Edwin A. Sumcad –
…Weaponizing Tariff In A Trade War —
Economic wars – like the US-China tariff war going on right now – is no different from any global wars that stained the pages of history with blood. One of the many economic weapons warring countries used in a trade war is tariff imposed on goods coming into the country.
Let’s lay down the premise of a tariff war: The objective of the tariff-imposing country A is to protect its local industries so that these industries can develop without external competition like the flooding of exports from outside countries into the tariff-imposing importing country A producing the same goods. Targeted exporting country B slapped with escalating tariff responds with a counter-tariff-slap also on goods imported from tariff-imposing country A. And this is how trade war begins and escalates into an economic nightmare if this situation is not stopped by capitulation or a trade deal satisfactory to the negotiating warring countries.
Here in the United States, the Left and their economic analysts taking a lead-cue from low IQ Speaker Nancy Pelosi and Senate Minority Leader Chuck Schumer in attacking the President of the United States, called the current tariff war with China “Trump’s trade war”. They ignore the stark reality of a tariff war existing between the two giant economies of the world – that of the United States and China — calling it “Trump’s trade war”, instead of the real US-China trade war. As always, this hostile group of Americans operating in the dark side of the realm, only goes personal on Trump they hated so much even more than they curse their mother-in-law.
As anti-Trump trigger-happy shooters 24/7, these enemies of the State in Congress, their collaborative economic pundits and fake news accomplices in the Media cannot see the bigger picture of this US-China trade war in their sniper scope. What appears in their scope gunsight is only Trump, the target.
That’s when they pull the trigger to execute a planned character-assassination of the President of the United States.
We know that both President Trump and President Xi need the support of the population and economic institutions in their respective countries as they fight this war using tariff as a weapon of economic destruction. While opposition to trade war is muted in China, in the United States, it explodes in banner-headlines as news alert against President Trump.
As I write this piece, the U.S. Chamber of Commerce (USCC) was on national television staging a rampage-attack on President Trump branding him as purveyor of economic doom to this country as he widens the trade war to lately include Mexico as a target of a US-weaponized tariff. I was listening ad nauseam to the false cover-up narratives the USCC was putting up against Trump for the American public to swallow hook and sinker. It is like the complicit Media is feeding the American public a dose of cyanide.
I cringed with total disagreement and revulsion while listening to USCC’s deceptive argument highlighting the adverse effect of trade war on the US economy, especially on the poor American farmers who the politicking Chamber claims is a segment of the population that is badly hit by “Trump’s trade war”. But the truth is, what the Chamber is dishing out to the American public is insidious, hypocritical and toxic propaganda because it is public knowledge that the Chamber is one of the country’s biggest lobbyists committed to protect the interest of giant business corporations, not the millions of workers slaving themselves year-in and year-out for those USCC’s shielded capitalist businesses and conglomerates that rake tremendous profits and amass wealth annually.
The general public must be served notice and warned so that every Americans will know where USCC’s interest lies when it makes an underhanded analysis of the trade war against President Trump, and that’s neither with nor for the American people but with and for the corporate world. The irony if of it all is that Trump is not only risking his physical well-being as well as his political life, specifically his presidency now under siege, but also at risk is the security and safety of the First Family, relatives and friends being attacked wantonly while as the nation’s duly elected President he is draining the swamp and mending the broken global trading system he promised to the American people from the get-go when he ran for President.
Consequently, what Trump has been doing so far stirred and twitched the dead (those “killed“ by Trump and his political campaign in the 2016 presidential election) to rise from their grave and bear arms against him as an extraordinary president of reform who is engineering a Golden Age — a Renaissance — for the old United States of America and the decrepit, deleterious and badly impaired global system of the past years.
My take about this President who meant what he says or promises to do he will do is to me a reminiscence of such unwavering determination and resolve that I am tempted to compare him to an unleashed juggernaut of Mt. Olympus, the home of the gods I was privileged to study and learn during my literature days in the academe. As a presidential juggernaut, I expect Trump to level the ground regardless of who are or is standing there blocking his way.
