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Why are Republicans Afraid of Tariffs?

From Lincoln to William McKinley to Theodore Roosevelt, and from Warren Harding through Calvin Coolidge, the Republican Party erected the most awesome manufacturing machine the world had ever seen.

And, as the party of high tariffs through those seven decades, the GOP was rewarded by becoming America’s Party.

Thirteen Republican presidents served from 1860 to 1930, and only two Democrats. And Grover Cleveland and Woodrow Wilson were elected only because the Republicans had split.

Why, then, this terror of tariffs that grips the GOP?

Consider. On hearing that President Trump might impose tariffs on aluminum and steel, Sen. Lindsey Graham was beside himself: “Please reconsider,” he implored the president, “you’re making a huge mistake.”

Twenty-four hours earlier, Graham had confidently assured us that war with a nuclear-armed North Korea is “worth it.”

“All the damage that would come from a war would be worth it in terms of long-term stability and national security,” said Graham.

A steel tariff terrifies Graham. A new Korean war does not?

change_me

“Trade wars are not won, only lost,” warns Sen. Jeff Flake.

But this is ahistorical nonsense.

The U.S. relied on tariffs to convert from an agricultural economy in 1800 to the mightiest manufacturing power on earth by 1900.

Bismarck’s Germany, born in 1871, followed the U.S. example, and swept past free trade Britain before World War I.

Does Senator Flake think Japan rose to post-war preeminence through free trade, as Tokyo kept U.S. products out, while dumping cars, radios, TVs and motorcycles here to kill the industries of the nation that was defending them? Both Nixon and Reagan had to devalue the dollar to counter the predatory trade policies of Japan.

Since Bush I, we have run $12 trillion in trade deficits, and, in the first decade in this century, we lost 55,000 factories and 6,000,000 manufacturing jobs.

Does Flake see no correlation between America’s decline, China’s rise, and the $4 trillion in trade surpluses Beijing has run up at the expense of his own country?

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.

How have EU nations run up endless trade surpluses with America? By imposing a value-added tax, or VAT, on imports from the U.S., while rebating the VAT on exports to the USA. Works just like a tariff.

The principles behind a policy of economic nationalism, to turn our trade deficits, which subtract from GDP, into trade surpluses, which add to GDP, are these:

Production comes before consumption. Who consumes the apples is less important than who owns the orchard. We should depend more upon each other and less upon foreign lands.

We should tax foreign-made goods and use the revenue, dollar for dollar, to cut taxes on domestic production.

The idea is not to keep foreign goods out, but to induce foreign companies to move production here.

We have a strategic asset no one else can match. We control access to the largest richest market on earth, the USA.

And just as states charge higher tuition on out-of state students at their top universities, we should charge a price of admission for foreign producers to get into America’s markets.

And—someone get a hold of Sen. Graham—it’s called a tariff.

Patrick J. Buchanan is the author of the recent book, Nixon’s White House Wars: The Battles That Made and Broke a President and Divided America Forever.

36 Comments (Open | Close)

36 Comments To "Why are Republicans Afraid of Tariffs?"

#1 Comment By The Other Eric On March 5, 2018 @ 10:34 pm

The only problem I have with the tariffs is that for practical purposes, steel and aluminum are raw materials and the price raises will encourage companies to offshore their manufacturing. Tariffs on electronics along with subsidies to build an electronics industry in the USA would be far more effective.

#2 Comment By what’s in a word On March 5, 2018 @ 11:02 pm

Graham thinks we’re so stupid that he doesn’t even try to paper over the obvious inconsistencies anymore, e.g. he’s terrified of Trump imposing a steel tariff but has no problem with the starvation blockade of Yemen.

All Trump has to do to get Lindsay back on board is drop the term “tariff” and replace it with “sanction”.

#3 Comment By Tom Piatak On March 5, 2018 @ 11:55 pm

Bravo!

#4 Comment By MikeCLT On March 6, 2018 @ 8:16 am

They are not afraid of tariffs. They are afraid of their donors.

#5 Comment By Brad Fisher On March 6, 2018 @ 9:27 am

Wow. There is a lot wrong here. Nonetheless Pat manages to land on the right answer: a value added tax.

Canada used to have a “manufacturers sales tax”, which is just about the stupidest tax possible, particularly if you have just signed a shiny new free trade agreement with a country that is 10 times as big as you are. The only problem was that the new “goods and services tax” was so unpopular that the Conservative government was crushed in the following election.

