Democrats drum darkly about a Trump trade war with predictions of collapse, calamity and more, but the truth is as simple as a 24-cell spreadsheet.
“Free Trade” dates back to 16th century Spain when agreements were made with “favored nations” to pass goods without import or export duties, fees or taxes. The expression has been badly abused and manipulated through history. Today if China exports a frozen chicken to America there is no duty on it, but if America exports a frozen chicken to China the duty is 100% regardless our “Free Trade” treaties.
We have had the same imbalances with virtually every nation we have traded with as Washington, DC “K” Street lobbyists have paid off US Senators and Representatives for votes to allow such imbalances. The list is virtually endless and sugar is a fine example as the world trades sugar for two cents a pound while we pay 20 cents, or more, due to a “sugar lobby” slipping the elected ruling class money for votes to maintain this injustice.
Meanwhile, back at the little spreadsheet, we see that after WWII to some time in the 1950’s the situation was approximately what we have in the “Before” column. “Before” the modern “Free Trade” agreements.
A manufacturer of an item would have about 20% of his product cost in the actual manufacture of the item. Another 20% would go into marketing it, including advertising, promotion and retailing. All taxes including Federal Corporate income tax, employee withholding, property taxes, regulation fees and on amounted to 40% of the final cost of the product. 20% would be the net profit. These are approximate, but net profit would rarely be less than 10% even on a high volume product.
In the 1950’s when American producers discovered Japanese manufacturers they found their manufacturing costs could be cut in half, sometimes even more! The marketing costs remained the same, but all taxes fell to 30% as it is much simpler to have a warehouse than a factory, less and lower paid employees so profits doubled to 40%! And, with all the lower costs the business ballooned when retail prices declined with competition!
Meanwhile, closing factories meant the number of employed persons went into decline, but with so many consumers pleased with all the stuff they could buy the complainers were few in number, but eventually that number would be large.
Mr. Trump wants to impose tariffs, which will raise the cost of manufactured goods high enough to restore American manufacturing, which will enable people to buy more when they have jobs instead of welfare, food stamps and untaxed cash incomes.
We are now doing $3.5 trillion in imports and with 35% duties this could fund most of the national budget, but of course that will decline in time unless world trade expands other ways. That is possible:
Our agriculture is spectacular and we now feed much of the world and can feed more if we stop using 40% of our corn crop making ethanol. We also need to get over the fear of genetic engineering as our scientists are only doing what Mother Nature does, but intelligently instead of by chance. We have too long had too many people listening to uneducated “green gurus” who are in the business of selling books of doubtful value or even truth. Many of these people have no training, do no science, and know nothing, but predict apocalypse from the dinner plate for profit.
The Trump analysis is clearly valid, based on facts and will be executed by people who have you and your welfare in mind rather than their bank accounts. It is provable that you have been lied to about the Trump trade strategy.