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Wednesday, June 20, 2018

Germans capitulate to Trump

We learned in school that tariffs are bad for the economy. Teachers blame the Depression not on the bad monetary policies of the Federal Reserve (which was designed to avoid recessions) but on the Smoot–Hawley Tariff Act. Conservatives and liberals alike now parrot the pap of Free Trade, as if it magically improves the economy.

The economy under the Bushes and Obama show that was a fallacy. Other nations have tariffs (and we do too) and Europe uses regulation as a barrier to trade.

In fact, protective tariffs work. The United States has had tariffs since 1816.

The Tariff Act of 1828 imposed a 38% tax on 92% of imports. Tariffs funded the government and helped build the economy into the world leader by the end of the 19th century.

You know who opposed the Tariff Act of 1828?

Slave owners.

South Carolina voted to nullify the act because it raised the price of goods while hurting the cotton market as England retaliated. Congress and South Carolina reached a compromise in 1833. The lower tariffs still protected American industry while accommodating the export of cotton as England eased its restrictions.

From Lincoln to Reagan, Republican presidents supported protective tariffs.

President Trump does too, but he is using them to force other nations to lower their tariffs and other barriers to commerce.

It is working. Germany's auto industry wants to lift tariffs on U.S. autos rather than lose the American market.

"German automakers are moving to head off an expanded Trump trade war threat of a 25% tariff on U.S. imports of European cars. The Wall Street Journal reported on Wednesday that Daimler, BMW, and Volkswagen have pitched the idea of both sides killing their auto tariffs, which stand at 10% in the EU vs. 2.5% in the U.S.," Investors Business Daily reported.

"Commerce Department Secretary Wilbur Ross responded positively to the idea, but it comes with a big catch: The German automakers also want the U.S. to kill a 25% tax on imports of pickup trucks and SUVs."

President Trump's 25% SUV tariff sure got their attention fast. Who knows, we may actually achieve a Free Trade market when all this is over.


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  1. Using tariffs to get other nations to lower their tariffs and other barriers to commerce is all fine and dandy. But President Trump is also looking at it from a national security standpoint. We must have a strong steel, aluminum, and industrial base for our national security. With the reinvigoration of NASA and the formal recognition of our Space Force (we already have one, it just wasn't previously formalized) look for our aerospace industries to start booming as well. - Elric

    1. Yes, we do have one.
      Steve Miller leads it

    2. Code name "Maurice?" What about Clint Eastwood, Tommy Lee Jones, James Garner, and Donald Sutherland? - Elric

  2. Gotta get a mule’s attention before you reason with it

  3. The Tariff Act of 1828 was not objected to by slave owners, but Southerners generally (look up Joe Johnston's line on the percentage of slave owners in the Confederate Army), as it made imported goods prohibitively expensive in the face of goods made in the North.

    The tariff was the main source of revenue for the US and, when the South seceded, Lincoln had to impose an illegal income tax (which didn't work), so he had to go to the Northern Abolitionists for money.

    I dunno about anybody else, but I was educated with the fact the protective tariff was one of the main causes of the Civil War.

    A very nice summation here, as well as here and the Mises Institute.

    I'm not arguing tariffs are always bad, but the protective tariff is hardly the hill to hang your hat on.

  4. Reciprocity is always fun.

    They charge us 10 percent, we charge them 10 percent.

    We can't own real property there, they can't buy real property here.

  5. Hopefully The first of many dominos to fall. Wilbur Ross may look frail but he is a tiger. Love him looking out for the USofA.

  6. "We learned in school that tariffs are bad for the economy."

    Lots of things we learned in school, well it ain't necessarily so.

  7. Your blog is great. I read a lot of interesting things from it. Thank you very much for sharing. Hope you will update more news in the future.
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  8. Free Trade is, economically better.

    Unfair Trade, free for you to sell, but not free for me to sell, is not better. Trump offered to get rid of all tariffs, subsidies, and non-tariff barriers.

    Good luck with that. Trump is right, that's the right economic goal.

    Cooperation evolves ... thru Tit for Tat. Start out with no tariff, if they have a tariff, you add one. When they lower theirs, you lower yours.

    That's the realistic, Fair Free Trade we should all be aiming for.