Having said that I doubt if even giant business organizations as powerful as USCC would survive if this resolute President would do his job to honor his promise to the American people — and to the world — to recast the fractured system back to order, and transition from the old to a new paradigm of beliefs and social mores that define our way of life, and in the process make this nation the greatest on the planet as this President envisions.
We owe it to the Fake Media, and to the bogus anti-Trump members of the Press that are pretending to be bona fide journalists as to why opposition to trade war in the United States appears like a July 4th celebration to Trump’s opponents, while in China it is subdued, absent this fire and fury seen in the United States. Partly if not mostly because of the fact that fake journalists infested the once reputable press repertoire like Washington Post, New York Times and their kind, and totally gutted the reputation of CNN, MSNBC talk shows and their derivatives, in terms of viewing ratings and/or atrophy due to the declining number of patronage.
Lately, those character “assassins” targeting the person of President Trump, his family, friends and supporters were even more infuriated when the President tweeted that “trade wars are good, and easy to win”. The tweet came about when President Trump as I said expanded the current trade war with China to Mexico.
Trump threatened a 5% tariff on Mexican exports to the United States that by Trump’s ingenuity and deal-making expertise was calculated to create havoc on the Mexican economy if Mexico does not put a stop to those migrant invasions of the United States coming from their side of the border.
By the way this weaponized tariff threat on Mexican exports to the United States worked quite well as Trump intended it to be. Mexicans ceased becoming stubborn all those years on the issue of illegal immigration and this time came out with reason, heeding the dire effects of tariff once imposed on their exports to United States because they knew who this President is and what he is capable of doing to the Mexican economy. Trump is President totally different from his predecessors, who is always true to his promise, whether that promise is for the good of the country or in the form of warning or threat to defend and protect the country and the American people. Our southern neighbor knew that Trump will use all legal means possible to do what he said he would do if his offering of tariff-immigration deal to Mexico to stop the massive flow of migrants into the United States from the Mexican side of the southern border meets opposition, resistance and/or willfully ignored.
Thus face-to-face with fake news every day, the accusation of equating Trump’s presidency to the demise of democracy (the Hillary Clinton Hail Mary against the presidential candidate who beat her crazy in 2016) or alluding to Trump that as President he violated the Constitution or every law in the statute book to achieve what he wants as President (the Demonrats’ cry for impeachment is relentless) is totally hogwash. Hardly would Trump betray his promise to the American people as the unfolding of events show in his favor.
The Demonrats in Congress do not want to pass an immigration reform law to regulate the influx of immigrants. They want an open border so that illegal immigrants can sneak in and once inside the country they would register them as electorates and vote them back to power at the earliest in 2020. But they did not expect that Trump is that smart enough and resourceful enough to use tariff as a weapon like what US Presidents in the past had used, to achieve economic and political gains and/or objectives. To them Trump is always a surprise.
For example, it is fake news for the anti-Trump Media to say that Trump did not make good his promise to build the Wall when the Pelosi-Schumer obstructionist campaign against Trump did not provide the required funding to build that Wall. What the obstructing opposition got in return was an emergency declaration from President Trump where, as a result, funding was made available. In this legally challenged declaration, the Court supported Trump. The Wall and the needed infrastructure appurtenant thereto are being built even as we speak as funding became available – thanks to this President’s resourcefulness and ingenuity.
As we now know, the tariff threat targeting Mexican goods was aborted when the Mexican government and the people of Mexico in support of their government’s decision, complied in a written agreement to do what President Trump wanted them to do to stop those migrant invasions coming from the Mexican side of the southern border.