Oh dear.

#6 Comment By Tom Piatak On March 6, 2018 @ 9:41 am

America would be much better off if it had listened to Pat Buchanan on this issue when he first started pointing out where NAFTA, GATT, and all the rest would lead–to shuttered factories, devastated communities, and a shrinking middle class.

#7 Comment By Kent On March 6, 2018 @ 10:43 am

A couple of thoughts here Pat:

1. There was a reason we wanted to offshore manufacturing: to break the back of labor unions and move wage income into profits. Do we want to reverse that?

2. If I own a set of factories, why shouldn’t I have the personal liberty to produce wherever I want to produce and move my profits out of the country too? Is my liberty to be consigned to the welfare of the United States?

3. “And just as states charge higher tuition on out-of state students at their top universities,”. My youngest is applying to med school. He has been offered placement only in out of state schools charging $60K/year. And in-state schools do the same, only offering placement for out of state students. Is that what we want?

#8 Comment By collin On March 6, 2018 @ 10:59 am

No, the main fear are:

1) For steel tariffs, there could be a movement for other manufacturing plants to move especially car factories. Ford and Toyota are the most concerning.
2) This is a tax increase on working class and middle class families who did not get much of a long term tax decrease last year.
3) The steel industry employs 140K workers but effect 6.5M workers. So steel tariffs will increase ~14K jobs versus the loss of 50K – 65K jobs in construction or other manufacuturing.

4) I most of the extra earnings for steel companies simply corporate leaders and their shareholders.

#9 Comment By Chris in Appalachia On March 6, 2018 @ 11:44 am

Well, Pat, tariffs might help workers, and some think they might hurt investors. Guess which one Republicans feel more kinship with?

#10 Comment By Michael Kenny On March 6, 2018 @ 11:56 am

“How have EU nations run up endless trade surpluses with America? By imposing a value-added tax, or VAT, on imports from the U.S., while rebating the VAT on exports to the USA. Works just like a tariff”. Hold on a moment! Hasn’t Mr Buchanan spent years telling Americans that the EU is run by dastardly “globalists” who believe in worldwide free trade? Now he tells us that the EU’s VAT system “works just like a tariff”! And before we even get that far: “Germany [relied on tariffs] and swept past free trade Britain before World War I”! Oh those silly Brits! Why don’t they just stay in the wonderful EU and stop pursuing their free trade chimeras! It sounds like Mr Buchanan is urging the US to adopt the original EU model: a large internal market protected by a high tariff wall, an idea that the founding fathers of the EU probably got from those Republican presidents he refers to. However, Republican presidents since Reagan have been ramming global free trade down the throats of an unwilling Europe using “free trade Britain” as a Trojan horse, with threats to leave if the other Member States didn’t knuckle under. Well, the silly Brits may well leave anyway and Trump is destroying the US, so maybe this is a good time to get back to basics!

#11 Comment By Lenny On March 6, 2018 @ 12:11 pm

Pat says:
How have EU nations run up endless trade surpluses with America? By imposing a value-added tax, or VAT, on imports from the U.S., while rebating the VAT on exports to the USA. Works just like a tariff.

FYI: VAT applies to all products sold inside the EU , both imported and domestic.
The USA can implement its own VAT anytime it wishes.

Also, American exports are exempt from local sales taxes anyway, while imports to the US are subject to those same taxes.

What is your point?

#12 Comment By AJ-in-LA On March 6, 2018 @ 12:25 pm

Need more research. Lexuses (Lexii?) are manufactured in the US.

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Likewise, nearly every “foreign” car maker, both luxury and non-luxury, has some manufacturing capacity in the US. Honda makes cars in Ohio, BMW in South Carolina, Mercedes in Alabama. I could go on.

It’s both lazy and inaccurate to paint a picture of perfidious foreign automakers importing millions of units to the detriment of “American” manufacturers.

Consumers learned a lesson starting in the late 70s: Cars made by legacy Detroit manufacturers were lower quality and had worse gas mileage than their Asian and European counterparts. Whatever improvements have been made on this front by “US” manufacturers, consumers have been slow to unlearn this lesson. I’ve been around the car business my entire life, both with “American” makes and Asian and European ones. To this day, “American” cars all seem like rental cars to me, and I wouldn’t buy one for myself.

