People can bellyache about Donald Trump’s tariff program. Do you have a better idea?
The last time the US had a trade surplus was 50 years ago. The statistics being presented by the Trump administration:
*$1 trillion world trade deficit last year
*90,000 factories have closed down over the past decades
*6 million factory jobs have disappeared
A while back, I had an opportunity to visit a friend in Cleveland. He is a brilliant scientist and has a couple of ventures in the city. When my business partner and I arrived at his office, I was stunned at what I saw. His office is in a former factory that made elevators. Half the buildings remain derelict, with wood-covered windows, graffiti, and decay. Train tracks run through the complex, though a train had not been there in ages. The other building had been repurposed for high-tech companies. In the hallway leading to my friend’s office, hundreds of lockers are no longer in use. I closed my eyes and tried to imagine the numerous workers talking before or after work: what were the plans for the weekend, summer travel dreams, yesterday’s ballgame scores? The place was eerily quiet.
The trip also included a stop in Detroit. If you had asked Martians who bombed Hiroshima and Detroit, they would certainly conclude that the Japanese had bombed Motor City. Endless blocks of boarded-up houses and factory after factory are monuments to better times. One could imagine how things were in the days after World War 2 until the 1980s, when the jobs started to be sent to Canada, Mexico, and beyond. The mammoth buildings sat empty, not a window in sight. My partner took a hotel where the clerk sat behind six inches of bullet-proof glass. Next to the Coke machine was a Last Will and Testament vending machine. It's not a great neighborhood.
For decades now, under both Democrat and Republican presidents, the US has been crushed in international trade. Countries big and small have had tariffs against US goods, with the US having no tariffs that are too low in return. Some countries have tariffs on specific goods that run well over 100%; part of their goal obviously is to protect their local manufacturers of the same goods. However, the overall effect has been massive trade imbalances against the US. It’s amusing to see Nancy Pelosi, Chuck Schumer, and Bernie Sanders in the 1980s thundering that the US needed to raise tariffs against our trading partners. Nothing serious was done, and now the US is down a trillion a year.
So what are the alternatives to Donald Trump’s actions that have sent the markets into free fall? Just continue along as always and hope to the debt fairy that the US economy will simply not implode. As Elon Musk has pointed out, debt service is more than the annual Pentagon budget. Printing more money devalues the dollar at home and abroad. The three-prong approach of Donald Trump in the long run will make the US a much stronger country, but in the short run will lead to volatility and anger:
*Use DOGE to get rid of excess spending
*Use reciprocal tariffs to even the international playing field and bring more money into the country
*Reduce regulation to unleash American productivity
Admiral Isoroku Yamamoto understood the production potential of the United States and told his bosses in Tokyo that an attack at Pearl Harbor would give him a free hand for six months before the power of the US would slow him down. He attacked Pearl Harbor on December 7th, 1941, and the US destroyed four of his carriers at Midway in June of 1942. The US, at the height of its war production, produced a mind-boggling collection of war material:
*650,000 Jeeps
*2,751 Liberty Ships
*12,731 B-17’s
*324,750 Total Airplanes
The productivity continued after the war, with the US as the only major country with its production facilities intact. Those golden days continued for a few decades. Then China joined the World Trade Organization and NAFTA, and tariffs from other trading partners destroyed American manufacturing. Cars were made in Mexico. We found out in shock that during COVID-19, we no longer had the capability of producing our own drugs: everything had been outsourced to China. Many people did very well with the globalist program that left manufacturing towns and workers in the dust. Donald Trump, in the lead-up to his 2016 victory, was the first candidate to earnestly talk about the plight of factory workers and their destroyed towns.
I had a professor at Harvard who wrote a book and went on a tour to promote it. While in Pittsburgh in the 1980s, he mentioned on a radio program that smoke pouring out of the smokestacks was a sign of the city's economic health. The DJ tried to ask if the professor was implying that smoke was somehow healthy. He again repeated that smoke belching out meant economic health, not healthy air. After a few rounds of this banter, he angrily said, “There are many people who would like to see a lot more smoke coming out of Pittsburgh!” He stormed off, and the radiotelephone switchboard lit up: bring him back. He later held a town hall with unemployed steelworkers. Globalism made things cheaper and made some people rich; it decimated the working class in the US.
So again, if someone has a brilliant idea of how to erase trillion-dollar trade imbalances without firing a Stinger missile at the stock markets, please put your idea below in the comments. Donald Trump slams the brakes on a train that has been moving faster and faster over 40 years. The world is not ready for it. The smart leaders will negotiate with Trump and come out with the least damage. The idiots will raise their tariffs and lose. Americans love to buy things, but given the chance, they can make products faster, cheaper, and better than anybody. And that’s why they put up their tariffs to protect their own producers and internal markets. The world getting rich off the back of America is over. There will be short-term pain, but all levels of American society will do well in the long run.