By the way the US Chamber of Commerce is supportive of this open border policy of the Demonrats in Congress. The influx of illegal immigrants drives wages down. It is good for companies USCC is protecting. In a sense, like Judas Iscariot in the Holy Book – the Bible — who sold Christ for a few pieces of silver, USCC betrays its fidelity and loyalty to this country which is tantamount to treason.
This is the latest example, as of this writing, of tariff being weaponized to achieve a defined objective. It put to shame this anti-Trump narrative ran by the Media as fake news that “Trump’s trade war” with China, Canada and Mexico will be a requiem to the US economy.
I was surprise to know that the learned U.S. Chamber of Commerce lacks sufficient knowledge of what the US economy is all about; the United States is an advance super-economy described by economists worth their salt as a self-reliant-self-re-enforcing push-button “Automatum”. But maybe in their studies they were using a different book.
And also maybe I could be wrong, and because I could be wrong, I grant that in fact USCC is knowledgeable of what the US economy truly is.
But obviously in a willful self-denial USCC had made a mean-spirited anti-Trump assertion that this super-economic “Automatum” is going to implode because of President Trump’s penchant for warmongering.
No President can singlehandedly destroy this Automatum economy that is self-functional. To give you an idea: Think of the human liver that when chopped off heals and self-replace itself. Not even Obama’s eight years of economic abuse of the system could derail the continuous running of the economy off the track. It sputters but still moves forward.
In an attempt to blindside the American public USCC stepped out of the line and breached public trust.
This USCC attack is so gross and vicious enough to embarrass the national conversation on how tariff can be weaponized to achieve a legitimate objective, whether that objective is social or cultural, economic or political (as in the immigration crisis in the border that Trump has the foreknowledge to exploit and take advantage of).
Maybe it is not farfetched to suggest that this bunch of “ignoramus” should unlearn their ignorance by enrolling in the school of economics, specifically focusing on fiscal and monetary policies, and learn again the wherewithal of an economic war.
It is interesting also to focus on the nation’s international reserves as a function of balance of payments made bad by a chronic trade imbalance as in the case of the United States vis-a-vis roque trading partners since the World Trade Organization was established on January 1, 1995 under the Marrakesh Agreement, which was originally signed by 123 nations on 15 April 1994. Its forerunner was the General Agreement on Tariffs and Trade of 1948. WTO regulates trading in goods, services and intellectual property among others between and among member countries.
But the fact that the world trading system needs an organization like WTO not only to regulate trade but to police compliance of the organization’s rules and regulations for a better world trade system, indicates that weaponizing tariff does not or may not always attain its drawn objective. In some instances, it is even counter-productive when tariff is used wrongly as a weapon in a trade war that could lead to or worsen recession.
The worst weaponized tariff ever recorded in the United States history was when Congress passed the Smoot-Hawley Tariff Act of June 1930 (SHTA). This came about following the stock market crash of 1929. President Herbert Hoover and Congress then believed that by imposing high tariffs on imports from US’ trading partners would “protect American farmers and secure the nation’s economy.” But contrary to that expectation, the stock dived to a devastating low of 140 negative. It prolonged the ensuing depression when other countries also raised their tariff shields to protect their economy and survived the depression.
But although SHTA did not accomplish US objective by weaponizing tariff against the whole world to boost the US economy as President Hoover envisioned, it led Congress to pass the Reciprocal Trade Agreements Act of 1934. With this Act US shifted to negotiating trade policies with individual countries in lieu of “unilateral tariff across the board”. This is now Trump’s talking point in today’s tariff war – “tariffs as a bargaining chip”, a Trump improvement and/or innovation of the decrepit SHTA concept President Hoover espoused.
The rationale behind this Trump’s bargaining dictum in today’s “Trump’s trade war” (which biased and ignorant cynics ridiculed) vis-à-vis China and other rogue trading partners is the fact that Trump is now communicating to our global trading adversaries his message of tariff reciprocity in a very simple language and direct to the point: “If you lower your tariffs on such and such, we will lower our tariffs (too).” (Barfield).
