At last week's World Economic Forum in Davos, Switzerland, President Donald Trump mixed compelling pro-growth talking points with his signature streak of aggressive protectionism. It's safe to say that these two ideas are officially on a collision course.
On one hand, Trump insists that "America is back and open for business." His promises to make America a 15 percent corporate-tax haven and lower energy costs are signs of this commitment.
On the other hand, Trump warns of punishing tariffs and retaliatory measures for Americans who dare to manufacture or source inputs for their products from abroad, or for countries that dare to tax their own citizens in ways he deems unfair. This sends a very different message: that the U.S. is closed to the modern way of doing business.
The stark disconnect not only runs the risk of choking off much of the global commerce Trump claims to welcome but threatens to stick U.S. consumers and businesses with higher costs. It's a blueprint for undermining American competitiveness, not enhancing it.
It bears repeating that tariffs are not exactly paid for by foreigners. They're taxes on imports shouldered by American consumers, including businesses. Most of what we import are inputs for businesses to produce things in America. Some imports are traded between related parties. Think of Tesla, which is headquartered in Texas but has foreign subsidiaries that must trade with one another.
Even if you believe U.S. businesses should have to buy inputs at home, you are supporting increasing the costs of producing at home. Either way, tariffs make American producers worse off and undermine the competitive advantages Trump is otherwise trying to strengthen.
More baffling still is Trump's conflation of Europe's value-added tax with tariffs. In his remarks, Trump railed against the European Union, claiming it treats America "very, very unfairly" by imposing "a large tax that we know about -- a VAT tax." For that, he wants to punish Europe with tarif...
No hoodwinking or hornswoggling here.
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