The choice between punishing foreigners vs. rewarding Americans.

Donald Trump has offered five reasons to raise tariffs:

1. He claims that tariffs will force foreign manufacturers’ prices up, which will help American manufacturers compete.

2. He claims many countries, notably China, manipulate currencies and dump products at below-market prices. Tariffs supposedly force these countries to raise their prices.

3. He claims that tariffs can help reduce the U.S. trade deficit and encourage the domestic consumption of American-made products.

4. He claims the tariffs will make us less reliant on foreign suppliers of critical sectors like steel and aluminum.

5. He claims the federal income from tariffs will provide money for tax cuts to offset inflationary price increases.

The problem is that these are not only mutually incompatible but individually false.

MUTUALLY INCOMPATIBLE

Consider #1 and #4. Suppose our tariffs successfully force foreign manufacturers to raise prices, making them less able to compete with American manufacturers (#1).

In that case, our government will have less tariff income thought to offset inflation with tax cuts (#5).

The more successful is #1, the less successful will be #5.

Further, because all U.S. tariff money comes not from foreign exporters but from U.S. citizens, the reduction in the trade deficit would be funded by Americans, not by foreigners.

Since the lower 80% of Americans purchase most foreign goods, the proposed tax cut would benefit the rich, not the average American.

All tariffs are transfers of money from the poor and middle to the rich—a right-wing, reverse Robin Hood approach.

The whole point of tariffs is to force prices up. By design, tariffs are inflationary. Inflation will require domestic manufacturers to pay more for supplies.

Workers, paying more for goods and services, will demand higher wages, thus forcing American manufacturers to pay more for labor.

INDIVIDUALLY FALSE

Trump’s claim that tariffs will increase foreign manufacturers’ prices is incorrect. Tariffs will add a sales tax to the foreign manufacturers’ prices. Like all sales taxes, the sales tax will be paid by the buyers, in this case, Americans.

The so-called “trade deficit” is not a real deficit. It is an even exchange. America pays with dollars; they pay with goods and services.

The U.S. creates money effortlessly by pressing computer keys, while others produce goods and services through physical labor and resources.

In that exchange, we receive the better of the bargain.

Tariffs only can make us “less reliant” on foreign suppliers of critical sectors like steel and aluminum by increasing the prices of steel and aluminum.

Paying a higher price for steel and aluminum does not benefit America.

Finally, the biggest lie of all: Trump’s claim that the federal income from tariffs will provide money for tax cuts. The federal government already has infinite money to provide tax cuts.

In fact, if the federal government collected zero taxes, it still could continue to deficit spend endlessly.

Being Monetarily Sovereign, the government never can run short of dollars.

THE BETTER SOLUTION

Strangely, when faced with a problem where the solution involves reward or punishment, Trump always chooses punishment (except for himself). If the problem is how to protect American industry and the American economy in competition with foreigners, the solution is not to punish the foreigners but to reward America.

If foreign companies price their products too low for American industry to compete, the solution is for the U.S. federal government to reward American industry via tax credits and direct payments.

That is what we have already done for many industries:

The U.S. agriculture sector is one of the most heavily subsidized in the U.S. Government support here includes direct payments, crop insurance, and various subsidies aimed at stabilizing farm income and ensuring food security. Rather than increasing consumer prices, as tariffs do, these support lower consumer prices.

Oil, natural gas, and coal industries have historically benefited from tax breaks, deductions, and other financial incentives that lower production costs and encourage domestic energy production.

Renewable energy sectors, such as solar and wind energy, have received substantial federal and state support through tax credits, grants, and loan guarantees to help drive the adoption of cleaner energy sources.

Elon Musk should appreciate this: The U.S. government has offered incentives and funding for developing and manufacturing electric vehicles and related technologies.

Substantial government support is provided to the aerospace and defense industries, including direct contracts for research, development, and procurement, which are essential for maintaining technological leadership and national security.

The semiconductor industry has seen increased government support (such as through the CHIPS Act) via grants and tax incentives. These measures aim to reduce reliance on foreign suppliers, enhance domestic manufacturing capabilities, and secure critical technology supply chains.

SUMMARY

The federal government has the infinite ability to create dollars. Rather than trying to punish other nations with tariffs, which in reality punish Americans and cause inflation, the federal government should reward Americans and simultaneously fight inflation by addressing the shortages that cause it.

Rodger Malcolm Mitchell Monetary Sovereignty Twitter: @rodgermitchell Search #monetarysovereignty Facebook: Rodger Malcolm Mitchell; MUCK RACK: https://muckrack.com/rodger-malcolm-mitchell; https://www.academia.edu/

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A Government’s Sole Purpose is to Improve and Protect The People’s Lives.

MONETARY SOVEREIGNTY