Your Independent Journal from the Heartland
The long-predicted tariff apocalypse generated from the White House, seen for months as an economic phony war, is finally beginning to take hold. At this writing, erstwhile major U.S. trading partners not signing deals to the Trump administration’s liking, or committing political offenses of one kind or another, are being transferred from Washington’s blanket 10% baseline impost (now applied worldwide) to a variety of more punitive tariff categories.
Excluding China, engaged in semi-hostile trade talks with the U.S., America’s declared import blacklist at mid-year featured the following: Brazil and India (50% tariffs), Switzerland (39%), Canada (35%), Mexico and the European Union (30%). Under pressure, the EU subsequently signed a humiliating agreement acceptable to the White House and had its tariff reduced to a still-harsh 15%. By late summer, the average effective U.S. tariff rate (total tariffs paid as a share of imports) had risen from 2.5% pre-Trump to 18.6%, highest in a century.
Billionaire Treasury Secretary Scott Bessent, head of the administration’s tinfoil-hat trade team, is putting the best face he can on the chaotic, extortion-based process. He calls it a policy of “strategic uncertainty.” He refuses to admit U.S. consumers will ultimately pay the tariff tab, and anyway, he snidely adds, low retail prices are “not the essence of the America dream.” Easy for him to say.
The rationale for this self-defeating trade policy is based on two assumptions. One is that inflation will not increase as a result; the evidence so far says that’s wrong. From March through August, prices for imported goods rose by 3%, helping to push overall inflation up 2.9% over a year ago. Producer wholesale prices, a predicter of retail inflation to come, rose as well, increasing by 0.9% in July alone, their highest jump in three years. As if on command, major retailers Proctor & Gamble, Walmart, Stanley Black and Decker, Nike and Mohawk Industries all initiated significant price hikes in August.
A supposed compensating factor, the second assumption of the prevailing trade madness, will be a massive upsurge in domestic manufacturing and blue-collar jobs. But the trend is in the exact opposite direction: the production-jobs tally for May through July indicated a minus 37,000 hires. By September, the manufacturing sector was officially in recession.
Nevertheless, Commerce Secretary Howard Lutnick, another of Trump’s dim-bulb economic advisors, visualizes new American factories springing up as far as the eye can see in response to high-tariff nirvana. Several months into the new regime, there’s no evidence of that happening. It didn’t happen in 2018-19, when Trump tariffs of 10% to 25% on imported steel saved 1,000 steel-making jobs, but cost 75,000 others in domestic industries that used steel fabrication in manufacturing; this year’s steel tariffs are slated to double that level, reaching 50%.
Even if our long-lost manufacturing jobs miraculously come back, the workers needed to fill them will not. A recent survey indicated three-quarters of Americans theoretically favor a revival in factory work, but only one-quarter would be interested in doing such work themselves. The hyper-enthusiastic Lutnick sees no problem; thousands of robots will presumably man assembly lines. So much for reviving blue-collar employment. Together with the white-collar chatbots of AI, this will advance American capitalism’s long-desired goal: a profit system without labor costs.
The dirty little secret about all this, of course, is that inflation and unemployment have little to do with why tariffs (ultimately indirect sales taxes on retail consumers) are being raised. They’re really part of a Republican strategy to change the way government is funded by reducing income taxes on the richest Americans and on corporations, while shifting the burden to middle- and low-income Americans in the form of regressive national sales taxes — in effect, instituting a massive, class-based transfer of wealth.
Tariffs were how government (minus such things as social safety nets) was financed up through the Gilded Age — until enactment of the 16th Amendment to the Constitution in 1913 permitted passage of the federal graduated income tax. Donald Trump would like to reverse the process once more and return to an earlier America, when the wealthy essentially lived tax-free.
As things stand, one portion of the economy is doing reasonably well: the top 20% of families (annual incomes above $170,000), which are generally immune to the Trump tariffs. But various estimates suggest that typical American households will be paying a Trump trade surtax on the cost of everyday items that approximates $2,500 annually — more if China is heavily tariffed, as the administration has recently threatened, starting Nov. 1, with an additional 100% tariff.
The Svengali behind the Trump tariffs is one Peter Navarro, a Harvard-educated economist and ex-Democrat disillusioned by the results of NAFTA, China’s entry into the World Trade Organization (WTO), and globalized free trade generally, which altogether cost the U.S. several million jobs around the turn of the millennium. The impact on American manufacturing pinpointed by Navarro is undeniable, but it was the result not of free trade between nations per se, but of unrestricted employment outsourcing and offshoring for the benefit of corporations, a side effect of global intrafirm trade U.S. policymakers foolishly allowed to happen.
That tragic mistake — I wrote about it numerous times in these pages prior to 2020 — could have been corrected, but was not. Now, Navarro has convinced his boss that the simplistic answer is protectionism, a cure worse than the disease.
Taking his cue from his guru, Donald Trump calls himself Tariff Man and proclaims tariffs the answer to all economic problems. He’s not the first tariff man; protectionist conservatives Alexander Hamilton, Henry Clay and Donald’s hero William McKinley were tariff men before him. Clay’s Whig Party kept protection for domestic industry on America’s agenda for most of the antebellum period, but the competing Jacksonian Democrats, cognizant of what was really behind it, resisted them every step of the way.
In a preview of tariff battles to come, here’s Democratic Treasury Secretary Robert J. Walker (1845-49), a staunch critic of high protection: “As the profit of capital invested in manufactures is augmented by the protective tariff, there is a corresponding increase of power, until the control of such capital over the wages of labor becomes irresistible ... The government by protective duties arrays itself on the side of the manufacturing system, and by thus augmenting its wealth and power soon terminates in its favor the struggle between man and man — between capital and labor.”
[Next time: ROOTS OF PROTECTIONISM]
Wayne O’Leary is a writer in Orono, Maine, specializing in political economy. He holds a doctorate in American history and is the author of two prizewinning books.