#13 Comment By Garry Kelly On March 6, 2018 @ 12:28 pm

MikeCLT says:
March 6, 2018 at 8:16 am

They are not afraid of tariffs. They are afraid of their donors.

Not of but “for”

#14 Comment By Howlvis On March 6, 2018 @ 1:36 pm

Trump’s tariffs make no economic sense, and the national “security explanation” makes even less sense; they are a sop to the corporate industry heads flanking him at the announcement; and they will hurt the people who voted for him.

#15 Comment By ukm1 On March 6, 2018 @ 2:22 pm

Open-border-Republicans are for Free-Trade Globalism, which is based on the solid principle that products MUST BE manufactured where costs are artificially or actually low and products MUST BE sold where higher profits can be realized regardless of national boundaries and regardless of the TRUE costs to the citizens of the United States of America who DO NOT find well-paid employments.

Few professors of Economics at my local colleges have told me that, the costs of producing both finished and un-finished products CAN BE drastically reduced by producing any products — such as steel — overseas, which makes American companies highly competitive as company-stock-prices soar, ALTHOUGH in that process the United States of America actually and gradually becomes a country of shop-keepers — instead of a country of manufacturers — in the long run.

But, those professors of Economics at my local universities assured me that, “There is no FREE LUNCH in the discipline of Economics, because you will have to give up one thing for the other.”

So, Americans have a choice of whether to remain as shop-keepers or as manufacturers!

#16 Comment By Ronald On March 6, 2018 @ 2:51 pm

“1. There was a reason we wanted to offshore manufacturing: to break the back of labor unions and move wage income into profits. Do we want to reverse that?”

I’m amazed that someone would admit it was class war on the working class.

#17 Comment By One Guy On March 6, 2018 @ 3:10 pm

The trade deficit is because we pay more for imports than we sell in exports, right?

So the way to fix it is to start paying more for imports?

Seriously?

#18 Comment By Ken Zaretzke On March 6, 2018 @ 3:57 pm

The VAT, or value-added tax, is a great idea. Even better is the idea of a natural strategic tariff.
[2] (An invaluable discussion of the natural strategic tariff can be found in the book *Free Trade Doesn’t Work*.)

#19 Comment By serpent On March 6, 2018 @ 5:50 pm

The globalists are lamenting Trump’s tariffs on steel and aluminum. Their self serving arguments are more academic nonsense by those who write their theories on chalkboards but have never seen the American Rust Belt; or, if they have seen it, disregarded the pain, as it’s not their families that suffer

Yes, products made in America that use steel and aluminum will cost more; however, the answer to that is to have more tariffs on finished products made from steel and aluminum. If, for instance American manufacturers of washing machines must pay more for producing their products, then put tariffs on machines made outside of the United States so that foreign goods will not be cheaper than the domestically produced goods.

American labor should not have to compete with the slave labor of other countries. America is still the worlds biggest market, it is time we tell those manufacturers who fled America that if they want to sell their products here they better make them here or they will be paying a stiff tariff . This will protect American labor from having to compete with slave labor. Let those manufacturers who left America in search of cheap labor sell their products to those who earn twenty-five cents per day.

#20 Comment By shadow On March 6, 2018 @ 6:11 pm

The globalists are trembling at an American president who wants to re establish American manufacturing. Bravo Mr. Trump. Yes, tariffs on steel and aluminum with cause the manufacturers of products using steel and aluminum to rise. The answer to that is more tariffs on finished products. For those who left in order to exploit cheap labor let them sell their products to the workers who are being paid twenty-five cents per hour. American workers should not have to compete with slave labor.The idea of free trade is comparative advantage–if country A makes a product more efficiently than country B and country B makes a different product more efficiently than country A trading is mutually beneficial. But if one of the countries moves his production to the other because of cheap labor this is not trade; it is labor arbitrage. Just travel through the Rust belt and see the grass and trees reclaim the empty parking lots where once hundreds of cars were parked. Those cars represented workers that came to the plant each day and who are now working in a convenience store if they are working at all.

#21 Comment By fabian On March 6, 2018 @ 6:23 pm

I’m all in favor a war with NK if, and only if, Graham leads the first charge.
As to the European VAT, yes a Ford import in France will be VATed by 20% but, a BMW import in France will also be VATed by 20%. The export of a Peugeot to Germany will also be VATed in Germany to the tune of I suppose 20%. The VAT is borne by the final consumer.

