-and-history

When Trump says he will “Make America great again”, the again he refers to is the 1890s, when the Donald falsely states that Americans were at their richest. He is wrong by a factor of 10:1. He attributes this wealth to President McKinley’s use of tariffs. Is this true? Not even close. Hiltzig explains how unwise use of tariffs helped to drive American into the Great Depression of 1893, the worst financial catastrophe before the stock market crash and depression of 1929.

Let’s start with the basics. What is a tariff?

https://www.latimes.com/business/story/2024-10-01/column-trumps-glorification-of-the-1890s-in-america-displays-his-dangerous-ignorance-of-economics-and-history

It is a “tax on imported goods”. Let me quote that again. It is a tax. Donald Trump knows very well that it is a tax. He is lying again and again and again.

How does the process work? Jed Graham explains that, in the case of a 10% tariff on cheap bicycles made in China, that currently sell for $60, when the product reaches the the import office they have to pay $6. That $6 goes as an asset into the U.S. National budget. OK, so the U.S. benefits but what typically happens is that the price of the product is elevated, perhaps not for the entire $6, but by some amount, let’s say $3 (my estimate, not Graham’s). An American citizen (or undocumented alien) pays the three dollars (and the tax owed on that $3). So all or part of the tariff is ultimately paid by the little guy. Donald and his buddies buy yachts, not cheap bikes.

But that’s just the start. The increase is also inflationary. Everyone is affected in the end. But again, not across the board. The poor pay disproportionately. It is just another cheap shyster grift from a man who is selling $3 bibles – made in China – and charging $60 for them. And you can be sure there will be no tariff on the Trump Bible.

Hiltzik digs deeper into the long-term effects of tariffs. Throughout most of American history, tariffs were the primary sources of income into federal coffers. They contributed to the stock crash of 1893, that began a profound business downturn, lasting well into the next century. 800 banks and 150 railroads went bankrupt and unemployment skyrocketed almost to 20%.

The crisis began following the crash of National Cordage Co., which had lied to the public about their financial stability. This was one of many historical instances where failure to regulate larcenous companies triggered economic meltdowns. Remember Enron? And do not forget that Trump and Project 2025 heavily feature deregulation.

But we digress. Congress passed the National Tariff Act (the McKinley Tariff) in 1890. It imposed almost 50% imposts on many products. The public was infuriated; the tariff, rather than making America great, had driven prices of popular items very high. Republicans lost the midterm; even Congressman McKinley losing his seat.

When Republicans regained power in 1896, they restored the tariffs that Democrats had removed. Woodrow Wilson sharply cut tariffs and reenacted the income tax in 1913. This tax thereafter became the mainstay for public funds.

John Murphy argues that tariffs are bad for the economy and industrial sector.

https://www.uschamber.com/international/why-tariffs-imports-have-been-bad-exports

Tariffs are inflationary and they invite tit for tat retaliation by foreign governments. In the end manufacture and export are stifled.

Tariffs are not all bad. Oren Cass defends them in the pages of the Atlantic.

https://www.theatlantic.com/politics/archive/2024/09/economic-arguments-tariffs-trump/680015/

You have been castigating Biden for the past four years for not getting us out of inflation more rapidly, but now you want to elect a man who will introduce 10%, 20% even 60% inflationary tariffs? That makes no sense.

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Fred Grannis


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