Political Debate: Tariffs- Alternative view

In 2017, President Donald Trump remarked on the state of U.S. trade, stating, “We lose $800 billion a year on trade, every year.” Trump’s claim is far from the truth. I identify as a Constitutionalist, meaning, I believe our country was founded on Judeo-Christian values, (i.e. constitution & bill of rights), and that we should hold onto such values to the best of our ability as we create laws and exercise political authority. Ultimately, my Constitutionalist position puts me on the conservative side of most political issues. However, on tariffs, I take a more moderate view: tariffs are generally a poor economic policy. Trade deficits—how much more import cost exceeds export value—don’t equate to a bad economy. In some political instances, I agree with Trump’s conservative efforts; yet, tariffs aren’t one of them. The Trump administration has painted an unrealistic picture of why tariffs are good. Their narrative explains that at one point we had good industry in the U.S., however, that industry has since moved away to foreign suppliers. The remedy to this, in Trump’s view, is tariffs. Trump’s tariff narrative is wrong for a couple of reasons, which I will explain.

The first issue with Trump’s narrative on tariffs is his understanding of what “industry” means. For instance, when manufacturers (and manufacturing jobs) are outsourced to other countries it appears to the public like the U.S. is losing. However, this isn’t necessarily true, as industry is more than what Trump and others might imagine it to be: men working in a factory or a quarry. U.S. industry is far more developed now. For instance, technology and healthcare, more developed industries, are two of the biggest contributors to the U.S. economy. According to the CIA, “The US has the most technologically powerful economy in the world, with a per capita GDP of $59,500. US firms are at or near the forefront in technological advances, especially in computers, pharmaceuticals, and medical, aerospace, and military equipment.” Furthermore, in 2018, the U.S. healthcare industry accounted for 17.8% of U.S. GDP, according to Statista. The U.S.’s developed industries, healthcare and technology, reveal that industry has evolved, and isn’t simply the out-dated narrative that the Trump administration created. The U.S. isn’t losing through its loss of manufacturing jobs. Would you rather work in manufacturing or the healthcare industry? I’d imagine most would choose healthcare over manufacturing, which testifies to the superiority of these industries in comparison.

The Trump administration argues that high trade deficits weaken a country’s economy. However, there are many examples of countries with trade surpluses—the amount by which export value exceeds import cost—with poor economies. In contrast, there are examples of countries with trade deficits and good economies. For instance, according to Trading Economics, in 2018, Iran had a large trade surplus of 12.983 billion USD; however, in 2017, Iran had a total unemployment rate of 12.1%, according to the World Bank. Does Iran’s economy sound like something you’d like? Not me. Even with such a high unemployment rate, Iran still has a large trade surplus, revealing that a trade surplus doesn’t necessarily equal a strong economy. Continuing, the four largest trade deficits by countries, in order from highest deficit to lowest, are the United States, the United Kingdom, India, and Canada, according to the CIA. Do these countries seem to have weak economies even with such high trade deficits? No, they don’t, because there is no correlation between trade deficits and bad economies, thus, defeating Trump’s argument that a trade surplus will bring economic prosperity.

Lastly, I’d like to mention how exactly a tariff will affect a country’s economy. When a tariff is placed on the import of a certain product, it hurts everyone except the people working for said product. For instance, say a tariff is enacted on cereal, this will increase the demand for local cereal providers, yet, at the same time this will also increase the cost of cereal and it will decrease the demand for foreign suppliers. Thus, this tariff negatively affects everyone except those working domestically for the cereal business. Furthermore, enacting tariffs may result in a tariff war, which is when countries respond to tariffs put on their exports by also enacting tariffs on their imports. This back-and-forth tariff war is extremely detrimental to both countries’ economies. Through free-trade agreements, countries avoid the risk of tariffs wars and the negative effects of tariffs. 

Sources:

https://tradingeconomics.com/iran/balance-of-trade

https://www.worldbank.org/en/country/iran/overview#1

https://www.cia.gov/library/publications/the-world-factbook/rankorder/2187rank.html

https://www.cia.gov/library/publications/resources/the-world-factbook/geos/us.html

https://www.statista.com/statistics/184968/us-health-expenditure-as-percent-of-gdp-since-1960/

https://www.bbc.com/news/world-43336599

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