Tariffs as a Negotiation Chip

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The way President Donald Trump is talking about tariffs recently leads me to believe he may only consider them a temporary bargaining chip. He recently tweeted:

Tariffs are the greatest! Either a country which has treated the United States unfairly on Trade negotiates a fair deal, or it gets hit with Tariffs. It’s as simple as that – and everybody’s talking! Remember, we are the “piggy bank” that’s being robbed. All will be Great!

Is his intention solely to lower trade barriers with other countries? That is, the US will impose tariffs only in retribution to tariffs placed on us? This certainly sounds like it.

Coming from a free-market libertarian perspective, tariffs are a terrible idea. Not only are you only taxing your own people, as they have fewer choices and so pay higher prices, but you are giving an unfair advantage to the country you are imposing tariffs on. See, all things being equal, will people go to a country with high tariffs to buy their goods, or a country with low or no tariffs? The answer is obvious: people prefer to trade where there are no tariffs. This is why countries like Hong Kong even exist: They are trade shelters, where people can come to buy and sell freely before making the “last stop” in a high-tariff country.

Thus, countries which impose tariffs are really only hurting themselves, separating their economies from the world trade system, and raising prices for their people. Yes, it raises revenue for government coffers, which may be necessary for, say, national defense, but that’s another discussion and I think all economists agree it’s better to keep money out of government altogether, allowing individuals to invest it as they see fit. (The “Tragedy of the Commons” AKA “General Welfare” means that people will not invest in public goods and services, making something like government necessary for those sorts of things.)

Regardless, it appears that President Trump’s strategy is not to replace income taxes with tariffs, similar to how President Jefferson did when he was in power, but instead to cause other countries to lower their own tariffs.

What would the effect be? Their economies would become more open, more competitive with the US. Capital would flow into their countries, capital that would’ve otherwise flowed into tax or trade shelters, or even into the US.

This sort of things honestly bothers me. It’s one thing to run your country as one of few tax or trade shelters. It’s quite another to encourage other countries to join you as a competitor.

In business terms, this is like Donald Trump challenging Jeff Bezos to make Amazon even more profitable, even though he knows it means he will have less access to investment funds and more competition in the marketplace.

I don’t know what Trump’s long-term strategy is here, but it could be he wishes to overthrow or reveal the globalists for who they really are. Yes, there is a way to prosperity, and no it does not involve the heavy hand of government. Perhaps Trump sees America’s future in making other countries great too.

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