Sometimes a politician or a political party can come up with some really bad ideas. These days, people tend to agree that events in American history such as ‘segregation’, the Vietnam War, or the 2003 invasion and subsequent occupation of Iraq–just to name a few–were all a disaster.
‘Protectionism’ was another really bad idea. The Tariff Act of 1930, also known as the Smoot-Hawley Tariff Act, badly hurt both the U.S. and the global economy. Yet, beyond all reason, President Trump is implementing protectionist policies. Even worse, Republicans and other conservatives who know better are supporting Trump in his folly.
Herbert Hoover and other Republicans had thought they could protect American jobs and industry by taxing goods that came from other countries. They mistakenly believed at the time that taxing imports would force businesses and citizens to ‘buy American’.
The plan didn’t work, and the U.S. descended into a terrible economic depression. There were other reasons that contributed to the Great Depression, but the Smoot-Hawley Tariff Act is recognized as a leading cause.
Trump’s economic policy is rooted in protectionism. He has started trade wars with U.S. trade partners, and has repeatedly bragged about these trade wars. The unfortunate thing is that every Senator and State Representative that has backed trump KNOWS that trade wars are bad.
Even worse, Trump’s tariffs have been hurting the economy for years.
Many small business owners contract Chinese labor to manufacture their products. It is these American small businesses that are feeling the brunt of the tariffs, because it is they that must pay the tariffs. Without the reliance on cheap Chinese labor, these small businesses would not be able to operate. That is not an argument to justify the use of offshore labor, it is merely fact. This is the way the American economy has been structured.
American farmers are in the same boat. Especially the small family owned farms since the bulk of Trump’s tariff relief money is being given to large scale industrial factory farms. Meanwhile, China has stopped buying American soy beans and instead started sourcing soy beans from Brazil.
Decades from now, it is likely that students of both history and economics will be taught about Trump’s trade war. The textbooks will refer to Trump’s disastrous economic policy as the failed second attempt at protectionism, which eclipsed even the folly of Hoover. Importantly, if we manage to have kept the lights on, the textbooks will remind the students that the avoidance of protectionism is a lesson learned.
Trump has claimed that China has been taking advantage of the U.S. That isn’t quite the truth. We could say that U.S. corporations have taken advantage of U.S. workers, though. For 30 years, American manufacturing has been moving overseas. This has left U.S. factory workers in the dust, but the fact is the global economy has transformed over these last 30 years. It is impossible to coax the genie back into the bottle on this–without long reaching and calamitous financial ruin of apocalyptic proportions.
If today’s conservatives want to roll back the effects of globalism on the American working class, they should have listened to the anti-globalists 30 years ago, instead of charging into free trade agreements without fear or regret. That is not what the conservatives wanted though. They were, and still are, in love with Reagan and Thatcher and their neo-liberal restructuring of economies.
A mere 30 years later, we are in a situation where the majority of consumer goods are imported from foreign factories. It is a good thing, too, because as cheap as those cheap commodities are, few would be able to afford the goods manufactured in America.
Due to the discount offered on Chinese labor, Americans now have the choice of buying an American made vacuum cleaner (if they can find one) for a price they cannot justify when they can buy 5 vacuum cleaners made in China for the same sum. Just buy a new Chinese made vacuum every 2 or 3 years and you are still saving money.
That’s not all. Imagine the ‘market correction’ in American real estate if interest rates were to raise a mere 5%? God help us all if that happens. Just imagine, if you are paying $421.60 per month for every $100,000 in mortgage you have, if the rates go up to 8%, you will be paying $733.76 per $100,000 in mortgage.
Go ahead. Do the math. Can you afford those payments? Most people can’t. God help us because if that happens, there will be blood in the streets. Literally.
This is why the Fed has said they have no plans to increase interest rates through 2022. Just to make sure, the Fed will also buy $80 billion in Treasuries Bonds PER MONTH and another $40 billion in mortgage-backed securities. OH, and expect the U.S. economy to shrink by 6.5% this year, but don’t worry as it should regain 5% next year.
OH, but this economic trouble is all due to the pandemic, we are told. No, it’s not. The Covid-19 pandemic is actually the best thing to have ever happened to Trump because it has hidden the damage that he has personally wrought on the economy. That might even be why he is so reluctant to cooperate with expert medical advice on how to mitigate the spread of disease.