#22 Comment By Ken Zaretzke On March 6, 2018 @ 7:23 pm

Gary Cohn has quit because of Trump’s tariff move. That paves the way for Trump to call on Congress to reinstate Glass-Steagall. Doing it soon will throw a monkey wrench into the Democratic Party machinery. The mind boggles at the chaos it will cause for Democrats, dividing the economic-oriented base of the old (progressive) Democratic party from the identity-politics loon who comprise most vocal part of the new Democratic party.

#23 Comment By Youknowho On March 6, 2018 @ 7:38 pm

What scares Graham, and every other economist is not the tariffs, but the haphazard way of their being created and implemented.

If you want to shore up your industrial base, you do NOT make their raw materials more expensive. Aluminum and steel ARE raw materials.

No ideological argument will change that.

#24 Comment By John S On March 6, 2018 @ 9:22 pm

I thought Republicans hated taxes.

#25 Comment By Saad On March 7, 2018 @ 3:46 am

The only problem I have with this argument is that many goods manufactured in American tend to be of lower quality respective to their European and Asian counterparts. High tariffs robs the American people of choices in goods that are both cheaper and of better quality.

#26 Comment By pax On March 7, 2018 @ 10:47 am

I oppose tariffs per se. I am not convinced, however, that the U.S. has not outsourced its trade policies to foreign entities to their advantage and our disadvantage. We have done this with our war-making activities. Time to review everything in a cold, systematic, and analytical manner. Trump needs a measure of bipartisan support. The same may be said of immigration. Economists have long argued that change has a cost and that quick change has an additional cost(rate-volume model). Costs are increasing at an increasing rate. The discounting and diluting of the English language in places like San Francisco (Mandarin) et al has the cost of increasing informational and transactional costs at an increasing rate. Let’s be calm and “not so fast.” We need real leadership not round heels to the whims of well-financed lobbies.

#27 Comment By DanJ On March 7, 2018 @ 4:45 pm

Sure, there are nations who compete unfairly or dump products on the US markets. In those cases specific products or product groups can be identified, and tariffs set on those imports. It has been done before, and generally does not lead to trade wars.

But a flat tariff on steel does not make sense. Why make raw materials more expensive for your industry? You want to show China who’s boss? Of China’s steel exports, 1% goes to the US. They won’t even notice.

#28 Comment By ukm1 On March 8, 2018 @ 12:21 pm

‘Multinational free-trade agreements have been responsible for massive manufacturing outsourcing and job-loss over the last two decades.

For example, the KORUS free trade agreement has displaced at least 60,000 American workers since its enactment in 2007.

Meanwhile, since the North American Free Trade Agreement (NAFTA) took effect in the 1990s, at least one million net U.S. jobs have been lost because of the free-trade deal.

Between 2000 and 2014, there have been about five million manufacturing jobs lost across the country as trade deficits continue soaring!

One former steel town in West Virginia lost 94 percent of its steel jobs because of NAFTA, with nearly 10,000 workers in the town being displaced from the steel industry.

Since China entered the World Trade Organization (WTO) in 2001, there have been 3.2 million American jobs lost with 2.4 million of those jobs coming from the U.S. manufacturing sector.’

LINK

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#29 Comment By Kevin FFF On March 8, 2018 @ 7:12 pm

The entire basis of this argument is “we need to make stuff.”

This is a fallacy. Jobs in manufacturing have no inherent superiority. We have no need of a “manufacturing base” other than some sort of nostalgia. And nostalgia does not create wealth. Making “stuff” provides no measurable economic benefit over designing “stuff” or moving “stuff” or any position in finance or services. This is an archaic notion, just as ridiculous as the advocates of agrarian based economies 200 years ago insisted on a need to “grow” stuff.

I don’t care about manufacturing jobs. I don’t care about auto building jobs, steel jobs, garment jobs. That is all meaningless. What matters is the overall job basket which create the most wealth for the economy. Typically those jobs require education, not the ability to stitch a T-shirt or weld a car door. I would not care if we did not have a single manufacturing job in this entire country. Let other countries build “stuff” if that’s what they want to do. The United States should seek the best jobs, not the nostalgic and archaic ones.

#30 Comment By ukm1 On March 9, 2018 @ 2:23 pm

This message is intended for screen-name Kevin FFF for whatever those FFF actually mean I have no use.

“This” is NOT about “Making Stuff”.

