If you read the current drivel on the imposition of tariffs on the Chinese — notorious thieves of intellectual property, currency manipulators, erectors of hurdles to access to their market, a despotic Communist regime — you would think the entire economy is about to explode. Let me give you some facts.
Here’s President Trump putting the squeeze on President-for-Life Xi. Ouch!
Tariffs are taxes, right, Big Red Car?
Yes, dear reader, a tariff is a tax. The USA depended primarily on tariffs from its formation until the first income tax.
The first income tax imposed in the US was enacted in 1861 — 3% on all incomes over $800. It was rescinded in 1872.
In 1874, the US Congress enacted a flat rate Federal income tax that was promptly found to be unconstitutional by the Supreme Court.
The Sixteenth Amendment to the US Constitution, passed in July 1909, papered over this defect, but it wasn’t ratified until February 1913.
A Federal income tax was enacted immediately after ratification and has been enshrined in the funding of the Federal government since then.
Big takeaway — we didn’t really have an income tax until 1913.
So, we lived on tariffs.
Who pays tariffs, Big Red Car?
A manufacturer makes a product in China and ships it to the United States. When it lands, a tariff is collected.
This tariff — a tax — is passed along to the American consumer in the price of the product.
An accountant will tell you that the tax is part of the “cost of goods sold.” The Big Red Car will tell you, “It’s baked into the cost of the product.”
How big a tax/tariff are we talking about, Big Red Car?
Well, dear reader, that’s where the nonsense starts.
The USA collects, through the Internal Revenue Service, taxes (income, tariffs) of more than $5,500,000,000,000. That’s $5.5 TRILLION DOLLARS. [Note for sake of accuracy, your BRC includes Federal, State, local taxes on income. Full disclosure, y’all.]
The tariffs we are talking about are at 25% on $200,000,000,000 of Chinese goods. Do the math. It’s $50,000,000,000 — chump change when compared to the total revenue of the USA and nothing when compared to the current tax burden.
So, $50,000,000,000/$5,500,000,000,000 = 50/5500 = 0.9%. Less than 1% increase in taxes to the Treasury.
[OK, for those who know the history here, we were already at a 10% tariff that had no impact on the US economy. President Trump technically raised the tariff from 10% to 25% — a 15% increase creating a $30,000,000,000 impact. It is chicken feed, y’all.]
But, here’s the big deal — YOU ONLY PAY ANY TARIFF IF YOU BUY CHINESE STUFF.
If you don’t buy Chinese stuff, you pay ZERO in tariffs. This is a tax you impose on yourself.
Don’t want to pay more in taxes? Stop buying Chinese stuff and buy American stuff.
THIS IS EXACTLY WHAT YOUR BIG RED CAR IS DOING. NO CHINESE GOODS.
OK, mansplain me a little more, Big Red Car
OK, dear reader, tariffs are useful in several different situations.
1. Tariffs are used to protect strategic industries like high tech, steel, aviation.
2. Tariffs are used to protect fledgling, startup businesses. Cite your own examples.
3. Tariffs are used to punish bad actors — talking to you China and your intellectual property theft, your currency manipulation, your closed markets, and your slave/child labor. There is more — like the environmental impact of Chinese manufacturing.
To put China into perspective, we export more to South Korea, Japan, and Singapore than we do to China.
Our Gross Domestic Product is $20,500,000,000,000.
China bans ALL imports? It’s less than a 0.6% hit on GDP, plus we would just find a different place to sell those goods. It is not a zero sum game, y’all.
What are the benefits, Big Red Car?
First, most important, China has to be a FAIR trader. They have to stop cheating, stop stealing intellectual property, stop manipulating their currency, stop erecting unfair hurdles to market access, and they have to clean up their manufacturing process both from the point of labor and the environment.
Second, any manufacturer who makes their goods in the USA is subject to ZERO tariff.
Want to buy a BMW? Buy one made in Spartanburg, South Carolina where BMW has been making cars since 1992. BMW makes the X3, X4, X5, X6, X7 SUVs in the Palmetto State — no tariffs.
BMW is spending and has spent more than $2B to expand that plant over the last five years. Why? Tariffs play a role.
The benefits of BMW’s investment in the USA is obvious — jobs, paychecks, US taxes on income, local and domestic suppliers, construction, property taxes. As you can see when BMW decided to join us rather than fight us, good things happened to our economy.
Who gets hurt, Big Red Car?
Agriculture will have to shift its focus. If you’re a wheat farmer or a soybean farmer, you have three options.
1. You can shift crops away from soybeans and wheat — duh?
2. You can sell domestically. <<< Big benefit is that American consumers are enjoying the lowest wheat and soybean prices in the last decade. Even an ill wind blows good?
3. You can develop different markets.
Now, riddle me this — if China buys wheat from S Africa or Australia, where do the customers who used to buy that wheat now buy their wheat? Filling that void is called developing a “different” market. You knew that, right?
Anecdote me up, Big Red Car
OK, go read this. Here is an example of a tariff that worked like a champ.
Canadian Softwood Lumber Tariff Revisited
Here are some other thoughts on tariffs.
Bottom line it, Big Red Car
The media is trying to use the entire tariff baloney as a wedge issue when it is a simple economic issue that will ultimately swing to the benefit of the US citizen. There will be adaptation pain in the ag sector, but every war has casualties and the impact can be mitigated by Federal action.
The media want you to believe the US is on the edge of an economic disaster when the actual numbers are chicken shit. They are “loose-change-in-the-couch” kind of numbers.
The Chinese have a lot to lose and we don’t. This Donald J Trump is the first President comfortable in the Men’s Room who is willing to leverage the power of the US economy. Nobody can live without access to the US economy. Not China, not anybody.
President Trump is just the first President to slap China in the face with that reality. Xi and T will speak again at the next G20 Summit. President Trump will teach the Chinese how the cow eats the cabbage when it comes to international trade. This is exactly why President Trump was elected — to stop the rest of the world from picking our pockets.
NATO got the message and the Chinese will also. Find another reason to hate President Trump cause he’s right on trade.
But, hey, what the Hell do I really know anyway? I’m a NO CHINA BUYING Big Red Car. Join me, y’all? Except for locally made Chinese food, of course. No tariff there. Be good to yourself. You deserve it.