Pat Buchanan figured all this out long before I did. And he’s been remarkably consistent all along in his correct argument that free trade is economically destructive for the United States. He was right about this in 1992 and he is right about this today.
The hysteria that greeted Trump’s idea of a 25 percent tariff on steel and 10 percent tariff on aluminum suggest that restoring this nation’s economic independence is going to be a rocky road.
In 2017, the U.S. ran a trade deficit in goods of almost $800 billion, $375 billion of that with China, a trade surplus that easily covered Xi Jinping’s entire defense budget.
If we are to turn our $800 billion trade deficit in goods into an $800 billion surplus, and stop the looting of America’s industrial base and the gutting of our cities and towns, sacrifices will have to be made.
But if we are not up to it, we will lose our independence, as the countries of the EU have lost theirs.
Specifically, we need to shift taxes off goods produced in the USA, and impose taxes on goods imported into the USA.
As we import nearly $2.5 trillion in goods, a tariff on imported goods, rising gradually to 20 percent, would initially produce $500 billion in revenue.
All that tariff revenue could be used to eliminate and replace all taxes on production inside the USA.
As the price of foreign goods rose, U.S. products would replace foreign-made products. There’s nothing in the world that we cannot produce here. And if it can be made in America, it should be made in America.
Consider. Assume a Lexus cost $50,000 in the U.S., and a 20 percent tariff were imposed, raising the price to $60,000.
What would the Japanese producers of Lexus do?
They could accept the loss in sales in the world’s greatest market, the USA. They could cut their prices to hold their U.S. market share. Or they could shift production to the United States, building their cars here and keeping their market.
I have already proved that free trade is totally incompatible with nationalism, national sovereignty, and the future survival of the nation due to the labor mobility required by it. Now I will prove that even complete autarky would, in the present circumstances, be of material benefit to the United States economy.
First, what passes for the macroeconomic facts, courtesy of the BEA:
- Q4 2017 GDP was $19,386.2 billion.
- Net exports were $2,420.7 billion
- Net imports were $3,020.8 billion
Now, let us accept the free trade advocates’ standard argumentum ad absurdum and suppose that Donald Trump actually does shut down all international trade going forward. Let us suppose that China, Japan, and the EU all retaliate with 100-percent tariffs and refuse to sell into the world’s most profitable consumer market. What does this mean in statistical terms?
It means the US economy loses $2.4 trillion in exports and gains $3.0 trillion in imports. Remember, GDP is calculated by the following formula: C+I+G+(x-m). So, this much-feared trade war, at its theoretical worst, would result in the instantaneous growth of the US economy from $19,386.2 billion to $19,986.3 billion GDP.
That is three percent annual growth, which is faster economic growth than the USA has enjoyed since the 1990s. In other words, the very worst scenario that the free traders can envision actually guarantees a bigger and better economy growing faster than the USA has seen for more than 20 years. And given the fact that US manufacturing prices are more expensive, the actual GDP growth will probably be in excess of that.
And just to be fair to the less intelligent, a word of warning to free traders before they resort to the obvious and anticipated rebuttals. Be very, very careful on what basis you attempt to pull your “yeah, but” arguments out of a hat. Remember, any assumption you negate here will also be negated in your own pro-free trade arguments. To put it plainly, I am hoisting you on your own macroeconomic petards.
In answer to the specific question, the Trump tariffs are a very small, but positive first step towards Americans regaining their economic independence from their globalist financial rapists.