When a large country depends for 80% of its manufactured goods or manufactured products on foreign countries, that is not good either financially or militarily.

For example, if I make a widget for $60 in America and sell to American buyers for $100 or if I make the same widget for $30 in the People’s Republic China and sell to American buyers for the same $100, I certainly am $30 richer by choosing to manufacture in the PRC than in the good old Patriotic Buchanan’s USA.

And, my company’s stock-price will get bigger, no doubt.

But, cotton-heads like you have failed to notice that, $30 of American manufacturing costs actually went to the PRC for producing the widgets by the Chinese.

Had I manufactured the widgets inside America, American workers would have received that $30.

Another example I can cite here is, H1B foreign-born white-collar-workers working in American corporations where American corporations save hundreds of billions of dollars annually BY NOT paying taxes to Federal govt. on those millions of H1B foreign-born white-collar-workers and, as a result, American corporations’ stock prices swell and American corporate executives receive hundreds of millions of dollars in annual bonuses — while millions of American college-graduates remain unemployed or under-employed.

#31 Comment By Howard owens On March 11, 2018 @ 11:31 am

Tariffs are nothing more than crony capitalism, favoring the elite few at the expense of everybody else. They’re just another form of government subsidy.

Last year, Domestic steel profits increased by five percent. More than 75 percent of domestic steel consumption is domestically produced.

The steel industry needs no protection.

The military needs only three percent of domestic steel production to meet its material needs. There’s no legimate nation defense justication.

These tariffs will lead to a net job loss in the US of 146,000 jobs. Prices will go up. Everybody will suffer so that rich steel plant owners can get richer.

#32 Comment By ukm1 On March 11, 2018 @ 12:42 pm

How Ard is Owens writes:

“Tariffs are nothing more than crony capitalism, favoring the elite few at the expense of everybody else. They’re just another form of government subsidy.”

The above is NOT an entirely true statement, especially when I look in depth about imposing taxes on certain imported items.

For example, right now when America-manufactured cars enter any Chinese territory, the Govt. of the People (i.e., the People’s Republic of China) imposes 25% tariffs (i.e., taxes) on America-made cars.

And, that is to the benefit of the “People” of the PRC by the Govt. of the People.

So, to say that, the Govt. of the People can impose tariffs on American exports to the PRC, but the Govt. of the suicidal Americans CANNOT and should not impose similar tariffs on Chinese exports to the USA is imbecilic.

Imposing tariffs is not crony-capitalism.

Allowing American corporations to run amok by hiring foreign workers with H1B visas — instead of American citizens — in order to increase corporate profits by not paying taxes to the federal govt. is an example of crony-capitalism.

#33 Comment By ukm1 On March 11, 2018 @ 1:00 pm

How Ard is Owens writes:

“Tariffs are nothing more than crony capitalism, favoring the elite few at the expense of everybody else. They’re just another form of government subsidy.”

The above is NOT an entirely true statement, especially when I look in depth about imposing taxes on certain imported items.

For example, right now when America-manufactured cars enter any Chinese territory, the Govt. of the People (i.e., the People’s Republic of China) imposes 25% tariffs (i.e., taxes) on America-made cars.

And, that is to the benefit of the “People” of the PRC by the Govt. of the People.

So, to say that, the Govt. of the People can impose tariffs on American exports to the PRC, but the Govt. of the suicidal Americans CANNOT and should not impose similar tariffs on Chinese exports to the USA is imbecilic.

Imposing tariffs is not crony-capitalism.

Allowing American corporations run amok by hiring foreign workers perpetually with H1B visas — instead of hiring American citizens — in order to increase corporate profits by not paying taxes to the Federal govt. is an example of crony-capitalism.

#34 Comment By Erik On March 26, 2018 @ 5:36 pm

Wow. The level of economic ignorance in this article is stunning… even a cursory read of Bastiat’s work “That Which is Seen and That Which is Not Seen” explains very clearly why Buchanan’s ideas are practically incoherent. I was going to take a whack at this, but fortunately someone far more august than myself has:

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#35 Comment By Tod Rund On March 27, 2018 @ 3:01 pm

Because it cuts down on their payola.

#36 Comment By Gerald On March 27, 2018 @ 6:45 pm

Why are Republicans Afraid of Tariffs?

Very simple. A tariff is a tax that American consumers pay on imported goods. Republicans do not like (or are not supposed to like) raising taxes.