With this in mind it is clear to me that in this trade war, Trump covets nothing but a prize reciprocity agreement with our trading partners who went AWOL in following the WTO rule call on fair trade. Therefore, it is a blatant demagoguery to accuse Trump of being anti-trade or the enemy of NAFTA and other trade agreements of the US with other countries whose unfair provisions he was only trying to correct to protect American interest. One has to be that smart and knowledgeable enough to understand how the mind of this unusual President works overtime for the United States of America vis-à-vis the whole world.
In my examination of Trump’s actuation as he begun engaging countries in a trade war, I found that Trump did not stray even just a bit from the principles on which the General Agreement on Tariffs and Trade was founded. As you probably are aware, GATT was the forerunner of today’s World Trade Organization.
Let us spice this knowledge of Trump with a little bit of history for the benefit of those unknowing anti-Trump cynics. Recall that the founding revolutionaries of this country were attitudinally adverse to tariff imposition and taxation. They fought the Crown of England when the Parliament passed the Townshend Acts of the mid-1760s imposing import duties on a range of goods the colonists were depending on for their daily existence. History had recorded the battle cry of that American revolution, i.e. taxation and tariff without representation that became the drivers of the colonies’ revolt.
Let me quote this historical lines of the American revolution to show how adverse our forebears have been to tariff and taxation: “Under the Articles of Confederation, the toothless forerunner to the Constitution, federal leadership had no power whatsoever to tax its citizens.”
Surprise? A founding nation having neither tariff nor taxation tells us that something was not right. At this point in time, it was a trauma to the American psyche to impose tariff, or tax its citizens after all the blood they shed in fighting against it.
But then economic difficulties and conflicts of interest began to rear their ugly heads as the young nation grew and industrialized. This development progress had a foreboding negative effect exacerbated by the North-South conflict of interest (Union-Confederate armed confrontation) leading to the nation’s bloody Civil War. The no-tariff-no-taxation model has to give way. For economic relief in the midst of these difficulties, tariff and taxation have to be resorted to as a matter of urgent necessity for the nation’s economic survival.
Thus assuming that those anti-Trump trade-war bashers understand this historical root of how tariff is weaponized for economic survival, they should cooperate and help Trump win this war for their own good, and for the good of this country.
But if you are like low IQ Speaker Pelosi who stutters when she speaks out her confused mind against Trump and knows nothing of what comes out of her mouth, or the good-for-nothing yak-yak Sen. Schumer whose only job in the Senate is to taunt and demonize Trump, who cares?
This is another way of saying that Trump is aware of how to respond effectively using fiscal policy (tariff) as a defensive weaponry against trade aggressions. Trump reminds me of the U.S. Embargo Act of 1807 prohibiting American ships from trading in foreign ports as a neutral country during the protracted Napoleonic War (British-French-war since 1803). The year previous to that, France passed a law prohibiting trade between Britain and the US. This violated US neutrality. When France began seizing US merchant ships branding their cargoes as contraband, US Congress responded with an embargo weaponizing trade against France and other neutral countries trading with France. The embargo “energized” US textile industry that marked the “beginning of the manufacturing system in the United States.”
Thus some 300 years before Trump imposed tariff against China to protect the American steel industry, this President had already foreseen the outcome of an impending trade war. During the Obama administration the US steel industry was dying. Trump sees this industry reborn as a result of weaponized tariff he used in a trade war.
I see and share this Trump vision, and that it will soon come to pass as a legacy of President Trump to American generations yet to come. #
© Copyright Edwin A. Sumcad. Access nationalwriterssyndicate.com June 12, 2019.
This is a sequel of the author’s article on tariff war just recently published in this website. Sumcad is a journalist-cum-economist. He was Deputy Permanent Representative to the United Nations Economic and Social Commission for Asia and the Pacific. His published books can be purchased from Amazon.com.