Good morning kids. And so the big story this morning are the reactions to and predictions about President Trump's "Liberation Day" tariff regime. While I am certainly no economics expert, I certainly know enough to recognize what the offshoring of quite a large chunk of our manufacturing sector overseas has done to our economy and society in general going back now to the 1960s. The regulatory and bureaucratic factors as well as big labor unions were certainly factors that led to industry seeking cheap sources of labor as well as cheaper overhead by moving overseas.
Yes the usual suspects in the propaganda press, the Dems and globalists and/or Trump averse Rinos on our own side of the aisle are raising a huge stink about it.
Economist Thomas Sowell suggested that President Donald Trump may be taking a “ruinous” approach to tariffs and international trade. Sowell commented on Trump’s trade policies during an interview on April 1, a day before Trump enacted sweeping tariffs on dozens of countries. The “Liberation Day” announcement, as the White House billed it, put in place a system of “reciprocity” on international trade where foreign countries are tariffed in accordance with the trade barriers they impose on the United States.
“It’s painful to see what a ruinous decision, from back in the 1920s, being repeated,” the 94-year-old Sowell said on an episode of “Uncommon Knowledge with Peter Robinson.” “Now, insofar as he’s using these tariffs to get various strategic things settled and that he is satisfied with that.”
. . . “If this is just a set of short-run ploys for various limited objectives limited in time. Fine, maybe,” Sowell granted. “But, if this is gonna be the policy for four long years, that you’re gonna try this, you’re gonna try that, you’re gonna try something else. A lot of people are gonna wait.” Sowell noted the recent dips in the stock market that have followed many of Trump’s announcements on tariffs and said that “people are holding on to their money before they do anything because they don’t know where this is gonna lead.”
As I alluded, when Thomas Sowell speaks, people who know and respect his great intellect, listen attentively. Sowell makes reference to FDR and how his mistakes which exacerbated the '29 crash are being repeated by Trump. Yeah, everyone and their uncle are now screaming "Smoot Hawley" but the '29 crash became the Depression primarily because of the failure of the New Deal. Which, in a way DOGE is attempting to address.
And if we're going to take a look at history and tariffs:
“[W]e built a sustainable economy, we did this thing, starting with Alexander Hamilton, where we said it’s really going to matter that we make things in the United States. … Yeah, we’re going to import stuff, we [were] never not going to buy stuff from abroad, but we were going to make sure that the internal American economy was healthy, could produce a lot, provided jobs…not just for people with graduate degrees, not just for somebody who is going to work on Wall Street, but for people with less education…so that means you need an industrial base. We built that economy…behind a very high tariff wall…it built America into an economic powerhouse.”
People seem to not know or have forgotten that nations to this day protect their workers and their economy via tariffs. Also, 200 years ago there was no Federal government and bureaucracy nor a Federal reserve to screw around with our economy and interfere with the way people do business. But of course it took almost 200 years to build that economic powerhouse as well as the concomitant attitude of the people via the American work ethic, and the freedom to pursue one's dreams as well as to fail repeatedly before succeeding.
And regardless of Liberation Day, we're not going to suddenly become the great industrial powerhouse we once were overnight. It's going to take time. Sadly the one key element that is missing is anything even resembling a scintilla of national unity that we had at the time of Pearl Harbor that allowed American industry to kick into overdrive and finally get us out of the Great Depression that the New Deal created.
Now, is Trump correct in his assessment of the fundamental trade unfairness/imbalance that has been hammering us for decades? Absolutely. While the propagandists are shrieking about the DowJones tumbling. Remember this creates an opportunity for investors to pick up stocks at bargain prices, if they are willing to hold onto them for the long term.
Moving beyond tariffs, here's an oldie but a goodie, how about significantly lowering taxes or exempting taxes altogether for an extended period of time in the interest of enticing manufacturers to either build new factories and re-shore jobs and manufacturing back to the States? That and cut the regulatory regime of the federal bureaucracy so investors and enterprises can compete and, here's a radical idea, actually make a profit.
Finally, here's a positive take:
Critics claim President Trump’s reciprocal—‘kind’—tariffs will destroy jobs. This could not be further from the truth. In reality, President Trump’s tariffs have the potential to create 15 million new jobs. Many of these jobs will be high-paying manufacturing jobs, jobs with employee benefits—the very sort of jobs that were lost over the last 50 years to offshoring and the “race to the bottom.” How?
Reciprocal tariffs are an olive branch. If foreign countries come to the table and lower their own tariffs, then Americans will benefit from freer—and most importantly, fair—trade. This will open up new markets potentially worth trillions of dollars to American businesses.
If not, then tariffs will level the playing field and protect American workers from foreign labor—who often work in slave-like conditions for next to nothing. This will reshore America’s factories, creating millions of jobs in the process. . .
. . . To begin with, we need to remember that America is not an economy. We are a nation bounded by blood and tradition. The Constitution does not give anyone a right to buy “cheap goods” from China or Bangladesh. The President is obligated to do what is in America’s best interests—even if this prevents liberals from buying imported European cars.
In 2024, America exported $3.19 trillion worth of goods and services. This is in spite of the fact that most of our trade partners impose massive tariffs—as well as other non-monetary barriers to entry such as Byzantine regulations—on American goods. This goes to show just how efficient and competitive America’s industries are. Nevertheless, the playing field is not level.
Let us assume that trading partners see the error of their ways and reduce their tariffs to reciprocal levels. This will allow American businesses to compete on even terms and will open foreign markets for American businesses like never before. If we assume that a 1% reduction in net tariffs results in a 1% increase in trade—which is a reasonable assumption based on current economic models—then America’s exports would increase by $1.6 trillion, bringing total exports up to $4.8 trillion.
Increasing America’s exports would create millions of good-paying jobs. The U.S. Census Bureau estimates that every billion of GDP supports between 5,000 and 5,500 jobs. Based on this, these increased exports would support some 8.4 million new jobs. If we assume that only half of our trade partners play ball, we are still looking at over 4 million new jobs.
Elsewhere on the economic front, there is actual broad support for what Trump is trying to do, some of it bipartisan win nature, and unemployment filings plunged in March signaling a robust labor market, this with the full knowledge that Liberation Day was on the horizon. So, we shall certainly see.
And perhaps if we had not granted the Chi-Coms most-favored nation trading status, the economic and geopolitical landscape today might be much less dangerous.Just a thought.
Have a great weekend.
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