Huffington Post: Tariffs Are a Bad Idea

This evening I replied to an article on the Huffington Post about the struggle in Congress to deal with the debt ceiling. The comment I responded to was from a Tea Bagger who said that more money in our pockets will create more jobs. I stated that more money in our pockets will create more jobs in China for the reason that more money spent at Wal-Mart will be next handed over to a merchant in China. I said that in order to stimulate the economy we need to balance trade, and that tariffs would do just that. Finally I made the statement, “Why must we have unfair trade agreements?”

About 20 seconds later a reply to my comment was posted by a “Huffington Post Moderator” saying “Tariffs are a bad idea. They work both ways.” Well, golly-gee! I didn’t know that, and I am glad that the Huffington Post Moderator figured out my point in 20 seconds.

The problem is that we want the low prices of the cheap imports, no matter what the effect is on our economy. It is true that tariffs will raise prices, which is what the Federal Reserve has been trying to do for 10 years as they fight the deflation bogey man.  But prices are artificially deflated due to the fact that we are importing from third-world countries with lower standards for safety and labor relations than we have here. In addition to that, the Chinese have kept their currency pegged to the dollar all these years, but is now being adjusted slightly. If the Chinese currency were allowed to float, then market dynamics would cause a weakening of the dollar and cause Chinese products to become more expensive. However, that is bad in the eyes of the Chinese. They don’t want to see their currency appreciate against the dollar so they can maximize their profit.

It really is a matter of greed and desiring to exploit cheap labor without having any negative effects on the domestic economy. The whole global economy model was encouraged by the large corporations who saw an opportunity to get market share in the huge economy of China and other developing nations and to lower their labor costs. When I first saw jobs being outsourced, I said, “This is like firing your customers when you send a job overseas, because employees are consumers.” Of course many displaced workers found opportunities in various service sector fields, but the fact remains as I have discussed previously, the enormous trade deficits we have amassed amount to huge claims on American assets. How will they be settled, with US Treasuries, corporate debt and equity, real estate, commodities, or goods produced by Americans? Warren Buffett, who I think of as a very intelligent person, said the US is heading toward becoming a nation of sharecroppers. He said that for this very reason. So yes, Huffington Post Moderator, tariffs do work both ways, but they are not a bad idea because we have unfair trade agreements. I am advocating enough tariffs to bring about a balance in trade.