Tariffs only work if they raise prices of imported goods above the cost of domestic goods because the purpose of a tariff is to create space in the competitive landscape for domestic producers to grow and prosper by raising the cost of the imported good so that domestic goods can undercut them on price in the consumer market.
If the tariffs are on imported components used for domestically assembled goods, they fail.
If the tariffs are on imported goods that face no domestic competition, they fail.
If the tariffs eliminate price competition in the domestic market by creating a monopoly or monopsony for domestic producers, they fail.
How many markets or products in the US are suitable for tariff protections?
Not cars; they are assembled from imported parts and electronics.
Not consumer electronics; they are assembled from imported electronics.
Not household appliances; they are assembled from imported parts.
Not out-of-season produce; there is no domestic competition.
Not shoes or clothes; domestic manufacturing is not price competitive.
Not cosmetics; created from imported materials.
Not pharmaceuticals; domestic market does not compete on price.
Not oil that turns into gasoline; domestic light sweet crude oil unsuitable for existing gasoline refineries.
In eight of the top 10 places people spend their money to buy stuff, that stuff is imported or made from stuff that is imported, and can’t be protected by tariffs.
The cost of living in the United States prevents the kind of economic success demanded by Wall Street of a company that needs to pay labor to manufacture products at scale in the United States.
Tariffs do nothing to change that. If you want to create a domestic manufacturing growth, then you need to first quash abuses in the financial markets to reward long-term investors and punish short-term investors1, then remove the pressure of rapid growth from young businesses2, then create incentives to start and build manufacturing businesses3, then protect them with tariffs.
Trying to create jobs or grow manufacturing capacity or build domestic market independence with tariffs on their own is folly.
- Something like:
a. Changing the line between short-and long-term capital gains to holding the security for 10 years, and then taxing short-term capital gains on securities as regular income.
b. Restoring prohibitions on stock buy-back programs.
c. Raising corporate tax rate to 40% to prime the market for incentives in the target sectors.
d. Taxing securities used as collateral on loans or lines of credit as a realization of capital gains.
e. Taxing off-shored cash for un-circulation. ↩︎ - Something like government backed venture capital funds, market forges, and incubators that can jump-start the market without worrying about making yacht and helicopter money in the ROI. ↩︎
- Something like tax abatements and interest-free loans for companies, training and retraining programs for workers, and rebates and tax-deductions for consumers. ↩︎